Kicking the Tires
With so many SaaS options on offer -- from ERP and CRM to spam blocking and servers, to online backups and PBX-based telephony -- which SaaS applications should small and midsize businesses study first? Craig of Enterprise Management Associates recommends starting with the "low-hanging fruit." Namely, evaluate SaaS alternatives to any business software that's difficult to run on premises. Especially with ERP, CRM, and some HR applications, "it's big, it can be complex, and typically companies need specialists in-house to get it configured and keep it up and running. So if I were a small or medium-size business, I'd think that perhaps my investments would be spent better building up the business itself."
As with any type of software, buyer beware. Especially watch licensing, and study pedigree. For example, Register's Vine says he evaluated multiple document management SaaS options, but several had setup fees and required too many minimum users to fit his budget. Some also appeared to have been ported from older, packaged software -- and it showed.
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Also evaluate security, how the provider backs up data, and service-level agreements. "You're still responsible for the levels of service you're providing to the business, so you have to be able to choose reputable vendors that will be able to give you the service you need," says Craig. "But one nice thing is, a lot of these vendors, you don't really have any contracts, so if you want to try it for a month, it's very easy to do that."
Mind the Ecosystem
When evaluating any SaaS business applications, also consider how they play with others. "These days it's basically integrate or die," notes Craig. Such integration is often based on APIs, "partner ecosystems," or both. With an ecosystem, for example, a vendor typically offers integration to its platform via a service-oriented architecture. Once built, anyone can use these new tools or integration capabilities.
The Salesforce AppExchange, which offers more than 700 compatible applications, is one example. Another is the SugarCRM platform, which the company says has 12,000 registered developers who have created 470 application extensions and helped port the open source application into 75 languages. As this suggests, long-term SaaS vendor success may have a lot to do with the popularity of the underlying platform, or at least the ecosystem in which the application can operate.
The Case for 'Incestuous' Software
All of these changes mean that on-demand software is looking less and less like the cutthroat world of traditional, packaged applications. Rather, "the SaaS vendors and the SaaS market are very incestuous," says Craig. "It's totally branched out from the enterprise software of the past, where it's very contained and very limited to basically my own company, to all these companies that are interacting."
Success seems to demand cooperation at least as much as competition. Yet what's especially striking is that many SaaS companies not only work together, but often literally run their businesses using each other's software. One proponent, OpSource's Ryan, says it's simply because of the math behind SaaS: "We're a midsize business, a couple hundred employees, and it's amazing the functionality that we have [thanks to SaaS]. We have sophisticated sales management tools and reporting (Salesforce.com), powerful ERP (NetSuite), and the most powerful ticketing system I've ever used, which is RightNow." At the same time, "we have a limited IT staff, really dealing with the desktop and laptops."
Say What You Mean, Mean What You Say
It's notable that SaaS vendors are drinking their own Kool-Aid and still alive to tell the tale. Of course, this alone doesn't provide any guarantees about the health and longevity of a particular SaaS provider. Yet with the relative ease of switching SaaS vendors if one folds or if an application's features and functionality stagnate, the power is in the hands of the user. For many, beyond the other benefits on offer -- lower prices, less risk, and freedom from vendor lock-in -- this alone may be worth the SaaS subscription price.
Mathew Schwartz has covered IT and business topics for more than 10 years as a journalist, researcher, and editor. His work has appeared in a variety of publications, including The Boston Globe, Computerworld, Information Security magazine, InformationWeek, the London Times, and Wired News.
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