Industry experts debate whether it's time for your company to go 100% with software as a service. But maybe the real question is whether SaaS is ready to support your company 100% of the time?
Nothing is hotter right now than software as a service (SaaS). Especially for small and midsize firms, the chance to get world-class software functionality without having to invest in big up-front costs seems like the ultimate no-brainer.
But is SaaS really ready to supply all of your company's software needs?
To find out, I recently checked out a panel of software industry experts who were debating that very topic. Though the session was hardly packed, interest was intense. That's because SaaS, the panelists agreed, gives functionality to smaller companies that they wouldn't have otherwise been able to access.
In one example from the panel, say you're a limo service renting a half-dozen cars. You can now turn to SaaS provider EchoSign to get exactly the same sales-contract service that giant British Telecom uses. And you get the exact same benefits: agreements signed in hours, not weeks.
As attendee Ben Kepes put it: Why build a data center or buy expensive traditional software when it's so much more readily accessible and cheaper via SaaS? In addition, SaaS lets companies avoid fixed costs and instead vary them according to growth and usage. Perhaps even more important in today's economic climate, costs can be cut if business and usage shrink.
"As a CIO, I never want to write another check to Oracle for $1 million based on my best guess of how many users I'm going to have," said Ingres CIO Doug Harr. "It doesn't make any sense. The old model is bankrupt."
Robert S. Hull, founder, CFO, and VP of professional services at Adaptive Planning, summed it up succinctly, saying the SaaS' subscription model is low-risk, high-reward. And unlike the application service provider (ASP) model that was once popular, Hull said, SaaS apps are actually solving key business problems. "That wasn't the case five years ago," he said.
Sure, they're all SaaS proponents, but at least these guys are drinking their own Kool-Aid. Harr said that Ingres made the strategic decision to become 100% SaaS. If it were not for Exchange and Office, Ingres would, in fact, be running entirely in the cloud.
To be sure, the savings are significant. In a previous position, Harr managed a Siebel implementation for 150 salespeople that cost $1.5 million. But Ingres implemented a Salesforce.com approach that costs $140,000 year for 130 users. The $600,000 Harr spends on Salesforce now is less than the up-front licenses he spent on Siebel four years ago.
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Similarly, Daniel Druker, senior VP of marketing and business development at Intacct, said he has 150 employees and just one IT guy -- who maintains Windows desktop PCs. Everything else is outsourced to SaaS vendors. "And I've got 100 customers like that," Druker boasted.
Who's On First?
What kind of company will be first to go entirely SaaS? Technology companies are prime candidates, as are service companies, startups, and any fast-growing organizations. Druker also said he sees "strong adoption in the midmarket."
Large companies are likely to be slower to embrace SaaS because of their huge investments in existing legacy infrastructures. Dismantling that existing infrastructure to transition to SaaS also is another cost. But Harr suggested that even in those cases, it can still pay off to simply ditch the sunk costs of legacy implementations and move to SaaS.
You have to look at total cost of ownership, Harr said, using a typical scenario: "I know we spent $1 million up-front, but we have a $200,000 depreciation bill and a $200,000 maintenance bill." So it may still make sense to build a spreadsheet and calculate the comparison.
Still, it's a big deal for an enterprise to make that kind of change, so Jeffrey Schultz, VP of marketing at Bill.com, expects larger companies to delay a strategic move to SaaS and instead have individual departments jump in whenever the overall corporate system doesn't meet their needs. "The burden is on SaaS vendors to make it easy for department heads to bring it in," Schultz said.
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