To SaaS or Not to SaaS: 2015 Enterprise App Outlook
Are integration complexities ruining the value proposition of enterprise SaaS? Yes, argues ERP expert and veteran industry watcher Joshua Greenbaum in his post that is the SaaS equivalent of “The Emperor’s New Clothes.”
“What has become obvious is that enterprise-class SaaS as a strategic implementation option is more and more dependent on the ability of the vendor and implementer to integrate SaaS services with the on-premise world,” Greenbaum writes. “That integration isn’t just a nice-to-have afterthought, it’s becoming the core of the business case for implementing enterprise SaaS, and that business case is making SaaS a much more complex undertaking than it was in the glory days at the turn of the century.”
Here’s why integration becomes more of an immediate issue when you’re in the cloud: On-premise, you could do what you want and make it work, but the vendor (and consultants) still made a nice profit from licenses and fees. Sure, it might all break with an upgrade, leaving you a very unhappy customer. However, the problem was obscured by the convoluted approach to on-premise implementations and, in the end, it was your system, your data center and your problem.
“Why wouldn’t you want to get rid of that,” you may be thinking and it certainly sounds like a great idea. Integration doesn’t ever “go away,” though. It just becomes someone else’s problem, and guess what? SaaS vendors don’t want it. As a result, enterprises are contracting with system integrators to handle SaaS integration.
That might sound practical to you, but SaaS vendors have learned the hard way that poor methodologies and practices can cause problems in their systems and — unlike you — they aren’t putting up with it.
“SuccessFactors has spent a tidy seven-figure sum of late remediating troubled implementations, and to be fair, the offending SIs have run the gamut from boutiques to the global SIs,” Greenbaum writes. “SuccessFactors is hardly alone in this regard, as evidenced by the increasingly universal requirement for vendor audits of SaaS implementations done by third parties, even the biggest and baddest of the global SIs.”
For SaaS vendors, these issues aren’t just a headache, but an actual threat to their business model.
“Meeting the data center’s service level agreements for a poorly implemented SaaS app means more effort and support costs,” he writes. “These brittle implementations are more likely to break at upgrade time, and in general letting them into the data center threatens to kill off the recurring revenue margin that the whole SaaS industry is built on.”
When you add enterprise-level integrations, it makes the problem even more acute, he adds. As a result, SaaS vendors are wising up and forcing customers to pay for audits.
Greenbaum sees this as a fair move, since “customers have a degree of culpability and responsibility that has been traditionally papered over in the rush to judge the vendor and let the SI get off scot-free.” But, obviously, it adds to complexity and erodes SaaS’ promise of simplicity.
He points to another ominous trend: Limits on API calls. APIs are generally how integration is handled in the cloud, so limiting their calls by default limits integration.
These developments make Greenbaum question whether SaaS solutions will be able to deliver either simplicity or cost savings.
“It’s clear now that we’re waking up from a cloud cost-savings binge that was a little too good to be true,” he writes. While the some of the grunt work may be gone, he adds, “… expecting that the end of the low-hanging fruit of the implementation business would mean that less money would be spent on services overall is a bit of a pipedream.”
In a response to Greenbaum’s column, boutique advisory Deal Architect’s CEO Vinnie Mirchandani confirms that SaaS vendors are worried about the “hordes of on-premise consultants… headed their way.” But he rejects Greenbaum’s thesis, arguing that SaaS does reduce complexity over the life cycle of the project.
“SaaS has dramatically collapsed the hosting, apps management and upgrade cost. DRAMATICALLY,” Mirchandani writes on his blog. “And with Amazon aggressively tackling connectivity costs, many SaaS implementations are already starting to see network costs decline nicely.”
I highly suggest reading both pieces for a balanced view on SaaS integration and other implementation issues. Greenbaum has certainly identified red flags that should be considered when you’re planning a SaaS implementation, particularly in a hybrid cloud environment. His concerns, while valid, are tempered by the long-term benefits cited by Mirchandani.
Loraine Lawson is a veteran technology reporter and blogger. She currently writes the Integration blog for IT Business Edge, which covers all aspects of integration technology, including data governance and best practices. She has also covered IT/Business Alignment and IT Security for IT Business Edge. Before becoming a freelance writer, Lawson worked at TechRepublic as a site editor and writer, covering mobile, IT management, IT security and other technology trends. Previously, she was a webmaster at the Kentucky Transportation Cabinet and a newspaper journalist. Follow Lawson at Google+ and on Twitter.
