Is SaaS Just an SMB Thing?

Ann All

Timothy Chou, author of "The End of Software," has called software-as-a-service "the most disruptive technology of the last decade."

 

Yet some folks, including experts sitting on a recent panel discussing where the SaaS market is headed, think it needs to become more disruptive if it ever hopes to achieve mainstream success (i.e. get companies of all sizes, not just SMBs, to use it).

 

An internetnews.com story quotes panel member Steve Papermaster, CEO of on-demand software provider nGenera, as saying:

If you're not providing disruptive change in the positive sense for customers so they can run and lead their business very differently from before, then you're not providing breakout value.

Too many SaaS solutions confine themselves to change in how customers pay for software, says Papermaster, rather than how they actually run their companies. Papermaster says only SaaS vendors that can deliver truly breakout services will be able to win enterprise customers and command higher revenues.

 

When I interviewed Forrester Research's Michael Speyer earlier this year, he also said that SaaS vendors needed to provide benefits other than cost savings

:

Simple financial value doesn't have legs; it's not going to carry you forward. If you simply promote the financial savings, SaaS becomes just another delivery option.

There was disagreement between some of the panelists over whether SaaS is appropriate for general enterprise use or inherently better suited to SMBs and larger companies seeking highly niche applications.

 

Papermaster, for one, advocates going after enterprise customers. Lisa Lambert, managing director of the software & solutions group at venture capital firm Intel Capital, says SaaS simply makes more sense for SMBs, because they can't cope with the high costs, complex deployments and long implementation cycles associated with traditional enterprise software.

 

Speyer and other experts, including Goldman Sachs analyst Sarah Friar, are predicting consolidation in the SaaS market, a trend that could fast-track SaaS' advance into the enterprise. Friar expects software giants like Microsoft and SAP to acquire SaaS pureplays in the coming months.



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