SaaS: It's Not Just About the Money

Ann All

Buying technology in many ways isn't so different from buying other goods and services. We consumers tend to be lured -- at least initially -- by low price. But we generally won't stick with something unless it meets -- or hopefully exceeds -- our expectations.


After some trial-and-error, we often find that the option that is neither the least nor the most expensive tends to be the one that does the trick. Those who shop with only price in mind most likely end up disappointed.


Similarly, many companies experience a kind of buyers' remorse with their outsourcing initiatives. Some that outsource simply to slash costs end up suffering when cost objectives aren't met and service suffers. Those that outsource to free up internal resources for more strategic work, to gain access to specialized talent or to meet spikes in demand are generally more successful.


Now a Yankee Group report suggests a similar effect for software-as-a-service deployments. According to an iTWire story about the firm's research, companies using SaaS cited reduced cost as the third most popular driver for adoption, behind improved application quality and performance and faster time to value.


Companies using SaaS specifically for business technology optimization (huh?) mention the ability to deploy without adding new infrastructure and reducing upfront costs more often than companies using SaaS for other reasons, notes the story, which also mentions the research was sponsored by HP.


As with outsourcing, our suspicion is that companies that buy into the considerable marketing hype and deploy SaaS with the idea that it will somehow solve all of their problems are going to end up disappointed.


As Jeff Kaplan, managing director of THINKstrategies, told us in an IT Business Edge interview earlier this year, "a lot of people are jumping on board, maybe with not the same level of expectation or education about what they should be looking for."


Kaplan also noted that -- again, similar to outsourcing -- due diligence takes on added importance as new providers proliferate to capitalize on growing interest. He says:

Users have to do a thorough job of investigating what is available so they can set the right expectations for themselves. The concept of on-demand is a relative term. There are many SaaS solutions that you can point, click, procure and use instantaneously. But there are many others that refer to themselves as on-demand which really do demand a certain amount of time and effort to deploy.

Add Comment      Leave a comment on this blog post
Nov 29, 2007 5:21 AM YF Juan YF Juan  says:
Thank you for your insightful observations. I think SaaS, like anything else amongst IT solutions, is no silver bullet. And, like picking any IT solution, the users/buyers still need to go through the process of assessing the feature and pricing fits. The fact that the delivery and maintenance mechanism is different/better, does not abdicate the responsibility of the buyer.So, that is the bad news.The good news, from what I have seen as a SaaS vendor, is that SaaS allows IT to start small. And, given the form factor, it is very easy to scale up. Similarly, I am also seeing companies going to an SaaS solution to addresses a specific problem that the IT team may not be as well equipped to address (usually the #4/5 items on the top 5 list ). All these allows companies to take baby steps instead of having to abandon existing infrastructure en mass. SaaS rocks!Warm regards, YF Juan Reply
Nov 29, 2007 10:56 AM Jim Stemos Jim Stemos  says:
Great content, have you checked out Projity ? Their SaaS solution, Project-ON-Demand is a complete replacement of Microsoft Project. Projects have finish dates and it can take months to deploy Microsoft Project and integrate with Project Server, Sharepoint Server etc. Project-ON-Demand is available immediately in a browser with no installation. That turns on the productivity immediately and is only $19.99/month. It turns out Microsoft Project is part of the Office family of products and is installed on 7% of all Office desktops. Project has a retail price of $1,000 which makes it the highest profit margin product for Microsoft and drives over $1 billion in revenue for Redmond. Project-ON-Demand is a complete replacement of Project and available in a browser anytime/anyplace on Linux, Unix, Mac or Windows. This is a tremendous benefit over Project which is constrained and only on Windows. Project-ON-Demand even opens native Microsoft file formats so migrating is immediate. There are free trials that take under a minute to set-up. I am a big supporter as you can see :-)If you have not checked out the Projity site it is recommended. Reply
Dec 3, 2007 3:22 AM Shreepal N G Shreepal N G  says:
Nice article ,In today's Business world its all about value proposition and SaaS have a very strong and transparent Pricing model . Companies who sells their SaaS products cant just sell it by comparing it with an exisitng popular product my Money. today SaaS products are getting sold primariliy because of the feature and ease to use , easy to deploy and easy to manage factors . and as we have SaaS 2.0 in the market these SaaS products and services will be sold as business enablers rather than as a cheaper solution. and its a great business Model for small-medium companies and as SaaS V3.0 comes out we hope MS /sun/oracle might go V3.0 . Reply

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