An Undercurrent of SaaS Anxiety?

Arthur Cole

The future looks bright for Software as a Service (SaaS), with analysts, vendors and service providers all looking ahead to healthy gains in the coming decade. Now if only those darned customers would get on board.


The latest Red Herring Software Report, for example, touts SaaS as "the hottest trend in enterprise software," and then offers a litany of reasons why enterprise executives are holding back. They're still tied to the traditional licensing mode. They're apprehensive about reliability and security. Many sectors still need a level of customization that SaaS can't offer. And some are even starting to wonder whether there really is a cost benefit over the long term.


Acceptance is really the last major stumbling block in SaaS's eventual takeover of the software market, according to David Linthicum blogging on Intelligent Enterprise. Even though a good number of IT managers say they could never trust software they do not own and host, the same attitude was prevalent in the early days of the Web. The needs of users, and customers, always win in the end.


Canada's quotes a number of vendors at the Mass Technology Leadership Council saying that a SaaS growth spike is on the way, even though most major clients have barely dipped their toes in the water. The general consensus is that once the major software vendors like Microsoft and Oracle devise a workable SaaS model that doesn't eat into license revenues too quickly, things should start hopping.


Microsoft, for one, continues to move in the SaaS direction with a new 12-month strategy designed to pitch services as an adjunct to traditional software, rather than a replacement. Most of the services will be presented under the "Live" brand, although it's not quite clear yet how the company plans to differentiate between the various Live versions of Office, Exchange and Sharepoint, or whether it feels the need to do so at all.


It seems that, on the record at least, most SaaS players have high hopes for the future. But too much fist-pumping can sometimes hide a certain apprehension. And sometimes, for one reason or another, good technologies simply don't catch on.

Add Comment      Leave a comment on this blog post
Apr 16, 2007 1:32 AM vinod vinod  says:
The model will predominantly address the demand of SME/SMB segment which will look at taking the advantage of a full fledged ERP/CRM without the huge start up costs.I think if the vendors are able to address the continutity and firm commercials issue, i think it will be the model for the future. Reply
Apr 16, 2007 11:48 AM Gary M. Zeiss, Esq. Gary M. Zeiss, Esq.  says:
Another major challenge to the widespread adoption of SaaS in the marketplace relates to the discomfort in having critical corporate data in a potentially inaccessible or otherwise difficult location. For example, if the SaaS vendor becomes insolvent, if the vendor abandons the business model or if the vendor is acquired by a competitor, CIOs will be faced with difficult and uncomfortable choices.While the entry of industry giants into the marketplace will alleviate this concern to a certain extent, it is my belief that SaaS vendors must address the issue of "ease of exit" up-front and with the same degree of vigor that they sell "ease of entry." Like disaster recovery in prior years, exiting the relationship isn't the t the prettiest thing to talk about during business discussions, but a quality migration-out plan will, I believe, become a "standard feature" of SaaS agreements in the future. Reply
Apr 16, 2007 12:01 PM Cliff Jenkins Cliff Jenkins  says:
The problem is the same for all companies. All the stakeholders expect a decent return in a short time frame. The business model for SaaS can only be to build turnover up gently over a period of time and therefore it has to be as an adjunct to other business. The cost of recruiting a sales consultant, plus the costs while building the pipeline is difficult enough to cover in the traditional market of selling four major contracts in a year. Now try the same calculations but with the sales income coming in over say four years.In our experience is that its the new'ish companies with real growth ambitions who love SaaS as primarily it leaves them free to concentrate on creating their business, without worrying about the IT.Apart from that the main problem is the same as everytime, the cost of getting the message out into the market, though again the period for return on investment is stretched.RegardsCliff Jenkins Reply

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