SaaS for Business Intelligence: Factors to Consider

Ann All

Business intelligence as a service will be a major trend this year, at least according to the companies selling it. (Granted, they're not exactly what I'd call unbiased, but analysts like Gartner believe the overall SaaS market will see strong growth, so BI-as-a-service will likely benefit.)


As I noted last month, Quentin Gallivan, CEO of BI-as-a-service provider PivotLink, thinks BI-as-a-service growth will outpace on-premise BI in 2010. The majority of folks surveyed by Kognitio, another BI-as-a-service provider, predicted a similarly rosy future for SaaS BI. Earlier this week I wrote about SAP's BusinessObjects BI OnDemand software, a SaaS offering being pitched to SMBs and "casual BI users currently underserved by products on the market."


Even taking the vendor-driven hype factor into account, I think it's safe to say the number of companies evaluating BI SaaS solutions along with more traditional ones will increase this year. A recent eBizQ discussion around the question, "Is There a Certain Size Business or Certain Vertical Industry for Which SaaS BI Makes Most Sense?" offers an idea of some of the factors companies will consider as they consider whether a SaaS product will fill their BI needs.


Nari Kannan, co-founder and CEO of Ajira Technologies, a company that designs and develops process intelligence tools, thinks pricing of SaaS solutions is a big issue, especially for larger companies. He worked for a company that used a SaaS sales force automation platform in 2003. He writes:

When we had 10 licenses, a monthly expense of $500 at $50 a pop plus startup expenses of about $3,000 made sense. But when we needed 25 licenses, the pricing just made hosting the same in-house much more sensible.

I've written about several companies that have cut their IT costs by using SaaS.Yet Gartner analyst Robert DeSisto is among the folks who say that, especially over the long haul, SaaS costs more than traditional on-premise software. As with other arrangements that involve leasing a product or service, users save up front but tend to pay more over time.


Yet when I asked Ingres CIO Doug Harr about such cost contentions during our interview about Ingres' use of SaaS, he responded, "I always wonder what happened to their calculators." He told me the upfront fee for the on-premise software he purchased for his pre-Ingres employer was more expensive than seven years' worth of a similar number of monthly seats for Salesforce.com. The financial advantage was more pronounced when the costs of software maintenance, upgrades and the personnel required to run it were included. I don't know if Kannan's calculations included the costs of hardware and human resources in addition to software, but it's clear there's no one standard answer as to whether SaaS or on-premise is a more economical choice.


Companies undertaking a cost analysis might want to start with this SaaS vs. On-Premise TCO Calculator, from the IT Business Edge Knowledge Network.


Lyndsay Wise, president and founder of WiseAnalytics, believes smaller companies or business units within larger companies that want independent applications are most likely to adopt SaaS BI. Mike Vizard pointed out earlier this month on our CTO Edge site that nearly a third of SMBs surveyed by CompTIA plan to invest in SaaS this year. SaaS is a little like potato chips in that companies may find it hard to stop at one SaaS application. Wise says companies already using SaaS are more likely to consider SaaS BI as well.


Karthikeyan Sankaran, a BI consultant for Hexaware Technologies, thinks most companies will find SaaS BI works best for making decisions that are based on a loosely coupled information chain, while on-premise software has an edge for decisions that utilize a tighter information chain. The example he offers: decisions using data from an ERP system to data warehouse to reporting. As he writes:

Bottom line, I expect every organization, big or small, to have a mix of on-premise and on-demand BI platforms, each serving a specific business community and opportunity.

I'm with Sankaran. I've been saying for some time now that most companies will end up with a hybrid environment of both SaaS and on-premise software.


IT Strategy and Business Transformation consultant Dave Youkers listed five characteristics that could tip the hand in SaaS' favor, many of which I have heard before in discussions about SaaS. He mentions using SaaS in environments where compliance to standard policies and/or regulations in reporting and information archiving are desired, which echoes a point recently made by Chris Proudfoot, head of procurement, process and system strategy at British insurer Aviva PLC, in a recent InfoWorld article.


Proudfoot, who has used both on-premise applications and SaaS for procurement, said users are more likely to ask for individualized processes when using on-premise software. With SaaS, he said, "You've basically got to adapt to the [SaaS] process. It's a way to standardize..."

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Add Comment      Leave a comment on this blog post
Mar 2, 2010 2:46 PM Nari Kannan Nari Kannan  says:

Unfortunately, breaking out a calculator settles the matter for sure, I think.

At 25 licenses @50 per month, it comes to $1250 a month and $15K a year. In just one year, you can buy the server software for $5K, a server for $2k, a database management system like SQL server for another $3k and have $5K left over for a person who's partly on this. That's just one year!

Mar 3, 2010 7:37 PM Chris Wales - Swift Reporting Chris Wales - Swift Reporting  says: in response to Nari Kannan

Sometimes vendors choose to offer named user license fees on a sliding scale.  For example, 10 users at $500 and 50 users at $1000.  This type of licensing scale brings the actual cost of offering a SaaS solution in line with the fees charged to customers.


Mar 9, 2010 6:36 PM Dyke Hensen Dyke Hensen  says:

Hi Ann,

Thanks for publishing.  I have a couple of other sites you might want to add as references.


The site great source for the cost data involved with implementing BI  - but it is a members only site, but if you are already a member you can look at surveys on overall budgets and associated cost data for the last 5 years.


The next link is open and it's from Nucleus Research.  Nucleus has been doing ROI studies for years, and again is a respected source for proven models and methodologies as it relates to both SaaS and on-premise applications and implementations.


And finally, just a comment on sustaining costs.  As a SaaS vendor we strive to dramatically reduce all the costs, not just the hardware and software upfront fees and associated yearly maintenance with each,  but staffing costs associated in maintaining, tuning and upgrading costs systems.    When SaaS is done right, we should be able to compete on a cost basis even if the initial cost for both the hardware and software is priced at zero.


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