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ShareFour Factors Changing The SaaS Landscape
Posted by Chris Murphy on Sep 20, 2009 09:08 AM
A “future of software” panel at our InformationWeek 500 conference offered several fresh insights into why the software-as-a-service landscape is changing. Here are four.
1. Board of Directors support: “Before the boards were asking ‘What’s this SaaS thing?’” said Ray Wang, consultant with Altimeter Group. “…Now, they’re saying ‘Why aren’t you doing something in the cloud?’” Woe to any CIO who pitches a big IT investment without addressing the cloud option.
2. New product categories: SaaS can “pioneer new application categories that the SAPs and Oracles don’t show any interest in,” said Christopher Lochhead, adviser to SuccessFactors, a service for managing employee reviews. This raises the concern, though, that IT must integrate these hordes of niche services.
3. Attitudes about “on premises” are changing: Wang said everything on premises will come to be seen as legacy, like a mainframe today. Workday CTO Stan Swete said on premises will come to be only be those things “written by you, unique to you, owned by you.”
4. The recession helped SaaS: That’s because SaaS can be implemented more quickly, with less upfront capital, and often less training, says Lochhead.
The panel also included a couple doses of silliness about SaaS advantages, like suggestions that big enterprise app vendors were in peril because they lag in Facebook and Twitter integration. One CIO audience member, who’s made a huge bet on in-house collaboration and social networking software, said, “The further you get from California, the less you care about Facebook and Twitter.” Asked who was looking to integrate enterprise apps with Facebook or Twitter, only two IT leaders in the crowd raised their hands. Workday President Aneel Bhusri also downplayed it, saying customers like the integration Workday built for Facebook, “but generally people are trying to figure out how to bring those platforms, from a policy perspective, into the organization.”
We can temper each of the points above. In terms of board attitudes, outsourcing offers a comparison--you better have considered it, but you don’t always have to choose it. In terms of services sprawl, look for more cloud integration services, which add convenience but also costs. The move toward “on premises as legacy” is real, but these changes tend to be glacial. Every conference discussion about cloud computing circled back to major security concerns. This hurdle remains high. In terms of savings, Forrester notes that some find expected SaaS savings chiseled away by “change management, integration, or force-fitting a SaaS solution into their business process.” (The report, “The ROI Of Software As A Service,” notes many SaaS savings as well.) If a recovery comes, speed-to-market actually might be SaaS’ biggest edge, as companies that skimped on IT scramble to meet needs.
Conventional enterprise apps vendors can still blunt some SaaS advantages, with a software-plus-services strategy. You see it happening, as SAP builds niche SaaS apps around its on-premises ERP, or Microsoft plans online Office . But Bhusri contends SaaS marks a new era and only “a fraction of the very large enterprise software companies will make the shift. Most will become maintenance houses.”
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