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1/14/2010
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Why You Need A SaaS Strategy

Too many CIOs take an ad hoc approach to software as a service. That won't cut it as SaaS use expands.

Business technology leaders find themselves in something of a cloud computing deluge, showered by vendor marketing, new services, and even CEO questions about their "cloud strategy." Much of the exuberance centers on the kind of computing-by-the-hour service that Amazon.com and others sell but most enterprises are only starting to ponder.

Amid the lofty aspirations, few have noticed just how powerful and grounded a force software as a service has become. The impact that SaaS will have on IT organizations is profound, and as business technology leaders, we need to ensure that our companies are ready for it.

While SaaS shifts software deployment and maintenance burdens to the service provider, freeing up resources for other projects, IT is at the mercy of the provider for availability, data security, regulatory compliance, and other key issues. Outages will halt business, and poor response times will hamper productivity. SaaS apps aren't just a nice-to-have. Three-fourths of companies using SaaS consider application services extremely or critically important to their organizations, according to our InformationWeek Analytics survey of 281 business technologists, including 131 who now use SaaS. About one-third describe their SaaS apps as mission critical.

Despite that importance, too many IT leaders treat SaaS ad hoc. Of those using SaaS, 59% say it's a tactical point solution, and only 32% consider it part of their long-term strategy. CIOs will get the most from SaaS by making it part of an overall enterprise architecture. We'll spell out nine key areas an effective SaaS strategy must address.

Why is SaaS on such a roll? Surprisingly, the No. 1 reason is speed to implementation--37% of SaaS users cite it as a major driver. As companies come out of the recession, with pent-up demand for new capability and often smaller IT staffs, this factor could become even more important. Speed is followed by capital expense savings, cited by 28% of survey respondents, and operational expense savings, cited by 25%.

SaaS isn't universal. But among the 47% of our respondents who use it, SaaS has moved far beyond sales force automation and CRM. Human resources, Web presence, e-mail, service desk, collaboration, financial, and backup apps all are used by a fourth or more of SaaS customers. At my firm, Fusion PPT, a boutique federal consulting firm with staff working mostly at client sites, we use SaaS for 100% of our business server applications. From invoice, billing, and time sheets to sales pipeline management to e-mail, we don't own a single server or software license.

This article is based on an InformationWeek Analytics report, priced at $99 for a limited time:

What you'll find:

SaaS Strategy Report • Deeper analysis of key strategy issues, including security, data portability, and app selection

• Our complete research data, including charts on security, satisfaction, usage plans, vendors used, and more

• Tips for researching and vetting SaaS vendors

• Insight into barriers to SaaS adoption

Download this Analytics Report
We went with SaaS for the main reasons the survey respondents are: quick setup and reduced capital costs. But another benefit, which will be increasingly powerful, is employee demand for mobility. SaaS will force IT organizations to make more apps securely accessible outside their corporate environment, be it remote offices, on the road, via a smartphone, or from a home PC. The demand for remote access may outpace IT's ability to deliver apps on a variety of platforms. For browser-based SaaS apps, mobile access is the name of the game.

For the half of survey respondents that haven't moved to SaaS, security's one of the biggest barriers: 39% cite it as a major obstacle. However, only slightly fewer cite the fact that they still don't know much about SaaS. Perhaps the fervor over cloud computing is overshadowing the education about simple software as a service. Data ownership is also a big obstacle, with 31% citing it as a reason they're not using SaaS. In speaking with SaaS vendors, they say security, privacy, and portability are the three objections they hear most. Portability will likely be one of the biggest worries this year, as companies pour more data into these apps and, having gained some SaaS experience and seen the growing number of choices, start switching providers.

9 Keys To SaaS Strategy

SaaS strategy is getting short shrift--perhaps because it's often being forced on IT. Among SaaS users, only 37% say the IT organization is the primary driver to use it; 54% say another C-level exec or line of business is behind it.

SaaS should be on the table any time a new IT-driven capability is brought into the company, and IT should have a clear framework for evaluating and operating it. In developing that SaaS strategy, teams should address these nine key areas.

InformationWeek: January 18, 2010 Issue To read the rest of the article, download a free PDF of InformationWeek magazine
(registration required)

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