Cloud // Software as a Service
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3/21/2011
11:47 AM
Chris Murphy
Chris Murphy
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Global CIO: Even For Google, No Free Pass For SaaS

Google has made a notable concession to business users of Google Apps. It's a sign of things to come for software as a service, as enterprise customers get more demanding.

The second reason the Google Apps slow lane is important is because it sends a signal to business customers that Google can be flexible with them. Software as a service has had its honeymoon, and it's now going to face a lot tougher scrutiny.

That's my conclusion after reading the recent InformationWeek digital issue cover story, which looks at the state of SaaS and includes an exclusive survey.

Two numbers jump out from that State of SaaS article. First, we asked survey respondents about seven possible reasons their organizations might not use SaaS. Every one of those reasons is cited by fewer respondents this year than last year, except one: concerns about features/functionality. That percentage rose only a little--4 percentage points, to 20% -- but it's notable that business technology pros say their organizations are less satisfied with SaaS features today than they were a year ago.

The other key data point is that the percentage of respondents who say their organizations are satisfied with SaaS fell to 74% -- still impressive, but that's a big step down from 85% a year ago.

Companies were once just glad to get decent features from SaaS, quickly, without having to beg their IT teams to implement the service. (Well, until it was time to integrate those apps with anything.) Now, the fact that software is available as SaaS is no big whoop -- people take it for granted. The pressure increasingly is on SaaS vendors to ramp up features, make integration easier, allow for more customization, and offer better assurances on performance (SLAs) and security. Businesses won't just accept being a tag-along to a consumer-driven product.

As Michael Biddick writes in that SaaS cover story:

"It won’t be easy. SaaS providers’ profit margins are razor thin, and as the customer base expands and enterprises start demanding customization, providers will have their work cut out for them. For vendors offering both licensed and subscription as-a-service products, it’s a balancing act to offer world-class enterprise software while catering to a clientele that’s fixated on speed of delivery."

As SaaS customers get more demanding, Google must decide how badly it wants to win big business customers. Google's main rival for SaaS e-mail and collaboration leaves no such room for doubt: Microsoft is in land-grab mode, racing to get business customers on its cloud-based Exchange service.

Google showed some commitment to business customers with its recent Apps move. Count on would-be enterprise customers to keep testing that commitment with ever-tougher demands.


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