The SaaS Industry Should Eat Its Own Dog Food

SuccessFactors, provider of an employee-performance management software service, announced today that it's using NetSuite's ERP software service. Well, good for them. And shouldn't we see more of that--the software-as-a-service industry eating its own dog food?If a SaaS provider wants potential customers to feel good about SaaS, it should set the example by running as much of its own applications on software services--that make sense--rather than on premise. Because if a SaaS provider has concerns about security, control, and long-term cost of ownership for SaaS for their own IT infrastructures, why shouldn't their customers?

Of course, not all SaaS vendors and offerings are alike. ERP as a hosted, subscription-based software service, for example, continues to be something I would bet even SaaS vendors are having a hard time taking off premise. I don't have any data on how much SaaS has been adapted within the SaaS industry for internal operations, but my guess is there are still a lot of servers running software in data centers at SaaS companies.

Salesforce.com, for example, says it's very committed to SaaS/cloud computing for its own internal IT infrastructure, but still has some important apps running in-house. It's using its own Force.com computing platform for some apps, plus things like Workday for HR and Google Apps, and Coda on Force.com for some ERP-type business processes.

But Salesforcce.com still has Oracle accounts payable and receivable running in a small data center. Moving away from that on-premise software isn't easy for a company like Salesforce.com, with more than $1 billion in annual sales and continued strong quarterly growth. But when the time is right, Salesforce.com will move those financials into the cloud, said Trae Chancellor, Salesforce.com's VP of Enterprise Strategy (and formerly its CIO), in a discussion we had last week.

There's not a whole lot of pure SaaS solutions for ERP-type business processes out there (NetSuite, Workday, and Coda are some of them; SAP's Business ByDesign is still in test phase with limited customers), and even fewer that are designed for large-company ERP (although NetSuite and Workday insist they can be used for big business SaaS, although not sure a lot of CIOs and market analysts/experts are convinced of this yet). Even for the SaaS vendors, on-premise ERP could be the last to go.

So kudos for SuccessFactors, with annual sales of about $140 million, for demonstrating its support for ERP SaaS, and for supporting a peer in the fledgling SaaS industry.

According to the release, SuccessFactors is integrating its global sales operations with NetSuite at a cost that is one-third less than what it would pay for on-premise software. The company said it's also saving $250,000 a year on IT staffing costs.

SuccessFactors uses NetSuite OneWorld for ERP, general ledger, revenue recognition, foreign subsidiary consolidation, expenditures and approvals, and uses data from the system for reporting and analysis.