Getting Down to Basics About SaaS

I was interviewed today by a journalist from one of the CIO-oriented pubs who surprised me by asking a series of questions which came back to many of the same fundamental misconceptions about Software-as-a-Service (SaaS) which I thought I had dispelled in a BusinessWeek commentary I published in 2006.

The first misconception the journalist had was that SaaS solutions are not robust enough to satisfy large-scale enterprises, as well as small- and mid-size businesses (SMBs). I pointed out to him that large-scale enterprises have been leveraging SaaS solutions for a long time, but have only recently begun to talk about their successful experiences.

One of the most recent announcements of a major deployment of SaaS by a large-scale enterprises was by Flextronics who is adopting Workday's on-demand human resource management (HRM) solution to support its 200,000 employees.

Real Total Cost of Ownership
The second misconception the journalist revealed was the old "buy vs. lease" argument against subscribing to a SaaS solution. This argument suggests that after 2-3 years it doesn't pay to subscribe to a SaaS solution because it costs more than it would to simply purchase a perpetual software license.

This argument doesn't hold because the cost comparisons are flawed. In order to do a more accurate side-by-side comparison, IT and business decision-makers must calculate the full cost of deploying and maintaining a software application, and also calculate the risks associated with these processes.

Some research firms have suggested that it can cost as much as ten times the original software license fee to install and maintain the application. They have also found that over a third of enterprise software deployment projects fail to be completed and of those which are fully deployed many are under-utilized.

Avoiding the Old Software Trap
In addition, many organizations do not implement software updates and upgrades because they are afraid they will disrupt their operations. As a result, they are not taking advantage of the vendor's latest software enhancements.

SaaS eliminates the upfront software costs, and additional deployment and maintenance costs. It also eliminates the implementation and utilization risks. SaaS also ensures that every customer benefits from the vendors' latest updates and upgrades.

Finally, this journalist asked why a organization of any size should subscribe to a SaaS solution if they have an inhouse IT team that is talented enough to deploy and maintain software applications themselves.

My response was to ask why should today's overworked IT people waste their time simply deploying and maintaining software applications when they can be performing more valuable tasks supporting their organizations' strategic initiatives or enabling new business innovations?

If you are an IT or business decision-maker, you should be asking yourself the same question in these increasingly challenging economic times.