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SaaSing Back

11 Jun, 2009 By: Matthew Gonnering imageSource

SaaSing Back

The software-as-a-service (SaaS) demand continues to rise thanks to the pairing of great technology providers and decision makers trusting in the SaaS model to help solve their business challenges.  I speak with prospective customers every minute of the day and the shift in
demand over the last three years has been enlightening.  Isolating the request for proposals (RFP) alone can give you insight into how buyers have changed.

As an illustration, my company serves organizations with challenges managing and distributing voluminous digital content.  Three years ago, when we would submit an RFP’s for digital asset management (yes, the acronym is DAM and we do have fun with it) only a tiny fraction of
these DAM RFP’s (quit chuckling) were seeking information about how they could actually better manage their images, audio, and video files.  Most of the RFP was asking about the specification of hardware and other IT requirements.  As a SaaS provider, it was a simple case of copy
and paste: “Not Applicable, Software-as-a-Service Provider.”

So the SaaS providers would rarely get invited any further in the process, but on occasion some of us would be taken to the final decision to stand against the installed software provider just so the organization could compare apples and oranges.  I wish I could’ve been a fly
on the wall in the decision room for some of those discussions.  Of course, if you have a financial stake in the outcome, it would be very easy to filter those discussions through a heavily sarcastic ear.  So this is how I imagine those discussions might have sounded:

“We have entertained two different methods of deploying a technology solution.  One method is purchasing software from a “brand name” solution provider and then using all our available IT resources to acquire the necessary hardware that we will never upgrade.” 

And then? (sidebar)

  • We can deploy the $200,000 software on these devices so that we can determine what customizations we would need to accommodate the original specifications in our RFP.
  • We can customize it for 5x the cost we paid for the setup solidifying our legacy application status which makes future upgrades from this solution provider more difficult  (but I am leaving the organization in 12-months for a better job so what do I
  • We roll it out to the user base after partnering with one of the integrators that the solution provider recommends.
  • This should all take anywhere between 3 and 36 months.

So many times in the past, SaaS lost out to installed software because a company gets to “own” the software.  But is that really true?  You don’t own the source code.  You just license it.  But in an ownership society even the perception of ownership sounds just good enough to
sway some IT decision makers.  The ironic thing is there is never any buyer’s remorse after the purchase of installed software, only buyer’s “rationalizations” such as:

  • We also get total control over the deployment and our IT team will work closely with the department using the software to meet their schedules and requirements.  It doesn’t matter that they haven’t gotten along in the past because their projects keep
    getting pushed for other IT priorities.  This time will be different.
  • IT says they should deploy everything anyway because they want to continually purchase new hardware because, “It is fun looking at new stuff and the hardware suppliers give me tickets to cool events and other gadgets to play with for personal use.” 
  • More importantly, when the “brand name” provider releases new software they get a chance to debug it on the fly which is a great high pressure situation to help advance their skill set; almost like defusing a bomb. 
  • IT gets to increase their networking opportunities because they could work more closely with the integrators and third party providers that would write the customizations to the original brand name software. But first IT gets to determine if it can take
    the upgrade because there has been so much customization it will cause too much disruption to upgrade which means we will never do it.

Gartner put out a report in 2008 that indicated the SaaS model has become increasingly popular during the last three to four years.  The report said more than 40% of organizations have used SaaS for more than three years and nearly 90% of organizations surveyed expect to
maintain or grow their usage of SaaS, citing the following as reasons for adoption:

Immediate Deployment

SaaS services are immediately usable & begin returning on the investment immediately.

Service is Just as Important as Technology

Service providers supply implementation, training, software, integration, maintenance, upgrades, and support as part of the total package and are staffed to handle each component themselves.

Infinite Scalability

SaaS providers are already geared up to handle scalability so when you need to go from 100gb to 100TB, even for 24 hours, you can do it & only pay for what you use.

Lower Price Points & TCO

Service providers are sharing in the power of user communities, shared technology, and innovation to keep costs down and price points that make installed software pricing look ridiculous.  Also, no additional resources needed in a complete software-as-a-service model.  No
extra IT maintenance is required.

Nobody yet has gone so far as saying installed software is near-death, but I will.  It is simply not sustainable - and is also distracting to the SaaS focus. Eventually, installed software will seem as “historic” as a newspaper delivered to your front door (vs. online). SaaS
is now the favored & fashionable method of using software technologies.

Matthew Gonnering is CEO of Widen Enterprises, a Madison, WI-based SaaS provider of digital asset management technologies.  He can be reached at matthewg@widen.com. Visit www.widen.com.

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