Friday, March 10, 2006

To SaaS or Not to SaaS?

Interesting post by Charles Zedlewski of SAP speculating about the future of SaaS. He mentions the following "touted" advantages of SaaS:

- Quick to get started
– up and running in a day or two
- Cheap to install – no 12 month Big 4 implementation project
- Simple, no-haggle pricing - $xx per user, per month, all-in
- Simple to manage/monitor – i.e. hardware, datacenter, storage issues taken care of
- Always current – customers are always on the latest release of the product

I would like to add the following "real ones" to the list:

- Access to product and technology specialists: You can get access to the best people who can maintain and run your applications - including support specialists, developers and product functional experts. This cannot be done in an in-house setup without spending a lot of resources.

- Insulation against Shock: SaaS vendors, as they maintain multiple installations of customers across similar configurations, are proactively able to apply "learn one fix many" approaches to circumvent or eliminate problems that may arise in the future. Note that this is definitely more valuable than fixing the routine problems that arise. See here for how Oracle OnDemand does RCA (Root Cause Analysis) and proactive fixes. This point also includes the fact that the monetary loss due to outages and exceptions is always under control due to tight SLAs with SaaS vendor.

- Allow Bandwidth for Strategy: You cannot question the fact that SaaS frees up valuable management bandwidth to focus on strategic issues, rather than haggle with the vendors, stitch up SLAs, meet legal/regulatory requirements and hire/train IT staff.

- Best Practices and Regulatory Compliance: The SaaS vendor does this for you. Unless its imperative strategically to have an in-house setup, the SaaS vendor should be, in most of the cases, of value addition to your compliance and practices needs.


Vinnie Mirchandani said...

nice list...absence of up front sunk license cost is a big one...

Nitin said...

Not necessarily. In many hosted scenarios, you need to pay for the license and the hosting together. However licenses may be discounted attractively as the vendor may "adjust" the future cash flows of the hosting service against the upfront license payments.