Erik Keller: Is it time to get SaaSy?
Erik Keller -- Manufacturing Business Technology, 6/1/2007
If you believe it’s too early in the game to be making a decision about software-as-a-service (SaaS), you’re probably wrong. In fact, 2007 is the year that companies should decide how far and deep they want to take SaaS in the future.Why? Because 2007 is the year that big companies such as Microsoft, Oracle, and SAP are looking to deploy major upgrades. If you bite off on any of them—most of which will be very costly and time-consuming—you will be sealing your SaaS fate for the next five to 10 years.
Now for some companies, this is exactly the correct strategy, but for others it will be a big mistake that will minimize their ability to deploy a more flexible and less costly IT capability. So sit back and start to think about how far and deep you want to take SaaS in your organization.
One of the first areas that companies should consider is that of commodity services for processing, storage, and standard applications such as email. Key to successful deployment will be service-level agreements that can be counted on. Some of the more interesting deployments are being delivered by Google and Amazon.
For example, Amazon sells 1 GByte of storage for $0.15 a month through Amazon S3, and processing for $0.10 per hour through EC2. Such services allow two things: benchmarking internal groups, as well as offering an inexpensive way for companies to get through peak load challenges.
The next area of consideration involves more horizontally oriented applications such as human resources and sales force automation (SFA). Payroll has long been delivered as a service by providers such as ADP, while SFA is one of the more mature and popular SaaS deployments out of vendors Salesforce.com and SugarCRM. PeopleSoft founder Dave Duffield has started up Workday, which is initially rolling out HR, but eventually ERP.
An emerging set of providers offer niche applications. For example, Rearden Commerce provides services for travel management. Another is Ketera Technologies, a fast-growing company in spend management. WebEx, which has been well-used for online conferencing, has recently introduced a collaborative application platform called WebEx Connect.
Perhaps the more problematic area for SaaS will be in key operational areas such as supply chain management, ERP, and manufacturing execution. In these areas, I am more suspect about how many companies will be able to take full advantage of SaaS. Regardless, NetSuite has been deploying an SaaS ERP solution for years, and SAP is rolling out its online A1S offering this year.
One big change with SaaS that companies must plan for is funding. Traditional software is purchased via a capital budget, while SaaS offerings are subscribed to via an expense line. While in the eye of Motorola’s Toby Redshaw, “Money is money,” lots of corporate groups don’t think that way, so buyers will need to reconsider budgets and capital allocations while they make the shift to SaaS.
While I’m not saying you need to deploy SaaS across the board today, at the very least—before you blow big bucks on enterprise upgrades—you should figure out your future direction and needs. It will save you a lot of money and agony a few years hence.
Trust me on this one.
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