I re-read Nick Carr's "Does IT Matter?" last week, and it seemed to me even more relevant than when it was published four years ago. In particular, it spurred thoughts about SaaS's long-term value and viability in a commodity-IT world.
The major premise of the book seems very SaaS-friendly: Nick's thesis is that IT innovations are increasingly easy for enterprises to replicate, so that competitive advantage from IT is fleeting and not worth the price to create IT innovations internally, or even to pay an early-adopter price premium. As a result, vendors are becoming the major source of IT innovations, making innovations available to all enterprises, and IT prices quickly gravitate to the most cost-effective way to deliver the IT capabilities.
With a shared infrastructure and innovations quickly leveraged across its entire customer base through automatic upgrdes, SaaS is both a major driver and a major beneficiary of Nick's thesis. By eliminating a customer's up-front license costs, infrastructure outlays and benefit-delaying implementation projects, SaaS greatly reduces the adoption cost of IT innovations and capabilities for enterprises.
In addition, while SaaS doesn't eliminate switching costs, if a SaaS solution isn't meeting the enterprise's needs it can be turned off and replaced for far less than an aging on-premise solution.
In short, SaaS makes IT innovations easier, faster and lower-cost to adopt. This pushes IT innovations more quickly throughout the economy, greatly increasing the innovation's overall economic impact, though potentially reducing any unique technololgy advantage for any particular enterprise customer. As a SaaS provider, this works for me - our technology has a bigger impact economy-wide, much more cost-effectively and more quickly than if we sold on-premise software.
With that said, SaaS does matter to individual enterprises in one major way: Enterprises that aggressively adopt SaaS will achieve more benefits (from free ongoing upgrades) at a far lower cost of ownership than enterprises that dogmatically stick to on-premise software. SaaS adopters will pay less, have more flexible expense structures, and avoid throwing capital down the rat-hole of bespoke infrastructures.
All enterprises have to do is select true SaaS providers, avoiding SaaS pretenders that will leave them behind on old versions or with lesser capabilities over time than true SaaS providers. That's the subject of my next post.
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