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March 14, 2009

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Offshore SaaS Development

Very logical explanation... nice views...

Peter Cohen, SaaS Marketing Strategy Advisors

Excellent observations. It should be accompanied by a discussion of "Why Customers aren't Adopting SaaS more Quickly."

I'll offer a few reasons, though this isn't a comprehensive list:

- Concerns persist among IT executives about security, performance, reliability and configurability. See http://saasmarketingstrategy.blogspot.com/2009/02/whats-under-covers-and-does-anyone.html

- Companies' procurement and legal departments are not yet familiar or comfortable with SaaS contract terms and conditions and no standards are yet in place.

- Companies are cautious about deploying updates too quickly, especially if they are to be used by a large population of users.

- Vendors' marketing efforts to promote the new features sometimes can't keep with the faster release schedule. See note on "The Wheel of Death": http://saasmarketingstrategy.blogspot.com/2009/01/product-updates-and-surviving-wheel-of.html

- And of course, there's simple inertia inhibiting adoption of anything new.

While you make a strong case for the long-term advantage of SaaS solutions, there's more work to be done by marketers and others to overcome customer concerns and accelerate adoption.

John F. Martin

Thanks Vinnie - very good points, further underscores why on-premise innovation is missing (and eventually ossified as it goes to a software graveyard...).

I addressed my thoughts on the Innovator's Dilemma in a prior post at http://buildingsaas.typepad.com/blog/2009/01/saas-and-the-innovators-dilemma.html - very apropos for SaaS as a "disruptive technology" for on-premise software.

Regarding the CIO's dilemma in continually paying for low-innovation/value maintenance... perhaps an opportunity for SaaS vendors to promote their innovation investments more, assuming they can get past the IT on-premise gate-keepers!

vinnie mrichandani

John, thanks for the mention

you forgot 2 major reasons they cannot innovate

- there is little money and leadership for new product development. R&D in total gets 12-15% of revs, and as you say much of that goes to tweaking older releases, re-platforming etc so may be 5% towards new functionality

- Clayton Christensen's seminal work on the Innovator's Dilemma. Incumbent product (and sales and mkting) teams are hostile to new products. It is rare tech company like Intel which eats its own older children to allow new ones to mature. Most tech is about product extension,,,

The payback from systems integrators and outsourcers is even worse as they do not invest in R&D at all..

which goes back to my regular question - surely CIOs can squeeze 20-30-40% of each dollar or euro or yen in new product/process innovation if they kept their money internally - why do they keep accepting 5% or so investment by sw vendors?

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