Memo to the Skeptical CIO

Skep: Thanks for your participation in the "Skeptical CIO" panel at the SaaSCon conference in San Francisco.

Phil Wainewright captured the key points of this discussion, which I wanted to address here since your and your fellow CIOs' conclusions seem to indicate that SaaS pretenders and the big ERP vendors are dominating the discussion about SaaS in your offices so far.

To directly address the "Skeptical CIO" conclusions:

• "[SaaS is] not any easier to implement and use. Nor should it pretend to be." Well, as a SaaS vendor, when we're asked by a customer to install on-premise, we simply say "Ok, here's the CD and installation instructions, please call us when your IT group has assembled and installed and configured the servers, database, application server, and other infrastructure for our application. Or, here's the SaaS implementation login which we can start using RIGHT NOW." SaaS eliminates all the time and effort (and cost) to cobble together the components for on-premise software installation, which for an enterprise application can take an IT group months - at least, that's what the business buyers tell us. Plus, most SaaS vendors don't get paid until the software is being used, so they've built their SaaS software to enable fast implementation and to minimize training.
  
  Aberdeen Group's surveys have repeatedly shown both that SaaS implementations are faster and that SaaS's dramatically faster time-to-value is the most important benefit to the business buyer (here's one of their studies in our space). So, I'm not sure why you dismiss this SaaS benefit - surely you and your colleagues have endured plenty of multi-year on-premise software implementation projects?



• "Vendors should stop harping on about how, if you don’t like a SaaS solution, you can just unplug it and go elsewhere. That’s ludicrous." This comment is accurate; this claim isn't one that we make. Switching a SaaS application is really a new implementation - much easier and faster with SaaS, but not trivial.



• "The cost model is not necessarily any better. Customers amortize upfront costs anyway." SaaS creates economies of scale by sharing infrastructure across many customers - and it's true that a large IT shop with a pre-existing infrastructure can gain many of the same economies of scale.
  
  The faster and much smaller implementation project is a real cost savings, however, especially for large enterprises. As RightNow Technology's CEO puts it, you'll save the consulting teams that "camps their tents in the parking lot for three years while they get your application to maybe work."
  
  Another cost savings of SaaS is far less obvious. Ask your on-premise software vendor, "How much of your company's time is spent supporting old versions of your software across all your infrastructure ports (databases, operating systems, etc.), and porting and testing each version and maintaining the compatibility matrix?" If they have a significant customer base and are truthful, it'll be a large part of their development and support effort - according to The Economist, "as much as 70-90% of what programmers do in a large enterprise software firm is maintenance: upgrades, minor enhancements and bug fixes". True SaaS solutions reverse this proportion - spending only 10-20% of development effort on maintenance - because only the current version is maintained on a single platform, and every fix is automatically delivered to all customers. So the vast majority of the SaaS vendor's development effort is applied to new innovation and customer value.



• "On-demand vendors shouldn’t bother to portray themselves as partners in achieiving business results. They’re just software vendors selling products." Well, this may be true for some vendors - especially the SaaS pretenders who are telling you that SaaS is just another "deployment option". According to Jeff Kaplan, "The first thing CIOs have to look at is how any SaaS system is truly architected. Some vendors are still selling legacy apps but simply hosting them and offering them at a different pricing model." For a checklist of questions to ask a potential SaaS vendor, see the whitepaper Why Technology Matters.

Again, thanks for your participation - hopefully this gives some perspective from a true SaaS vendor's point of view.  The bottom line is that SaaS delivers a better ownership experience on factors that business buyers care about, driving SaaS adoption for new purchases and putting CIOs in the position of leading its adoption or being left behind. Embracing and driving the key benefits of SaaS - lower up-front cost, faster implementation and greater vendor accountability - will lead to higher/faster ROI with lower risk for both CIOs and the business.

Comments

[John Martin]

Hi Jhalopy, thanks for the note, the correct URL for "Why Technology Matters" and other white papers is now http://www.iqnavigator.com/White_Papers.html
Best regards -- JM

[Jhalopy Cruize]

Hi,
I downloaded the white paper "Why Technology Matters", but the pdf file is corrupted. Could you email me a good copy.
Thanks