8 Myths of Software-as-a-Service 169
abb_road writes "BusinessWeek looks at the current state of software-as-a-service, arguing that the model is well established and is distinct from failed ASP/Hosting models of the dot-com era. Far from a passing fad, the model is starting to see large-scale adoption, and traditional vendors are having trouble revamping their applications and financials to get in on the action. From the article, 'As SaaS gains mainstream acceptance, it is becoming an important disruptive force in the software industry. And as long as the quality and reliability of SaaS solutions continues to improve, the appeal of SaaS isn't going to go away.'"
Software is software, service is service (Score:3, Insightful)
Most all software EULAs say, "No Warranty" in terms of being good, doing what it says, or whatever. That is not a service, that is software, "Use at your own risk".
Service includes maintenance releases, updates, support, installation help, onsite repairs, telephone support, etc.
If I don't pay for software, odds are I can still use the software, but my service is going to be minimal at best. If I don't pay for service, it would take a real philanthropist to provide service to me.
SAP CEO's take (Score:4, Insightful)
"We have not changed our strategy. We have this mixed environment and run a hybrid model. We do it for good reason. Our customers want flexibility, so, over time, they can make the decision to source us in, or upscale the functionality and integrate us into the back end.
You can do this on-demand for certain areas and certain functions, but not for everything. Everybody starts with salesforce automation because it makes sense since it's not very structured. It's simple and more office-like. But the more you come from this type (of system) to the core of CRM (customer relationship management), the more difficult it will become to do it on-demand. People don't want to share the data with others."
Software as a service is a good idea... (Score:5, Insightful)
Marketing nonsense (Score:5, Insightful)
Vendor Lock-In in the worst way... (Score:5, Insightful)
Now that all our data is in the system and we are running our operations off of their system we are pretty much screwed...they can jump the price at any point and we just have to pay it. The sales people lie (no surprises there) about having ways to export your data, but there aren't any really there.
Just be sure before you jump into something like this that you have a way to get your data back AND get it in writing that said tools will always remain and be current.
(and, yes, since we bought into their system they have moved to only allowing Internet Explorer....D'oh!)
What is the goal? (Score:3, Insightful)
The office-app replacements are the proverbial "cure for which there is no disease". There is little reason that a composition program needs the network to function better, and certainly not enough reason to justify the hurdles involved in presenting these programs online. For something like tax-prep, it makes perfect sense to offer a "use" payment plan. The software is, by its nature, only ever used once a year, and the functionality needed (basic fill-in) is no real stretch for the Web. Something like customer-management is a task that is there to benefit the outside world, so having it tied into the network is an obvious choice. Something like internal project-management software depends more upon internal communication, but with the widespread connectedness of the Web, it makes sense to use the already-existing network to present the function, and get the peripheral benefit of being to check in on the road.
That said, the article read like a press release.
Let's see if the outsourcers are smart this time (Score:2, Insightful)
Once upon a time we bought an ERP system. We had the choice of buying our own server hardware and hosting it ourselves, OR we could choose the "service on demand" option. The "on-demand" option was pitched by a fanatic salesman who sent these nifty glossy brochures (via FedEx overnight/signature required, no less). Lots of cost justification charts to explain the ROI that you get by going this route; more than enough to fool the average golfer.
But in our case, it turns out that any year in which we did not fully replace the hardware, we would be better off self-hosted. And even if we upgraded everything every year, it was a break even deal for us. So every year, I get a another set of glossy brochures as the fanatic salesman tries to pitch (unsuccessfully) to the CFO and CEO. There must surely be some cost efficiency in combining a bunch of customers onto a huge box, but none of it would be coming back to us in the form of savings.
Of course we could have gone with lower-cost outsourcers, who would cheerfully save us some money and give us the exact same ERP software (with company "X" hosting the product instead of the ERP vendor). But I have to question the technical expertise of the low-cost competitors. The lower the price, the more questionable the whole proposition becomes.
The way you save money is to find an outsourcer who runs a tight ship and accepts thin margins. But how tight and how thin? In the nightmare scenario, the outsourcer goes bankrupt, access is cut off, and our confidential data ends up for sale on E-bay. What exactly is the contingency plan for that?
disruptive? (Score:1, Insightful)
Useful Metrics (Score:3, Insightful)
My company uses Netsuite as its accounting application. It is a web-based accounting and salesforce automatication suite that does many things well. There are some things that it does not do well, but can be worked around.
Companies like Netsuite and Salesforce may tout 99.99% uptime, but we have often run into scenarios where the service was running too slow to be unusable. Unfortunately, strictly speaking, the system was not experiencing "downtime", thus allowing the vendor to maintain their statistic, even though for us the system was as good as down.
The "lower cost of ownership" claims may not pan out over the long term. The article talks about SaaS being metered by usage levels. Netsuite charges by the named user, and I believe Salesforce still does, as well. The pricing model is similar to "normal" softawre. The TCO measurement depends largely on the size of an organziation, i.e. do they already have the pieces to implment a full-fledged CRM/SFA, (enterprise database, email and storage servers)? If you have these things in place and are used to supporting them, a traditional CRM or accounting package may cost less than an SaaS.
Other metrics that are missing are customer support response time. The unfortunate part of SaaS is that if the system goes down, everybody will call at once, and when you need the vendor the most they will be the most inaccessible. In general, though, I would love to see metrics of quality of customer support not only for SaaS but for regular vendors as well. When you deal with an SaaS, you typically don't have a VAR helping you out, it's you and the vendor directly. If their call center is understaffed or undertrained, it's painful
The article, itself, reads like a press-release and is horribly vague, especially when mentioned the "new 'Live' version of [Microsoft's] Office suite" - which does not implement Word or Excel, and treats on-demand updating of anti-viral software as SaaS. It isn't.
What we've found as a past user of Salesforce.com and current user of Netsuite is that you really need to do the upfront due-dillegence to make sure that these SaaS systems conform to your business model. Netsuite, especially, is awkward to deal with if your company provides services as opposed to sells widgets. Get a strong consultant on the front-end to make sure the product is a fit for your organization, and be prepared to do significant customization. Also, be careful to get specifics on how much it costs to import and export data to other systems. In Netsuite, for example, you have to have certain versions of their system to import/export XML records of your data (their webservice based pricing is, at the moment, still free depending on how much data you move through it). Make sure you have access to your data.
Doubletalk (Score:5, Insightful)
Why can't they just say "it's the same thing, but the business climate is more ready for it now?"
Re:Oh goody! More buzzwords! (Score:5, Insightful)
Basically they mean to say that businesses are becoming more and more open to externalizing anything that is not the core part of the business.* So, a company selling cooking grills no longer has an employee or department who handles email. They simply contacted 'Turnkey Enterprise e-Solutions Ltd.' and had them handle everything about email for the cost of $5 per address**, per month. After all, this company is in the grill business (core competency) not in the email business. Why worry about maintaining a server, or setting up users, or doing backups, or handling spam? The executive just wants to make better grills and sell them to more people.
So, let's say something like that (email) is proposed. Let's say our grill company (GrillCo) needs about 400 email accounts. Since they are not buying email servers or hiring spam gurus, there's no large initial investment for them. They can test it out with one department (accounting) and if the ten people there like it, they can expand to doing everyone's email that way. It eliminates risk for the buyer.
Now, is this a better way to go? The truth is anyone that will provide a definitive answer either way is off their rocker. It may work for some things, it may not work for others.
But the reason things like these are discussed, and possibly becoming more and more popular, is simple; for better or for worse, cost-cutting is being highly rewarded at the executive level. If you run a publicly-traded company and do not appear to be "cost oriented" then you raise suspicions among boards, shareholders and Wall Street.^ There's a whole crop of companies whose only goal is to cut costs for their clients (for example, ICG Commerce [icgcommerce.com]). Of course, sometimes these pressures come other sources [fastcompany.com].
So, by performing a buzzword-ectomy on the above, we result with something like this, "It has become fashionable to look at costs above other parts of a company's overall performance. Software-as-a-Service can sometimes help cut costs, so it is being considered more widely as an option."
Unfortunately for the tech crowd, it has less to do with AJAX and new whiz-bang applications and more to do with the business side (shudder) of things.
* Whether or not this is true I don't know, but that's what they are proposing.
** I'm picking a number out of thin air.
^ I'm not saying it's good, that's just largely how it is.
At IBM we called this... (Score:5, Insightful)
Being able to charge a subscription fee for your software and continue to get paid, rather than have to make money by continuing to get unit sales, is the holy grail of any software company.
Microsoft tried to force all their customers to this model without a heck of a lot of success. In my opinion, it's not because they couldn't have had this model, it's just that they tried too late - and found out that once something is "good enough", people simply don't spend the money to "upgrade" to something that's the software equivalent of road bed materials: an OS exists only to permit people to run applications, and once they run, you're done buying OS's.
Frankly, I think the best thing that has happened to Microsoft upgrade sales in a couple of years has been that iTunes doesn't run on Windows 98.
-- Terry
Re:Oh goody! More buzzwords! (Score:5, Insightful)
Re:Crap. (Score:3, Insightful)
What about security, ownership, (ugh) IP, et al (Score:3, Insightful)
First: information security. The customer has a whole new group of people, the SaaS organization, with actual or potential access to the customer's data. How is the customer to evaluate the real security of the SaaS organization? What about the link between the customer and the SaaS facilities?
Second, as the SaaS organization possesses the customer data, who is the actual owner of said data?
Third, can the SaaS withhold the customer data in the case of a disagreement? How quick is a resolution to any disagreement? Can the customer get a satisfactory dispute resolution? What stops the SaaS provider from sitting on a customer's data until the customer buckles?
Fourth, should the SaaS provider have a problem, can the customer data be seized and/or sold as an asset?
Fifth, should there be mis-behavior on the part of an employee of the SaaS provider, can the customer data be seized (intentionally or incidentally on a server)? What happens if an SaaS employee sells customer data?
Sixth, who owns any copyright/patent/trademark. Can the SaaS patent customer data or develop patents from customer data?
These seem to be rather daunting problems. Specifying answers in contracts is good, but resolving problems through contracts are slow and expensive. The customer is in a particularly vulnerable position, while the SaaS provider is in the catbird seat.
Re:This press relase brought to you by Salesforce. (Score:3, Insightful)
Re:Crap. (Score:2, Insightful)
Re:Software is software, service is service (Score:3, Insightful)