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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.'"
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8 Myths of Software-as-a-Service

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  • by Gravis Zero ( 934156 ) on Monday April 17, 2006 @03:06PM (#15143915)
    they have had disservices for a long time... just look at windows. it's a huge disservice.
  • To condense the article down: SaaS is a fancy term for outsourced business operations. The only difference is that companies provide communications about these services through... (wait for it)

    (wait for it)

    (keep waiting)

    the INTERNET!

    Are you impressed yet? It's very Web 2.0, I'm sure. Some of them might even use AJAX and Social Networking and Portal Technology and Peer to Peer Business to Customer relationships and ...
    • Yeah. It just sounds like more ways to extract money from the customer under a moniker. I didn't read the article so I don't know if they are talking about the consumer market or the commercial marketplace in this specific instance.

      But in the consumer market, ebay has been making it's auction software (blackthorne) a service for the longest time now, where it gets rented for 25 bucks a month (ever since they bought out the company who originally made it). Not too painful monthly, especially if your (smal
      • by walt-sjc ( 145127 ) on Monday April 17, 2006 @04:18PM (#15144405)
        The big problem with these services is not that they are crappy applications, but that you get into "All Your Data are belong to us" situations. It makes migrating to and from a service Very difficult, expensive, and timeconsuming - if you can do it at all.

        • I've also noticed a number of outfits promoting "software as a service" with phrases such as "upgrades are painless and free!" The problem with that is that I generally don't want my applications to update themselves without my consent. Maybe I like to wait until the bugs are worked out of a new version, or maybe I just like what I have because it works and I'm used to it. Either way, software as a service is simply placing too much control over the way I work and do business in the hands of a third party.
        • I work for a company that delivers its software this way but the "All you data are belong to us" thing doesn't have to apply as we've developed an API into our system (among other methods like direct access and custom development, etc) so that companies can offer their product into our lucrative system without exposing their data. The clients who use this option have their various reasons for going this route, as you would imagine. I believe this is common in many schemes like this.
        • It makes migrating to and from a service Very difficult, expensive, and timeconsuming - if you can do it at all.

          ...Which is a "window of opportunity" for some of those providers (at least two or more, probably little ones at present) to include "portability" as an asset and win the startups' portion of market in blitzsecond. Especially if large end-customers (khm*military*khm) demand it, for reasons of stability and survivability of provider thruout projected product or service lifecycle. (Hi)Story of Inte

    • The article acknowledged that this was merely the reincarnation of old-style Application Service Providers but also said that the current climate is more permissive for several, well, err 2, reasons;

      "Today's economic and competitive pressures make nearly any form of outsourcing fair game."

      "Many companies now consider various IT functions and business applications commodities and not core competencies."

      In trying to explain the new-wave of software rental services It further notes that:

      "Companies of
      • The article acknowledged that this was merely the reincarnation of old-style Application Service Providers

        Even though they mention ASP (probably to get their buzzword quota), the "concept" has nothing to do with ASP. Back when VAN companies charged your company money to move EDI data, they were providing a third party service. What the article is saying is that a service like this would be "special" because it used (wait for it) the INTERNET!

        Personally, I'm not impressed. The Internet has made communicatio
        • Back when VAN companies charged your company money to move EDI data

          I'm not completely clear on the concept of VAN companies. Could you explain them a bit more using an internet analogy?
          • Nevermind. I think I get it.

            VAN stands for Vehicular Anywhere Network. Because DARPA's Sneakernet didn't scale well for WAN configurations (offsite backups could take days and several wheelbarrows), pre-internet network developers came up with VAN. VAN's advantages were that it used the pre-existing transportation infrastructure (or 4WD vehicles when none was available), and piggy backed on the existing applicable state and federal vehicular code as a protocol. It's disadvantages were that it was difficult
        • Thats an excellent idea.
          Personally, I have an idea about combining a bookstore and ...(wait for it) the INTERNET.
          or taking by brother's auction buisness and putting it on.... (wait for it) the INTERNET.
          Still even better yet, I think I could work something out with my cousin the mail man to transfer messages on ....(wait for it) the INTERNET

          I could go on, but I catually agree with the parent, I'm just being a jerk.
      • Doubletalk (Score:5, Insightful)

        by StarKruzr ( 74642 ) on Monday April 17, 2006 @04:00PM (#15144291) Journal
        The article declares that ASP is totally different from SaaS and then completely fails to justify this statement.

        Why can't they just say "it's the same thing, but the business climate is more ready for it now?"
        • Re:Doubletalk (Score:4, Interesting)

          by Angostura ( 703910 ) on Monday April 17, 2006 @05:38PM (#15144868)
          The article makes 2 points:

          1. The business climate is different
          2. The ASPs tried to host apps that hadn't really been designed to run over the Net. The new generation is using apps that have been specifically been written with that in mind.

          I'm not sure I believe the hype, but at least get the author's points right.
      • by The-Bus ( 138060 ) on Monday April 17, 2006 @04:01PM (#15144293)
        I know you're being facetious but the statements are somewhat on-point. I'll translate and hopefully not offend anyone's intelligence by doing so.

        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 []). Of course, sometimes these pressures come other sources [].

        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.

        • 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.

          Part of the problem with SaaS and outsourcing generally is that "the core part of the business" has no intrinsic meaning, and soon comes to mean, "those activities that result in the greatest direct profits." On this model, "the core part of the business" is in all cases nothing more than sales and marketing--everything else is a support activity for those fundament
          • mod up (Score:3, Funny)

            by Mateo_LeFou ( 859634 )
            Nice post. Saas just has a stinky aura to it. It adds a new possibility to ye olde adage:

            Give a man a fish, he'll eat for a day
            Teach him how to fish; he'll eat forever
            Sell him fishing-as-a-service, and pretty much his entire physiological development is subject to the vagaries of *your busines model, because he wanted to concentrate on his core competencies

          • If I had mod points, you'd get modded up.
        • Hi there The-Bus,

          I work for a company that offers SAAS in the finance industry and I'd like to give you a different perspective on this matter.

          What you say is not wrong. However, you sound like cost-cutting is the unique benefit/motivation of ASP/SAAS. It is important to note that focusing on the core competency is, in and of itself, a big advantage.

          Imagine a CEO of mid-sized company, strugling to take his company to the next level, having to spend his time with the head of IT because of the various issues
    • Yea, it still sucks. The stuff they're providing as a service is mickey mouse crap that any self-respecting IT department should be able to handle, not the kind of stuff that REALLY takes serious work.

      I work in a place that depends on about 5 big apps...What I'd give for some kind of liscensing that would allow us to keep current without having to pay huge migration costs. That would be software-as-a-service...This is just not powerful enough to meet our needs.
  • And as long as the quality and reliability of SaaS solutions continues to improve, the appeal of SaaS isn't going to go away

    You mean if quality and reliability continue to improve that you appeal will continue to grow???

    Why didn't someone let me in on this secret a long time ago!

    • You mean if quality and reliability continue to improve that [your] appeal will continue to grow???
      That implies that all unappealing people produce low quality products and are highly unreliable. However, since I produce high quality products and am reliable, I must therefore be appealing.

      Awesome! I AM a hunk!
  • by hackstraw ( 262471 ) * on Monday April 17, 2006 @03:10PM (#15143950)

    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.

    • If I don't pay for service, it would take a real philanthropist to provide service to me.

      And yet it happens all the time in the open source world . . .
      • And yet it happens all the time in the open source world . . .

        True. I thought that when I wrote it, and expected a comment like this.

        I find that mailinglists and wiki's and 3rd party "support" much superior to paid for support. Call Apple, "Why is my brand new PowerBook kernel panicking when I change network locations?" Apple guy: "We have no knowledge of such an issue." Minutes later or osxforums or some other 3rd party site, the headline was "Bug and workaround in OS X version x.y regarding kernel pan
      • Actually, true philanthropy doesn't happen much more often in the open-source world than it does anywhere else. What you're getting from an open-source project isn't a service, it's an incidental benefit resulting from the service the project's developer(s) provide to themselves. Example: I want a program to do X (whatever X might be), which you also happen to want. I have the necessary time and skill to develop such a program for my own use, and do so. Since I made the program open-source, you also benefit
        • thats true but most projects do provide a significant ammount of support for the users.

          with smaller projects this comes from the developers themselves with larger projects it tends to come from other users (which can lead to blind leading the blind type problems) but virtually any sucessfull OSS project will have some sort of freely availible support.
  • by Anonymous Coward on Monday April 17, 2006 @03:11PM (#15143954)
    "Software as a service" is almost as old as the public internet. Many banks, hospitals and government institutions have been running remotely hosted mainframe apps for over 2 decades ... it's quite proven successful business model.
    • Stop being so logical and informative in your posts. That's not what we are here for on Slashdot.
    • That's what I thought at first, but I think they mean service as in something you rent out for private use. For example: [] , a web based project management thingy. AFAIK, you can't buy Basecamp and install your own copy. Basecamp exists solely as a service that you pay to use. The application that your bank offers is not quite the same thing because you're not using it for private purposes. You're using it to interact with the bank only.

      • I don't think the parent was meaning that banks, hospitals, etc. are hosting B2C applications remotely, but rather their software that they use internally is being hosted as a service by another computer elsewhere, either one they run or one run by another company.

        If I'm not mistaken, my bank (Wells Fargo) has their tellers using what looks to me to be a web page in IE coming from a remote site. Similarly, I've worked for a couple of clients in the past that have provided hosted software applications for

        • has their tellers using what looks to me to be a web page in IE coming from a remote site

          HTTP as a 3270 datastream for framebuffers; web services as CICS transactions, hidden modified fields and all; all apps and data on remote servers. It's all coming back around.

          I don't think the parent was meaning that banks, hospitals, etc. are hosting B2C applications remotely, but rather their software that they use internally is being hosted as a service by another computer elsewhere, either one they run or one r

    •, what I gather here is that "[Software] Application Service Providers" are out but "Software [Application] Service Providers" are in.

      Got it... I will notify Vanity Fair immediately.
    • Back when most /.ers were diaper-fillers computation was done by mainframes. There were not many of these (More than 5, IBM) and many companies bought time from computer service centres. Some customers ran their own software (ie computer as a service), but in the commercial sector most used the service provided software (ie. software as a service).

      For example a few small banks might all use the same service centre and the proved software, but just load their own data. The user model would be load disk for B

      • General Electric was also big in time-sharing during the sixties. My father used to run simulator programs on a big GE mainframe: he had a teletype in his office. Really, at the time it was the peak of high-tech.
  • SAP CEO's take (Score:4, Insightful)

    by dotpavan ( 829804 ) on Monday April 17, 2006 @03:16PM (#15143995) Homepage
    In an interview with CNET [], the CEO of SAP, Henning Kagermann replied to " With the success of, everyone is talking about on-demand applications. Where are you on that?" by saying:

    "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."

  • by danpsmith ( 922127 ) on Monday April 17, 2006 @03:17PM (#15144000)
    If you look at the fact that no code is ever flawless, and always has bugs, so there's always patches and upgrades. Most people in the regular software industry are passing off intermediate versions of flawed software as a product, and then giving the service away for free. This is just the opposite of that model and it makes more sense. Continuing to support, and making bug fixes to past versions of software is part of the service, clients have a real voice in the future of the software package by communicating what their future needs are. As they pay per period versus per version, software development companies don't have to guess anymore what their clients want to get them to "buy the new version" instead, the clients can have a real voice in what features are important to them in the future, without the need for pushing stuff off to a higher version versus an incremental update. It's a better model because instead of selling "why you have to ditch this old one and buy this new one" you are instead saying, "we have an established relationship in the past, and if you enjoy this, we can continue." Resulting in less useless bells and whistles in new versions, and more of the actual needed functionality. Instead of inventing things you dream they will want, you take care of their changing needs instead. That's why I think it's a winning model (if companies followed it correctly).
    • It's great as long as the particular applicaiton/service works well over the internet (usually in a browser).

    • The problem is that you still cannot eliminate human factors. Humans are fickle, and may have changed their minds between telling you what they want and when your engineering team finishes the feature. Existing customers may be able to tell you clearly which bugs are important to them, but they can't necessarily tell you what new features are needed to attract new customers. There is still going to be a level of guesswork between the customer and the engineer, what changes is who (customer or marketing) loo

    • What happens to the service and software as a service if the company goes out of business, raises the prices beyond value, or stops offering said service?

      If I have an app that works with MSDOS 2.3, I'm free to install and use MSDOS 2.3 with no service or any kind of support available or necessary.

      If MSDOS 2.3 were a service, and my software was incompatible with any other OS version, what would I do?

      • This is where I would break into the radical of saying that software companies using this model should perhaps keep a backlog of previous versions available to their customer and continue to support these for as long as possible, even if the features in one particular version have become obsolete or have been removed in subsequent versions. This would be part of that model. In an online model, you have no choice essentially but to upgrade, unless the provider runs a separate server with old versions which
    • "... the clients can have a real voice in what features are important to them in the future ..."

      Do they? One thing not mentioned in either TFA or your post is what does a customer do if the service is no longer meeting their needs? This industry has historically been about vendor tie-in. And about companies constantly ignoring what their customers want; and telling the customer what they will get once they are locked in.

      The obvious example for slashdot is Microsoft; but I can think of so many others tha

    • It's been tried and failed though. Unix AIX, Tru64, IRIX, and even Solaris( a few years back) were not sold as a package but as a service. You got a piece of hardware and software upgrades and maintence for a subscription price.

      And every single one of those models are being replaced by the current model of selling services and giving out software(aka linux,freebsd's,Solaris, etc)

      Selling or leasing software will fail for every large business will then be 100% depenadant upon some other company to let them
  • by plopez ( 54068 ) on Monday April 17, 2006 @03:18PM (#15144005) Journal icle.php/3598831 []

    Which seems to imply at least some backlash and return to 'on premise' models of software.
  • by XorNand ( 517466 ) * on Monday April 17, 2006 @03:19PM (#15144007)
    This message brought to you by This article reads like a press release from, the biggest player in the "software as a service" marketspace. I tried Salesforce when I started my VoIP business; if they're the market leader, this industry is too immature to be taken seriously.

    First off, it isn't is $65 per month, per seat and it has to be paid 3 months in advance. This makes it quite a bit more expensive for small businesses than say Goldmine or ACT. Secondly, the reliability was horrible. CRM is the lifeblood of any organization. *Any* downtime results in all of your customer facing people (sales team, customer support staff, billing, etc) basically sitting around on their hands. Sales leads were lost and customers were pissed off. The worst part about it is that we couldn't do anything about it. I couldn't reboot a server, rebuild table indexes, sacrifice an intern... nothing. I wasn't told what the problem was when the system came back up, nor was I even notified *when* they came back online. And I wasn't given an apology or a service credit.

    After several very public blackeyes Salesforce finally released a systems status page. In a pure act of corporate hubris they named it []. You know know something's deeply wrong when a simple status screen is given that hard of a PR spin. Sorry, but they already blew my trust. I don't care what BusinessWeek says, I wholeheartly recommend that an organization keep their key systems in-house!
    • Nice report (Score:3, Interesting)

      by dereference ( 875531 )
      I scanned through the issues, and they had an "informational" note about a "service disruption" on April 3, with the root cause as: "The technical team identified a software issue as the primary cause."

      Ah, the dreaded "software issue" problem. Maybe they should contact AOL; it might be related to their recent software glitch [] incident.

    • This message brought to you by This article reads like a press release from, the biggest player in the "software as a service" marketspace.

      It shouldn't be surprising. Mencken talked about this phenomenon going on when he was an editor for the old Baltimore Herald ... in 1901!

    • Hah. When salesforce is down I reload the following pages repeatedly: [], [], [], etc... Its fun to watch them keep tacking time on to their estimates as they completely fail to fix whatever it is that is preventing me from getting anything done. Of course, salesforce is fine right now, and I am still failing to get anything done... but at least it is my own fault this time.
    • by dskoll ( 99328 ) on Monday April 17, 2006 @04:36PM (#15144518) Homepage
      We are probably going to switch away from Salesforce to an open-source package. Why?

      1) The open-source tool is cheaper. MUCH cheaper, as in $0.00 vs around $12,000 per year.

      2) The open-source tool is not as good as Salesforce, but it does everything we need.

      3) The open-source tool runs on our internal network, so it's faster and more reliable than Salesforce.

      4) Although Salesforce has a pretty decent API for developing custom apps, nothing beats having the source.

      5) Our data is OUR DATA, and we don't want lock-in.
      • I think your last point is a fairly important one. There are all of these "services" springing up, but there's a little demon waiting at the end of the tunnel, should one decide to look for an alternative. That is, how do you get your data from one service provider over to another one? Granted, the same thing might apply to software, but when you figure in this cost, SaaS doesn't appear to be as good as people might be let to believe.
      • You're running that open source software on your own servers with 0.00$ per year? Your sys admins must be really cheap... Otherwise your list is pretty convincing.
        • No, it doesn't cost $0.00 to admin SugarCRM. However, the incremental amount
          of system administration required once it's set up is very small. I'd say that SugarCRM is going to cost us (a small company of 10 people) under $4,000 to set up, and probably under $1,000 per year to run. All of the costs are sysadmin time.
      • He means SugarCRM. It's an OSS Salesforce-a-like.

        We deployed it at 3.5.1 (about six months ago) and it has improved significantly since then. Overall I guess it's OK but still has a way to go, particularly on the documentation front. Reliability has been good in a kinda "we haven't lost any data" fashion. Performance is shoddy, but we're running it on a fairly slow box. Quicker than Salesforce though. The source is a bit scary and while there is a SOAP API the documentation (again) is shite.

        BTW, you can export from Salesforce in any one of a dozen ways so I wouldn't get tense about that.

        Sugar themselves are a bit weird. It took a while to be able to buy support queries ($95 a pop or $295 for five, IIRC), the organisation being set up a bit *too* focussed on upselling to Sugar pro or whatever it's called. They seem to be an organisation that learns, however, and hopefully people like me ringing up and trying to give them money for support queries will change their tune fairly quickly.

        With any luck it turns into a big OSS success story.

  • by farlane ( 49733 ) on Monday April 17, 2006 @03:20PM (#15144015) Homepage apparently now writing for Business Week.
  • Marketing nonsense (Score:5, Insightful)

    by kbolino ( 920292 ) on Monday April 17, 2006 @03:23PM (#15144036)
    This is crap. It's not even well-written crap, which makes it pure bullshit. There's more nonsense "terminology" in this article than I've seen in a long time. The belief that the "legacy applications" are the reason that the dot-com boom failed is unjustified. Business don't fail because of software, good, bad, or indifferent. And they're sure as hell not going to succeed because of it, either. From the article, "Now Oracle, Microsoft (MSFT), and SAP (SAP) must respond to the SaaS movement while trying to avoid cannibalizing their existing software business in the process." This is a bald-faced attempt at spreading fear, uncertainty, and doubt. Microsoft produces the operating system that most home/business clients use, and Oracle produces one of the most common commercial databases, both of which are staple products, and are required for this "software-as-a-service" to function. They won't be "cannibalizing their existing software business[es]" any time soon. So, I feel it is necessary to add another "myth" to this page: Myth #9: This article is a reliable source of information
    • From the article, "Now Oracle, Microsoft (MSFT), and SAP (SAP) must respond to the SaaS movement while trying to avoid cannibalizing their existing software business in the process." This is a bald-faced attempt at spreading fear, uncertainty, and doubt.

      Amen. Someone give the parent some Mod points.
    • While I agree that the article is largly marketing hype, your analysis of the Oracle and Microsoft is incorrect. While Oracle's #1 revenue chain is database software, they are also the number two market leader in Enterprise Resource Planning (ERP) software behind SAP. Microsft also has about 3% ERP market share.
    • You are so right. The dot-bomb fiasco seemed to me to be more based on lack of any realistic business plans in almost all cases. I had some money to invest & invested it--but not in any dot-bomb stuff. Bad business plans, no business plans, and business plans based on fantasies are the main causes of business failure. My 2 cents.
  • by ImaNumber ( 754512 ) on Monday April 17, 2006 @03:24PM (#15144047)
    Software as a service is great if you have some way to export your data. My company has (not my choice) bought into an online ERP [] system which looks good from afar, but is apparently far from good.

    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!)
    • Yeah, I know the feeling. Try getting your old data (in my case, 2000) from

      That was the one time in the last 12 years I did not choose to use TaxCut or TurboTax and boy do I regret it.
    • Sounds reminiscent of the bad old mainframe days, when companies were hopelessly married to a particular platform for what seemed like eternity. Now that there are more standardized server systems and less proprietary mainframes, it looks like SaaS is the next "proprietary mainframe".

      Maybe I'm a bit biased against this since I perceive the reduction by companies of IT staff as a direct threat, but like it's been said before elsewhere in this comments section, SaaS works better for some setups and worse for
  • AYBABTU (Score:3, Funny)

    by kimvette ( 919543 ) on Monday April 17, 2006 @03:32PM (#15144097) Homepage Journal
    Are there any software products from major software vendors who boast EULAS which don't effectively state AYBABTU?
  • What happens to your data when your service provider goes bankrupt?

    Maybe and their ilk have fine escrow agreements in effect but the article was incomplete for not mentioning how the problem gets handled.
  • What is the goal? (Score:3, Insightful)

    by FLEB ( 312391 ) on Monday April 17, 2006 @03:34PM (#15144110) Homepage Journal
    It being tax time in the US, I've had experience with an online-tax-prep service. I've also dealt with some online business-scheduling software (Fusionary IMS, similar to Basecamp []). Being on Slashdot, I've taken a look at some of the Online Word Processors from a few days ago, as well. My prediction: things like online tax-prep, relationship management, or project management will prosper, while things like the online "Office App Replacements" will continue to endlessly struggle for relevance.

    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.
    • Another point about tax software- it needs to change each year, since the laws do. So if you were buying it as software, you'd need to shell out for a new copy to use, one time a year for eternity. Since you can't use the software perpetually anyway, buying it as a service makes a lot more sense.
  • by Anonymous Coward
    Somehow I think not. Unless you can outsource EVERYTHING to a common vendor, integrating the various "service providers" is a formidable task.

    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
    • 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?

      It's called a Contract.

      • Wow, where do you get "Contracts" from. Where I live (Earth) you get a "contract" (no caps, what a shame) which isn't worth the paper it is written on once a bankruptcy judge steps in.

        I sure hope by "Contract" you meant "emergency data processing center with all applications and data in a runable state within the day". Otherwise, you're fired.
  • by Zephyros ( 966835 )
    I did some time at an application service provider a few years back. The model isn't as "failed" as they seem to imply. While it may be useful in only a particular niche, for those companies, it's a very good option. A lot of smaller companies don't have the resources to support a full-fledged IT staff or get a bunch of expensive desktops, and honestly they didn't need that much. They contracted with us, bought terminal PCs, and connected to our datacenter for their applications. This was also a good soluti
  • by SlashChick ( 544252 ) * <<zib.acire> <ta> <acire>> on Monday April 17, 2006 @03:39PM (#15144143) Homepage Journal
    It makes sense for a lot of software applications to move online. For instance, I filed my taxes online using today. The application was easy to use and worked just fine in Firefox. It makes sense to the companies behind these applications because instead of having to deploy multiple versions for every possible obsolete platform (from Win98 to Mac OS 9) that customers may have, they can deploy to specific browser configurations. Plus, as another poster mentioned, bug fixes are built in.

    In 10 years' time, I doubt we'll use CDs or DVDs for much. I don't have a CD drive on my current laptop and I have only missed it once since my initial install -- and that was to install an older version of Quickbooks (newer versions are available for download instead of on a CD.) CD-ROM only drives are quickly becoming as obsolete as floppy drives as we move to the Internet for software, music, and movie distribution. As online storage and backup services take over, the idea of backing up to a CD-RW or DVD-RW will also become obsolete. We'll be able to "jack in" anywhere, from any PC/Mac/Internet cafe terminal, authenticate ourselves, and have instant access to all of our data. TurboTax, and other services like it are just the beginning.
    • Gee, I have all of my data on my hard drive, and I can fit my /home partition onto a CD. Why do I need to jack in anywhere? As someone else has mentioned, tax software is a good candidate for this, but what about Photoshop? Or a compiler? or games? CD-ROM-only drives may become obsolete, but will new optical media be backward compatible (can one use CDs in an HD-DVD/Blu-Ray drive?)?
    • What would happen to this software model if things like this [] end up costing you money court time.
  • Useful Metrics (Score:3, Insightful)

    by Carcass666 ( 539381 ) on Monday April 17, 2006 @03:51PM (#15144230)

    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 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.

  • by tlambert ( 566799 ) on Monday April 17, 2006 @04:06PM (#15144321)
    At IBM we called this (with much skepticism) "Maintaining an on *grunt* going *grunt* customer *grunt* relationship".

    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
  • Amazon's excellent S3 storage service. We're using it for the indi [] downloads and it works great - they handle the big files while our Rails site serves up the site itself. Also, it's easy to automate since they've got a nice Ruby API []. Good times.
  • by Anonymous Coward on Monday April 17, 2006 @04:24PM (#15144457)
    SaaS brings up a whole lot of serious questions.
      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.
    • Well, I am not an expert by any means, but some of your questions are obvious.

      Q1: Even your OWN employees could steal and sell your data. But, if they do it via devices and logins, at LEAST you can get an audit trail on demand and quietly without tipping off anyone that you suspect malfeasance of some kind. One point for on-premise, 0 for SaaS.

      Q2. You and ONLY YOU own the data, provided it's original content, and you didn't steal, commingle, crib or cobble and simply repackage the work of others' legitimate
  • by HellYeahAutomaton ( 815542 ) on Monday April 17, 2006 @04:27PM (#15144469)
    "It's a trick. Get an axe." - Ash Housewares, Army of Darkness
  • Fail-Fast (Score:4, Informative)

    by SuperKendall ( 25149 ) * on Monday April 17, 2006 @04:37PM (#15144521)
    The good thing about Software As Service, is that instead of spend a few million dollars and a year figuring out some very expensive proprietary system is not going to work for you, you spend a few million dollars and six months finding out the software isn't going to work for you because systems architecture and setup are out of the picture (there is still upfront work involved of course in training and customizing, if the vendor allows that...).

    Thus the true innovation is that Software as Service allows you to holve wasted time on failed software rollout, and since time is money it literally pays for itself! :-)
  • 3-Tier Architecture (Score:2, Interesting)

    by SuperGhost ( 952604 )
    The problem with SaaS is that you are using virtually proprietary software. In a 3-Tier architecture you have the Data layer, Logic layer, and Presentation layer. You can access the Data Layer by numerous methods, ie. multiple applications can interface the data layer. With SaaS (from what I've seen) it is difficult or impossible to access the data layer.

    I believe what's needed, and may even be a good idea for a start-up, is DaaS or Data as a Service. Your data is securely (I hope) stored and backed up thro
  • i'm not sure but.. (Score:3, Informative)

    by ikejam ( 821818 ) on Monday April 17, 2006 @05:11PM (#15144736)
    are we overlooking the main point?

    Lets say my company requires a customer relationship managememtn software. Among my options would be to buy a pre-deveoped, customizable software SoftwareA for whatever amount of money.

    Now the problem is I'll have to set it up, set the whole damn environment up. Servers, backups, networks, databases, user accounts, etc etc. Now i miht be able to get the guys who sell me this to set it up initially at probably a huge amount of money. Then ill have to get them to train my IT guys, who'll probably need documentation and baic training programmes, and some kind of structure ot account for employee rolloffs and new recruits etc etc..So thats a huge IT maintenance budget, with a whole lot of maintenance and training overhead.

    So instead the guys who make SoftwareA says, you pay us rent, we have this SaaS version of SoftwareA. You and your team can access everything using browser over the internet. We take care of installation 9its htis side, you wont even know it) and support. Here's our site, here are your login IDs, Here's our support number. Usr access policy sould be through a easy to use GUI, or in complicated cases through a authenticated request from authorised users to support. We have guys who's expert at htis sotware and were here 24/7 coz we have lots of customer who need the same thing. Our overhead is shared, and we have a lot of advatage in terms of training and maintenance.

    All you need is a reliable net connection. besides your travelling employees could access it anywhere.

    Ofcourse net connection gone = boom. and its a big risk for critical software. But reliabilty of the net is increasing and this will be critical, reliabilty of the SaaS companies would hopefully improve. if you can have redundancy (dialup to their data center? local backup systems would prboably defeat the purpose :-s)

    looks like it could work, esp in SMEs...
  • Long time example (Score:4, Interesting)

    by LeeMeador ( 924391 ) on Monday April 17, 2006 @05:46PM (#15144906)
    The oldest such applications I've had to deal with are time logging application. My employers have had to charge by the hour for my time with the clients. So they always have some sort of web based time logging application. Usually there is also a way to enter expenses and such for reimbursement.

    Every one of these application that I have had to deal with has been very difficult to use. My theory is that they sell the application to one of the bosses based on the way the reports look. They make the user interface for the reports work well. That helps two people per company and saves their time. The people who enter time get the short end of the stick and 200 people waste their time and energy trying to enter hours.

    I mean ... how hard is it to write a web site to enter hours and tasks.

    The first one I had to use only worked right if you used the "right" screen resolution. You were supposed to change your screen resolution to run their application. And, if you didn't, the windows would be too small. They wouldn't scroll. They wouldn't resize. And you couldn't see the OK button at the bottom.

    Another one, two years later, would lose everything you entered if you tried to print it at the wrong time.

    The one I am using now (in 2006 after 5 years of these sinister felons) makes you go through 5 screen clicks to add more than 40 hours. If you go in to enter your hours after 6 pm on Friday it will default to next week. The first time I didn't know it and entered and submitted all my hours on the wrong week.

    I think the it shows the real problem with the business model. There is no incentive to improve the time usage for the people that do the work. The word comes down from on high because the sales doesn't have to convince more than a few people that use the application. This makes the choice of such software a burden on the company's bottom line because, by choosing it, they waste their employee's time.

    time is money
  • Paul Graham [] is somewhat known for saying that web-based applications (what they're calling Software-as-a-Service) is going to take the market away from installed applications, for some very simple reasons:
    • Installed apps only run on the machines where they're installed. Web-based apps run from just about any Internet-connected machine, which is much more flexible. I mean, if my desktop machine is having problems, I can go to the local library, or a friend's house, and I can hit GMail from there. Access to
  • This is an add from somebody pushing some new Ajax Shop. Probably that company that's mentioned 3x a sentence.

    Wether SaaS or not, soon it will make no difference. People will be able to choose between having their OSS solution of choice set up on their own hardware in their own shop or an OSS solution set up on the servers of their favourite IT service company.

    Preping customer hardware with software or running it for them on your own servers is not that much of a difference anyway. Not nowada

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