Monday’s Musings: The Hidden Value In SaaS Deployments
Gains In SaaS Adoption Driven By Speed And Cost Savings…
Preliminary data from Q4 earnings data show continued traction among SaaS solutions. Expect SaaS deployments to gain steam in 2010 as organizations finalize their SaaS apps strategies to take advantage of 7 key benefits:
- Richer user experience - SaaS apps bring Web 2.0 usability to the enterprise world through rich internet applications using Adobe Air, HTML 5, Microsoft Silverlight, and other tools.
- Rapid implementation - SaaS applications focus on configuration and integration, not hard core implementation. Users can be up in weeks, not months.
- Frequent cycles of innovation - At present, most vendors introduce new functionality, enhancements, and bug fixes on frequent refresh cycles. Some vendors provide as frequent as weekly updates, others - seasonal.
- Minimal upgrade hassles - Users focus on minimal testing scenarios and receive updates all at once. In applications with significant regulatory and tax updates, SaaS applications reduce the cost of compliance by as much as 77%.
- Always on deployment - Organizations can expect average up-time levels at 99.95% or higher for most applications. These results often exceed existing on-premise performance.
- Subscription pricing - Subscription pricing reduces the capital burden of common on-premise payment models.
- Scalability - Organizations can add or subtract users as needed without worrying about procuring new hardware and other infrastructure.
Moreover, latest Information Week Analytics survey reaffirms several key benefits of SaaS adoption - time to market and cost savings (see Figure 1).
Figure 1. Information Week Analytics Survey Confirms Trends In Adoption
…Yet, Aggregated Information Provides The Differentiated Value To Clients
Despite the obvious benefits with SaaS deployments, three hidden advantages will emerge with market maturity:
- Benchmarking. SaaS vendors sit on a tremendous treasure trove of data. Participating organizations could opt-in to share secure and masked information for the purposes of business optimization.
- Trending. Organizations could also opt-in to identify larger market trends. Trending information could be used to help organizations with planning.
- Prediction. More sophisticated organizations will take SaaS vendor trending data and design new algorithms to support predictive analytics. The richness and consistency of the data set will improve accuracy.
The Bottom Line For SaaS Vendors - Create Additional Value As An Information Broker
The end game for SaaS vendors may not be a re-creation of the on-premise world in the Cloud. In fact, those vendors with a true multi-tenant SaaS model may turn out to find additional revenue streams as information brokers. Expect demand for premium information-on-demand services to begin with benchmarking and evolve to prediction. For example, imagine the benefits gained by organizations who consume the latest buying behavior data from their CRM vendors. Organizations could turn to HCM vendors for geographical salary or hiring trends. Customers of financial vendors could better predict credit risk factors. A key requirement - customers must trust their SaaS vendor’s data ownership and privacy policies before the industry makes this transformation. With acceptance, vendors will have more reasons to move to a SaaS offense.
The Bottom Line For Organizations - Determine Your Data Rights Before You Sign The Contract
Organizations in SaaS deployments will want to preserve the their data rights and minimize their cost structures to consume aggregated information. A few key areas should be considered:
- Data usage. Organizations generally assume that the data belongs to the organization while the software belongs to the SaaS vendor. To be safe, organizations will want to be clear that rights to use data will require an organization’s permission. In addition, the disposition of data should be made clear
- Data access. Organizations should expect unhindered access to raw data, queries, and extraction. Access to data should not require additional fees.
- Aggregated data cost. Organizations participating in aggregated data programs should be given preferential treatment not only in cost, but also access to data. The cost of this “stone soup” approach should be factored in pricing.
Your POV
Where are you in your SaaS deployment? Have you thought about these long-term benefits? Looking for assistance with crafting, validating, or reviewing your SaaS Apps Strategy? Do you have a different point of view? Please post or send on to rwang0 at gmail dot com or r at softwareinsider dot org and we’ll keep your anonymity.
Other Useful SaaS Strategy Links
20091222 Tuesday’s Tip: 10 Cloud and SaaS Apps Strategies For 2010
20091012 Research Report: Customer Bill of Rights - Software-as-a Service
20090602 Tuesday’s Tip: Now’s The Time To Consider SaaS Software Escrows
20081028 Tuesday’s Tip: SaaS - Integration Advice
20090714 Sandhill.com - R ‘Ray’ Wang - “Opinion: Moving to a SaaS Offensive”
20070903 Trends: What’s all the fuss about True SaaS, OnDemand, Hosting?
20091208 Tuesday’s Tip: 2010 Apps Strategies Should Start With Business Value
Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.
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In response to Rick’s comment above.
Rick, I think its actually the opposite. SaaS allows you to switch between vendors more easily. You don’t have the same lockin as with installed software. It also changes the show when it comes to investigating new software. Also, you make it sound as if there is no migration time between vendors during the move. You keep the existing software SaaS contract, until you have migrated your data to the new vendor. You then run two systems in parallel, with only one being live before you cut over.
With SaaS, you can begin using the system with a small amount of data, and then choose to increase or abandon porting your business over to that vendor.
I’m wondering whether the US/Euro folks have omitted how much of a cultural/legal issue it could be to even consider offering agregated data. Also what value would a SaaS ERP’s general ledger, A/R or A/P info provide?
[...] Ray Wang has set out a number of other hidden value ideas that can be derived from SaaS [...]
Rick,
I understand your concerns. But the fact of the matter is, SaaS is ready for business. In fact it is ready for prime-time, with full applications that can run your entire company. I know this because we provide a full ERP SaaS solution to multi-national, global, billion-dollar corporations every day. And we’ve been doing it for 15 years.
Our customers have chosen us over our direct competitors (small companies you may have heard of - SAP and Oracle) because or we provide deeper functionality, and a much better value proposition overall that is made feasible due to the SaaS model.
Original concerns with the SaaS model for ERP usually centered around security and reliability of the internet. Over time those concerns seem to have been allayed for the most part. Like you mention, however, access to data still is a significant concern. However it no longer is a major sticking point. The fact is, the technical platform, combined with our daily release cycle, provides a value proposition that is just too compelling.
I tried not to make this response too “salesy”, though I may have failed. I simply wanted to advance the notion that major line of business applications, such as ERP, are already successful on top of a SaaS platform.
Aggregated data, either for benchmarking purposes or to create a shared data resource (e.g. a pool of applicants or a vetted community of learning content providers), is one area in which I’ve been working heavily with the HRM vendor community. This is potentially huge, but it not only requires the right SaaS architectures and operating procedures but also considerations of (1) subscription provisions, (2) privacy protections, some of which are legislated, (3) consistent domain model semantics and implementation coding structures (which, of course, is much easier to do via the configuration of true SaaS), and (4) many business issues as to packaging, pricing, consulting needed to make effective use of these new products, etc.
It would be interesting to know what size companies were surveyed, and if there was any correlation between the size and the issues raised.
Would be interesting to get a breakdown of the size of companies that Info Week surveyed. Is the any correlation between company size and the reasons given?
SaaS sounds great until you want to switch vendors. Then the trouble begins.
Today, if I have a conventional installation of an ERP system or other application, and later decide that I “don’t want to play anymore” and just sit on the license and use the system without continuing support or maintenance releases, I have every right to do so. My business can still function, my customers can be served, and I can use the system.
In a SaaS environment, what happens when I decide I’m tired of the “low monthly payment” (sounds like a credit card that I can’t afford!) and want to change apps, I’m stuck. Yes, I may get some “CD’s” full of data, but what can my business do with it? My company is essentially shutdown until I can figure out how to get MY DATA into a useable format and into another vendors app.
SaaS may be a great solution for social networking, but I’ve never been convinced that it is ready for business.
I could be wrong and I’m keeping an open mind. Looking forward to anyone who can “set me straight” on the issue.
@ray - the aggregated data aspect is often underplayed. To me there is the potential for that to have more value than the application itself. Freshbooks and others have been playing with this for a while. I counselled on this to one vendor 3 years ago. I’m seeing some examples at the SME level but am surprised there hasn’t been more said by those vendors further up the food chain.
[...] Ray Wang has set out a number of other hidden value ideas that can be derived from SaaS [...]