Business & Technology Nexus

Dave Stephens on technology and business trends

Sass on SaaS – Iasta’s David Bush Responds

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Thanks to David Bush of Iasta for the following thoughtful commentary on the SaaS questions I posed in my previous post. (Iasta has a great esourcing forum that I recommend highly for Sourcing professionals.) Here's his SaaS response, unfiltered:

Hi Dave, I wanted to take a minute to respond to your blog yesterday with some comments, feel free to post… As full disclosure, we offer both SaaS and Behind the Firewall. The huge majority choose ASP…

1) Why is multi-tenancy a good thing for customers?

Economies of scale. If a SaaS provider can apply hardware and a single software instance across multiple clients, their operational costs go down, and they can lower the fees they charge. This is a classic argument of spreading the costs around to multiple parties instead of custom writing code for everyone.

2) What contractual obligation do vendors offer to furnish your data if you decide you're ready to exit the rental market? Said more simply: what will it cost to leave the party?

Each user of this technology platform should review the contract to confirm that they own the data…but they should own it! In addition, it would make sense during a demonstration that exportation features exist and are easy to use. Iasta clients can dump the data at any time and we have always given people time beyond contracted periods to remove. There is never a fee from us for this and the only thing we would consider charging for – would be to contract for the exportation and reporting. We have done this before and not charged at all, but then again, we are smaller and have better service than any one else :). Typically, there should be no need to contract this process for a fee.

3) Will SaaS vendors offer a written SLA with financial penalties if service is interrupted?

When you consider that third party installations are no different then in-house installations in that they can be brought down by any number of forces beyond their control which include, but are not limited to, extended power failures, natural disasters, and Internet failures and that your in-house software could crash at any time when you use a new feature for the first time, everyone is in the same neighborhood.

When you consider that a mature on-demand provider will write and deploy code with the same quality as a traditional software provider, is this really an issue? Furthermore, a SaaS provider can respond more quickly to system problems, should they arise, than a traditional provider who may have to first send someone to your site. On the rare occurrence of a bug report, we have them fixed within a few hours at a maximum.

Personally, I would be more concerned with insuring the maturity of the service provider and the hosted infrastructure than I would with trying to wrangle an SLA. If the service provider has UPS systems, multiple Internet providers, and hot-swappable fail-over servers ready to go, chances are your uptime will be much greater than if you hosted the solution in house.

That being said…Iasta has an embedded SLA in our all of our contracts that is good enough that it does not get red lined. And yes, it does offer financial compensation back to the client. Our uptime rate is well north of 99.9%, so an SLA is usually immaterial.

4) How many SaaS vendors are too many SaaS vendors for an enterprise?

I would say that depends on the quality of the SaaS offerings and whether or not they overlap. If each SaaS system serves a distinct function and provides a standard API or standards-based data import/export facility (such as EDI, or, preferably, XML), then there should be no problem utilizing each offering to the full extent possible without conflict since you will be able to import the necessary data into your internal ERP and financial systems as necessary.

I tend to think that Capitalism also will play a hand in this. If the model sucks and the software sucks, the company will pay the ultimate price.

5) Where are the value-added services?

Most SaaS solutions offer free upgrades within the lifetime of the contract – most traditional software providers do not. That alone adds value. In addition, many SaaS providers offer continually updated and expanded free-online documentation, training, best-practices guidelines, and even (user) forums where as most traditional providers give you a manual at the time of purchase and that’s it.

There are also many services available (again, on-demand) for modest fees that you would pay consulting firms 3x for virtually the same thing. Roll-out plans, category management, global supplier support and staff augmentation are all services that we regularly provide, upon request.

6) Is there any non-vendor-sponsored data comparing TCO of on-premise vs. on-demand?

Good question. Considering ASP/On-Demand/SaaS has been analyzed by groups such as the ITAA and IDC, who are known for being impartial, I’m inclined to believe that most of the stats are true.

-David Bush

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Written by Dave Stephens

05/31/06 3:02 PM at 3:02 pm

Posted in Opinion

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