Business & Technology Nexus

Dave Stephens on technology and business trends

Sass on SaaS – Noah Eisner Responds

with one comment

My colleague Noah Eisner sent me interesting commentary on SaaS. Here it is:

saw your post on SaaS vs. on-premise. also i read minahan’s diatribe. i think the confusing issue is separating the solution from the SaaS part. as an example, back when i bought a prius, i saw a bunch of people who said that buying a hybrid car doesn’t make sense financially. they said that you just didn’t make your money back in savings…however, these reports always made one key critical mistake. you can’t just compare a prius to another non-hybrid car. two cars are totally different in their look, feel, capabilities, etc. the only way to make the argument if buying a hybrid pays is if the same car is offered in a hybrid and a non-hybrid option.

the same thing goes for software. as much as people will say that salesforce automation software is commoditized (which is crap), people still do evaluate the features/capabilities and pick the solution that is best for their business. so, when it comes to evaluating the TCO of salesforce.com vs. Siebel on-premise, it is impossible. the closest actually SaaS vs. on-premise where the pricing is available is SugarCRM. for them, SugarCRM enterprise is $885 annually per user for on-demand and $449 annually for on-premise. both options include unlimited online and email support. so you pay $436 per user annually for the on-demand hosting. now, sugar’s on-demand is a dedicated application/database per customer, not the same as SaaS pure multi-tenant.. but the costs are probably not far off.

so, is $436 per user per year a good deal…maybe? it depends…maybe if you don’t have too many users. but at some point, it may become expensive. also, over time, does the cost for you to host it go down…do you become more efficient…and thus does the TCO change over time?

as far as minahan’s stuff

– true multi-tenancy doesn’t matter unless it fundamentally allows you to do things quicker and cheaper as a software provider and then pass the benefits onto your customers
– can you maintain quick delivery cycles in on-premise models? probably yes. the problem isn’t so much old versions in the install base but that the software grows in complexity…which is the same problem that a salesforce.com will hit in the next couple years. the rate of their compelling new features has certainly slowed from its earlier days…especially if you factor in that they have had a ton more developers on the product recently.

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Written by Dave Stephens

05/31/06 3:15 PM at 3:15 pm

Posted in Opinion

One Response

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  1. I agree with the comment above regarding multi-tenancy. Selling and marketing a multi-tenant architecture is the equivalent of touting the unibody structure on a car. Some people will understand, but many people won’t or don’t care.

    Henry

    06/1/06 12:37 PM at 12:37 pm


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