Business & Technology Nexus

Dave Stephens on technology and business trends

A Few Comments On Aberdeen’s SaaS Report

with 3 comments

As I noted in an ealier “quickie” post, 5 Procurement SaaS providers sponsored an Aberdeen report finding Procurement SaaS to have advantages over traditional, installed software. And while the report’s findings are obvious based on its sponsors, I liked the report. So by all means, take advantage of the generousity of its sponsors and read it!

The key conclusion was faster time to go-live. Which in turn led to other benefits. And while everyone knows I take issue with some of the hype around SaaS, faster time to go-live is indisputable. It’s a definite advantage.

I was disappointed the only financial analysis presented “for a prototypical $1B company” showcased better ROI for going SaaS simply by the earlier go-live. This smacks of an old IBM study where they said choosing Ariba over an incumbent ERP vendor caused greater ROI because of faster supplier onramping. I think many customers dismiss this type of computation.

There could be other financial projections based on the other claims in the report. Maybe Sudy can produce companion financial case studies at a future date.

The only real negative I could find was in one statistic: 88% of respondents said that in house software system response time & performance was equal or better than SaaS. This reinforces my SaaS = renting-an-apartment analogy. At peak times some customers’ showers are running out of hot water! But it’s a solvable problem – the SaaS providers need to design their on-demand systems for peak load, not average load. And hopefully they will start doing that.

Neither this report nor any of the diatribes of my colleagues has changed my view that SaaS is wonderful but it’s not to be confused with a “category of software.” Instead, it’s a delivery model – one that makes sense where companies want to relieve their already overburdened IT departments and try something out for awhile.

Aberdeen’s data showed the vast majority of firms polled expected to use their SaaS solution 3 years or less (many a whole lot less). In fact, only 16% said they were looking to their “on-demand” provider for a solution for more than 3 years. This is a big red flag for companies that bank their entire business on SaaS – they are betting on a customer base who are just stopping by a while before heading on to their real destinations.

Of course, there’s another way to look at this – enterprises may just pursue a perpetual “shop around” mindset for their SaaS solutions. And SaaS-only vendors might be okay with that – after all, they believe their business model affords them advantages that should become ever clearer over time. I can hear them say it now: “Bring it on!”

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Written by Dave Stephens

07/11/06 8:52 AM at 8:52 am

Posted in Opinion, Technology

3 Responses

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  1. […] Last week, Procurement Central attempted to incite a new war over On Demand and Software as a Service (SaaS). ERP executive-turned-blogger-turned-open source evangelist Dave Stephens used the release of Aberdeen Group’s latest On Demand Supply Management Benchmark report to try to minimize the significance of On Demand and SaaS as merely a new flavor of application hosting.  […]

  2. Tim’s post is definitely worth a read to understand the mindset of SaaS-only vendors. And although my position may be untraditional, I continue to be supportive of the delivery goals of SaaS. SaaS offers convenience & makes sense in many situations. However..

    The fact that Tim says SaaS is “just like” open source when it comes to community is laughable. It just goes to show you how hard it is for traditional companies, wrapped in SaaS packaging, to understand the new paradigm of open source. Tim, open source means freely available source code & customer-led development! Not offering computers, A/C, and uninterruptible power to customers…

    Dave Stephens

    07/18/06 6:35 AM at 6:35 am

  3. I’m more with Dave than the SaaS-only SRM camp, despite having worked for a vendor of a SaaS offering. The very beauty of SaaS is that, to the end user, the experience of using the application’s features reveals nothing about the underlying deployment model (hosted versus on-premise). This de-coupling is the greatest power of SaaS. For many corporations, their IT groups simply can’t support another application deployment given workload, strategy, cost overhead, etc.

    The trade-off of SaaS is fewer integration options. Fortunately for most procurement departments, they are working on the basics of SRM and don’t require anything more than arms-length interfaces to deliver the benefits within reach. Examples are supplier master sync, spend data load, purchase req creation, etc.

    With procurement maturity, however, comes the tighter integration of procurement processes with other departmental functions. …And the need to touch THOSE departments’ systems in a meaningful way. I don’t think anyone is considering a SaaS sourcing solution with deep integration to a collaborative design/PLM system to support design-to-source cycles that run in days or weeks. In that respect, the ERP vendors’ solutions will ultimately appear more attractive and will sit on-premise given IT’s control of those systems.

    Bottom line: the rate of procurement transformation will dictate the useful life of SaaS and how long it remains as the most common deployment model.

    Impartial observer

    07/19/06 5:23 PM at 5:23 pm


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