Is Software-as-a-Service as big a deal as everyone predicted?

Software-as-a-Service (SaaS) is a success, but it’s the IT revolution that many pundits proclaimed.

This was supposed to the Year of SaaS. Between Google and Salesforce.com, the buzz was all about hosted applications. When you mashed SaaS with service oriented architectures and with outsourcing/offshoring, it looks like the future of IT would be centered for hosted applications.

Yet, in my experience, it hasn’t turned out that way. Take the most visible SaaS application, Salesforce.com. Sure, lots of companies use Salesforce. My own company does; our salespeople stopped using Act! (a Windows sales force management application) and migrated to Salesforce this past summer. To cite the other big application, yet, lots of organizations use Google Applications, especially for hosting their e-mail.

However, when I talk to my industry experts, the consensus is that hosted applications are being deployed tactically as point solutions, not as part of a specific SaaS strategy. Companies are using Salesforce.com because it’s a good sales force automation system for distributed teams, not because it’s SaaS. Companies are using Google Applications because it solves specific problems, not because it’s SaaS.

What about mashups? Perhaps we’re too early, but in every case that I’ve seen, a company’s SaaS solutions are just as siloed as their other enterprise applications. The concept of a grand unifying Service Oriented Architecture encompassing multiple enterprise applications and multiple SaaS providers has not materialized.

Was 2007 the Year of SaaS? If you go by the chatter, yes. Many buckets of ink were spilled on the topic, and many pixels were posted to blogs and online forums touting SaaS as the Next Big Thing. However, when you look at real deployments, it hasn’t happened. Sure, Salesforce.com has a million-odd end users. That means it’s a good sales force automation tool – not that we’re reached a SaaS tipping point.


Ken Rudin said...

Alan -- Yes, the main reason companies buy salesforce.com is because they like it. Why do they like it? Not because it's SaaS, but because companies find it easy to use and easy to manage. But, one of the reasons it's so easy to use and manage is because of the SaaS model. People using other CRM solutions (e.g. Saleslogix) frequently complain about the complexity of managing the system, and the users complain about having to frequently sync their laptops with a central Saleslogix server. There are no such hassles with SaaS solutions. So, though people don't buy salesforce.com because it's SaaS, it's the ease of setup, use, and maintenance that comes from it being a SaaS solution that enabled them to reach their millionth user.
Ken Rudin (CEO, LucidEra)

Niel Work said...

Alan - Perhaps you're not seeing the entire SaaS picture. We have over 150 of our application partners now offering their applications as SaaS, and both the number of accounts and the revenue is growing rapidly.

Like Salesforce, some of those applications are specifically well suited to SaaS, but there are many other "traditional" applications where our partners have discovered that they can reach new markets, streamline their implementation and support efforts, and make the customer's life easier through SaaS.

Salesforce.com is the measuring stick used by many industry analysts and writers, but their large shadow often hides many of the efforts going on throughout the industry that will eventually drive SaaS to be a "big deal".

Niel Powers (VP, Progress Software)

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Co-founder and editorial director of BZ Media, which publishes SD Times, the leading magazine for the software development industry. Founder of SPTechCon: The SharePoint Technology Conference, AnDevCon: The Android Developer Conference, and Big Data TechCon. Also president and principal analyst of Camden Associates, an IT consulting and analyst firm.