Software as a service: the next big thing

SaaS at the barricades

Some IT managers see SaaS as a godsend, with time-to-market and low maintenance central to the appeal. "It's a CTO no-brainer," says Jon Williams, CTO of Kaplan Test Prep and Admissions, a Salesforce.com customer. "I love the fact that I don't need to deal with servers, staging, version maintenance, security, performance, etc."

Another benefit is escape from the application-upgrade treadmill, where customers wait years for big new revs and then suffer business interruption during deployment, says Robert Jurjowski, CEO of Intacct, an ERP on-demand provider.

"It's not the cost of migrating from one release to the next that's the killer," Jurjowski says. "It's the retraining cost and the disruption to your business model that it creates every time you want to do that."

By contrast, Intacct and other SaaS providers incrementally swap in new functionality, streaming new innovations to all customers at once, keeping the user interface as consistent as possible.

Yet the main attraction for SMB customers -- letting a service provider shoulder the burden of software deployment, maintenance, and availability -- can be a showstopper for large enterprises accustomed to maintaining full control. Not to mention that the huge cost sunk into existing CRM or ERP licences becomes a whole lot tougher to justify.

As Andrew Clark, director of strategy for IBM's Venture Capital Group, puts it, "It's doubtful that a lot of our large customers are going to displace existing investments."

SAP and Oracle are trying to skirt such enterprise objections by selling their SaaS offerings as part of a suite of options that includes packaged software. In fact, SAP views its new CRM service as an on-ramp to buying and deploying SAP CRM software in the usual manner. "The key difference is that SAP has created this software-as-a-service offering and uses the same lines of code both for an on-premises as well as an on-demand deployment," says Peter Graf, SAP's executive vice president of marketing.

Oracle, which has offered hosted versions of its E-Business Suite for years -- and inherited CRM OnDemand as part of its Siebel acquisition -- sees the on-demand model as the centrepiece of its new Fusion initiative, according to Chris Hummel, Oracle's vice president of services global sales support. Like SAP, Oracle is taking a have-it-your-way approach, offering either hosted or conventional flavours, or a mix of the two, depending on the customer's preference.

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