Scheduling Chronicles

The ROI of Software-as-a-Service

A free whitepaper is now available that focuses on the long-term value of SaaS products.  The whitepaper is based on the findings of Forrester Research who, after examining client's decisions about purchasing SaaS solutions, concluded that firms achieve substantial ROI with SaaS solutions.

Whitepaper summary: Firms almost always consider software-as-a-service (SaaS) as a cost-advantage over on-premise in the short run due to its quick implementation times and pay-as-you-go pricing. But many firms question the long-term value of SaaS, wondering if the rent-versus-own model necessarily has a cost crossover point and if so, when? As SaaS continues to move into a broader range of applications and into larger, more strategic deployments, Forrester examined client decisions across a range of SaaS solution areas and found that firms obtain long-term value with SaaS solutions.

To download this free whitepaper, click here.

Report: One-Third of all Enterprises To Use SaaS in 2010

According to a recent report published by research firm Forrester, one-third of all enterprises are either currently subscribed to software-as-a-service applications or have plans to do so in 2010. 

This report included data from a survey of nearly 2,200 IT executives and other related technology executives from a number of small and medium sized organizations in North America and Europe.  Stefan Ried of Forrester believes that some might find it interesting that, despite the economic climate, larger enterprises are lining up to adopt SaaS faster than most small organizaations.

"Many vendors mainly position their cloud services toward SMBs with a belief that they will jump on the bandwagon first because they often have more limited IT budgets than larger enterprises," said Stefan Ried. "Instead, vendor strategists should investigate specific adoption levels by industry, region, or company size to identify their sweet spot for an SMB cloud offering. Large enterprises even adopt some cloud services significantly faster than SMBs."

SaaS: No Offense to Capital Expense

Steve Banker recently outlined the differences in how hardware and software are expensed.  He put hardware in the context of a vehicle where over time, the value depreciated to a point where it is more economically viable to sell or repurpose it.  In some instances of software, the same thing can happen.  While an initial software purchase can provide near-immediate value (which is should), especially when rolling out a new initiative such as alternative workspace that affects many areas of the organization, how does that value change when factoring in maintenance costs, additional feature requirements, and the cost (in time, energy, and money) of upgrading the system.

What I found most interesting is that even when going through the cost/benefit analysis of software purchases, the conclusion is that software-as-a-service is the preferred method of software delivery.  Why?  First and foremost, there are no capital expenses associated with SaaS so any on-demand purchases doesn't affect the balance sheet. Further, the costs of upgrading is minimal - if any - because those costs are included in the agreement.  And as Banker contends, "From a budgeting perspective, this strikes me as much cleaner." 

SaaS Adoption Continues to Rise – But Why?

Over the past couple of years the amount of attention over Software as a Service has grown considerably and with it, that adoption of cloud computing organizationally has grown with it.  Why?

There are several factors, not the least of which is because SaaS has bridged the gap between enterprise and small and medium business applications.  Solutions that were once only viable for large enterprises due to cost, infrastructure requirements and overall adoption are now available to the smaller folks, helping to expand the availability and thus market reach of these applications.  In fact, as Larry Marion of Datamation points out, BusinessWeek Research Services recently conducted a survey that found that four of five managers and senior executives in North America are interested in or currently in the process of adopting the SaaS model – and roughly a third of all respondents have already adopted it in one form or another within their organizations.

As Marion indicates, it’s important to note that there is a distinct difference in the level of interest in SaaS depending on who you ask.  Those executives at medium-size organizations are adopting SaaS for vital applications while those at enterprise companies really are more targeting SaaS for their second-tier applications.

But the point is, cloud computing continues to grow in popularity.  Even for larget enterprises, they can leverage SaaS to augment their existing applications rather than making the full investment of standard on-premise solutions.  At the end of the day, SaaS provides the flexibility for any company to utilize primary or secondary applications at a fraction of the price.  And that’s what it’s all about – reducing costs.  In the BusinessWeek survey, when asked what the three most important factors of SaaS were, the need to reduce capital and operating costs were far and away the most popular answer.  And in this economy, who can blame them?

Bessemer Releases Updated Top 10 Laws of Cloud Computing and SaaS

Bessemer Venture Partners, a global investment group, has just released its updated edition of “Bessemer’s Top 10 Laws of Cloud Computing and Saas,” a resource for SaaS providers on how to succeed in the cloud computing business.

The updated material is available on the Bessemer website and co-authors Byron Deeter and Philippe Botteri will be presenting it at the upcoming SalesForce.com Dreamforce conference.

What's particularly interesting is that Deeter and Botteri expand the definition of Cloud computing in the report as incorporating the popular Software-as-a-Service as well as new areas such as Platform as a Service (PaaS) and Infrastructure as a Service (IaaS). 

PaaS consists of the service and management element of the cloud platform and is rapidly changing to include elements such as intelligent provisioning as well as application and network management.

Further, IaaS is the “foundation” of cloud computing and includes storage, compute, backup, disaster recovery, databases, and security. 

These laws are the product of hundreds of conversations that the partners of Bessemer have had with cloud executives from our past and current portfolio companies, as well as other leading public and private cloud companies," said Deeter.

Gartner: SaaS Revenues to increase 18% in 2009

Global revenue from Sofware-as-a-Service (SaaS) will grow nearly 18% in 2009 to $7.5 billion, up from $6.8 billion in 2008.  That’s the latest according to technology research firm Gartner.

“The adoption of SaaS continues to grow and evolve within the enterprise application markets,” said Gartner research director Sharon Mertz.

Gartner says that the worldwide SaaS market will continue to grow through 2013 with expectations that revenues will exceed $14 billion, with content, communications and collaboration services capturing the greatest share of SaaS revenue at $2.6 billion.  This is followed closely by CRM systems at $2.3 billion and enterprise resource planning at $1.2 billion.

Mertz attributes much of this growth to on-demand vendors who are expanding their offerings though alliance and partnerships as well as moves to grow user application development via platform-as-a-service offerings.

Free Webcast: Saving Money with SaaS

TechRepublic, a popular resource for IT professionals will be hosting a live webcast on November 17th at 1:00 pm ET that might be of interest to any organization considering adopting Software as a Service as part of their business operations. 

Titled Saving Tim and Money with Software as a Service (SaaS), the webinar will provide an overview of the SaaS solutions and strategies for small and medium sides businesses.  

According to TechRepublic, the webcast will help attendees:

• Gain a better understanding of the market conditions that are driving the need for SaaS among SMBs as well as the leading trends and strategies to maximize its value to the business 
• Find out if SaaS is a good fit for your business and how you can properly assess your situation to determine the best SaaS solution for your particular type of business 
• Learn how an integrated SaaS solution provides a scalable platform that will grow with your business and provide even greater opportunities for lower costs and better service

To learn more or to register for this webinar, go here.

SaaS Stock On The Rise

The general state of the economy may be bleak but not in the world of software-as-a-service.  According to Nine Lives Media's SaaS Stock Index, SaaS stock rose nearly 30% in the first half of 2009. 

Among the big winners are Taleo Corp (up 133%), Amazon.com (63%), SuccessFactors, Inc. (59%), RightNow (52%), Constant Contact (49%), Kenexa Corp. (44%), and NetSuite (39%).  Others such as Dell, Google, Salary.com, and Ingram Micro also jumped, a potential sign of things to come.  While the performance of SaaS may have been less than stellar in 2008, perhaps SaaS is one market that can help lead us out of the current economic climate.

APIs the Key to Business Development and Customer Aquisition

The importance for SaaS vendors to have an API has never been greater than it is today.  That’s the latest from a panel of experts at the recently completed Interop Las Vegas event.

APIs are critical to any SaaS business with a channel partner strategy.  Why?  Because at the end of the day APIs accelerate the integration of SaaS applications with legacy solutions, therefore improving the adoption rate of those applications. 

As Network World notes in a recent article, SaaS applications can be an easier sell because customers traditionally don’t need (or require) the input of CIOs or the IT department – at least initialy – when reviewing potential solutions.  There’s no doubt that there’s involvement and, in fact, CIOs in particular are becoming more engaged earlier in the process as their awareness is heightened over SaaS applications.  But there’s certainly less resistance to new product adoption using the SaaS model than the traditional licensing model. 

When it comes to business development, however, an API is the backbone to a successful partnership.  In many cases, companies are looking for a variety of solutions to meet their needs but they also don’t want to have to manage a series of disparate systems as this creates a number of headaches across multiple departments.  An API can bridge this gap by integrating multiple applications that ultimately provide a more complete solution with greater "value add."  And the panelists at the Interop session claimed that using an API among partnering companies could cut the cost of acquiring customers for SaaS vendors which is a big plus since, as Tim Dilley of NetSuite notes "Customer acquisition is the biggest cost."

"'It's stunning to me the number of SaaS companies that don't even consider an API as part of the development cycle,' says Treb Ryan, session panelist and CEO of OpSource.  'Lord knows two Web developers in a garage know to put out an API. [For SaaS vendors not doing this it's] killing them.'" 

The Role of Customer Support for SaaS

I recently came across an intersting post by Mikael Blaisdell that focuses on SaaS, Support, and owning the customer relationship.  The question of who owns the SaaS relationship is an important one and the following excerpt highlights what many companies struggle with.

"Who is accountable now for maintaining that ongoing relationship [between customer and vendor], and whose performance review is based upon successful retention? In most SaaS companies, the accurate answer is: no one.

"There is an ownership vacuum, and it will be filled by someone. Perhaps that someone will be a new form of what was once a channel partner, capitalizing on both proximity to the customer and specific expertise in their vertical. Or it could be that Support finally comes of age within the company, reinventing itself as an authentic profession. The key to the success in this fast-paced game is in addressing what the SaaS sea-change has not touched, the burden of responsibility for making productive and profitable use of the technology. That value, not the code, is what the customer truly wants to buy, and will pay well for."

I submit that the best SaaS companies do not lose sight of the criticality of the relationship with the customer. Certainly at PeopleCube we have not. As we have grown our SaaS business, our VP of Customer Care, Carolyn Urban, has put forth an incredible effort to expanded our customer community offering to provide additional opportunities for interaction with us. Our Customer Care Center (http://connect.peoplecube.com) provides interactive forums where customers can exchange best practices with each other, a custom report archive where free exchange of reports is encouraged, proactive RSS feeds to notify customers of status changes of their incidents, searchable knowledgebase of technical articles, etc.

We understand that in the end it is not about the technology that we sell. Especially in the SaaS model, it is about not only productive and profitable use of our solution as Blaisdell suggests, but getting to those business objectives faster than ever.