Viewpoint -- When is SaaS "BS-aaS"?

Feb. 20, 2008
Plexus Systems CEO says "SaaS" concept has been hijacked by IT industry -- without providing the true business value.

There's been a lot of talk about the Software as a Service (SaaS) model. That debate has helped define what SaaS is now and what it should be in the future. But the chatter also asserts a number of erroneous SaaS definitions out in the IT marketplace.

So let's start by clarifying exactly what SaaS is and then later what it isn't.

  • SaaS is a software delivery model in which the user accesses software over the Internet from anywhere at any time. Users need only a web browser to use the software. Companies don't need to invest in and upgrade servers, operating systems, databases, backup equipment and complex programming environments. The software vendor provides all of that.
  • All customers run off of the same code base. This ensures that the software the customer uses is always up-to-date and saves the vendor from having to support different databases, operating systems and versions of its application. Customers can deploy the application very rapidly, since they don't have the lead time and hassles associated with configuring their local environments.
  • Customers do not have to worry about upgrading their software. For example, no one worries about what 'version' of Google they are running.
  • The software provider is contractually obligated to provide acceptable availability and response time. Again, the customer doesn't have to monitor disk and CPU usage and upgrade hardware.

The most mature instances of SaaS are multi-tenant, vendor-hosted solutions include, NetSuite and my company, Plexus Systems, Inc. These characteristics offer distinct advantages. For customers, they are the ease with which the software is kept current and the cost savings associated with a shared infrastructure. Some of the cost savings come from using a simple Web browser to perform any transaction in the system -- not just those that have been 'Web-enabled.' For our customers, SaaS is an enabler of nimble, responsive organizations that embrace both innovation and customer value.

Given these advantages over the basic Application Service Providers (ASP) delivery model of 2000, it's not surprising that SaaS has become the "hot" application delivery model. It seems every software vendor claims to have SaaS applications, whether the model meets all the criteria or not.

I have to admit, I take umbrage with the fact that the SaaS moniker has been hijacked by some in the IT industry.

If you are a customer seeking a SaaS solution that adds value to your operation, make sure you get a true SaaS application; not a pale imitation, which may really be just an old client/server application with a customized front-end and a few new features on a dedicated server in a third party data center.

Pretenders will offer a variation of the following:

  • A third-party hosting company running a separate instance of the solution for each customer -- This doesn't solve any of the delivery problems. It just moves them from the customer to a third party. Each individual customer must still go through the painful upgrade process. With no shared infrastructure, no costs are taken out of the equation. In fact, the costs go up because the third party hosting company also needs to make a profit.
  • A 'new' Web-based user interface with the same old database structure and very old business logic still intact. Some call this "putting lipstick on a pig" or "whipped cream on roadkill." If the underlying business logic is still in RPG, Cobol, or other older languages, the vendor has not kept up-to-date and the software will be expensive and cumbersome to maintain.
  • Not 100% Web Native -- unless the solution transmits just HTML (web native), the software will consume a lot of bandwidth. Get estimates as to bandwidth needs for a proposed application. You should be able to support your entire organization with a fractional T1.

The SaaS model evolved to drive out costs and complexity in the relationship between the software vendor and the customer. It addresses many problems that have arisen over the years.

To get a real SaaS solution that will yield all the benefits versus a hosted legacy application that will just add cost and complexity to the customer-vendor relationship, software buyers should do the following.

  • Be sure to see the actual software, not just Powerpoints.
  • See the software in use at a similar company.
  • Ask the software vendor to demonstrate the entire system from one of your computers without loading any software on it beforehand
  • Ask what the bandwidth requirements are.
  • See where it is hosted.
  • Truly understand how many users will be needed to get the full value from the system. SaaS is a subscription-based service, with fees usually (but not always) based on the number of users at a particular company.

There is no doubt SaaS delivers value to the customer in the form of rapid time-to-market and low maintenance. Customers want new features faster than ever before, and SaaS effectively enables responsiveness.

And if responsiveness doesn't sell you on SaaS, ask any CFO or VP of Finance if they are happy with spending a high portion of their budget keeping outdated software running, or with hiring IT people to babysit servers and applications, and they usually start fuming. They want an IT team that are business process consultants, and who focus on building value with technology, rather than simply babysitting technology. Or ask an IT guy how many of his applications are updated to the current version, and he'll likely laugh at you.

It's my belief that the SaaS model will be the future of most applications, as the advantages are just too great to match.

Mark Symonds is president and CEO of Plexus Systems, Inc. Symonds has his MBA in finance and accounting from Cornell Universityand a bachelor's degree from the University of Rochester. He is a Certified Public Accountant and is also certified in production and inventory management (CPIM) by the American Production and Inventory Control Society. He holds a variety of industry association memberships, including the Precision Metalforming Association (PMA), where he is a member of its national board of directors.

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