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Archive for April, 2009

Thinking about SaaS: Frontline report from SaaScon 2009

Posted by terrosatechnologies on April 6, 2009

This Thinking about SaaS summarizes our findings from the recent SaaScon 2009 Conference held by Computerworld in Santa Clara.

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After speaking with many of the attendees and listening to several of the key speakers, the direction of subscription based software is getting stronger and approaching mainstream status.

 

Nine out of ten companies plan to grow their use of “Software as a Service” in 2009 according to the Gartner Group. The conference speakers pointed out many examples and industry reports that SaaS is achieving maturity and now being deployed at an increasing pace in companies of all sizes and in most all industries. 

 

What is not so clear however is the continuing confusion and misinterpretation of terms like SaaS, PaaS, IaaS and Cloud Computing. But nevertheless, end users and the difficult economy are driving strong SaaS sales in 2009.

 

 

What we heard:

 

“SaaS adoption has moved past the ‘tipping point’”

 

“A new ecosystem is forming around Cloud computing that will transform the IT sector.”

 

“SaaS is not an optional disruptive technology.”

 

“Cloud, SaaS and Mobility are helping to make the “boundary-free enterprise”

 

 

Reading between the lines:  Business drivers are winning

 

Companies are moving to SaaS because of lower upfront costs, shorter implementation times, less implementation risk, reduced need for scarce in-house administration resources and more flexibility to right size systems (up or down).

 

SaaS in some cases reduces the cost of ongoing IT/MIS operations but its biggest gain for these groups is that they can now focus on providing new processes that give their organizations added competitive advantages over ‘on-premise’ only type operations.

 

So the old is new again; Return on Investment, Total Cost of Ownership, Risk Mitigation and business focus are still on top when it comes to investing in these types of systems.  SaaS is apparently proving its worth using these traditional measures, especially to  CFOs.

  

 

The job ahead for IT pros:

 

Recent surveys by Saugatuck and other analyst firms show that CIOs and other IT folks need more education and understanding of this software delivery method in order to feel comfortable moving forward with SaaS.

 

Total costs over time, security, availability of specific applications, integration issues, lack of customization capabilities and application speed over the Internet are the major concerns companies have with SaaS solutions according to a recent Forrester survey.

 

So despite the fact that SaaS is a form of outsourcing, there is a lot of work for CIOs and other IT staff to insure a professional level of systems delivery for their organization.

 

IT Leaders presenting at the conference recommended that CIOs develop a formal SaaS strategy, and incorporate SaaS into their existing governance model. SaaS software evaluation criteria, contract guidelines, Service Level Agreements, a SaaS integration strategy and a business process management design will be put into place by forward thinking CIOs. This guidance reinforces IT’s changing role in the organization as a business process leader, with less focus on infrastructure technology.

 

As the hype and idealized assumptions surrounding Cloud Computing are giving way to real world experiences, it is best to proceed with outside guidance and knowledge while the industry is still in this maturing process.

 

 

Where is the fit?

 

According to a recent Saugatuck survey, collaboration products of all sorts are the top application area for SaaS based solutions, with Human Resources and Customer Service next on the list. Finance and Accounting moved up from 10th place last year to 5th place this year – one factor that indicates SaaS is on the move from the periphery to the core of IT applications as the technology matures.

 

Between 2009 and 2012 at least 40 percent of upper mid- to large enterprises will seriously evaluate SaaS-based “core” financial solutions, as well as broader operational systems.  While early adoption has been focused on the small and medium size business market, SaaS is clearly moving on big company radar where appropriate.

  

For mid-sized companies, a mix of in-house and SaaS based solutions was demonstrated by John Dohm, the CIO for True Religion jeans. He found that vendor diligence and the ability to “try before you buy” testing of potential SaaS solutions helped his company improve operations, while avoiding adoption mistakes.  He also emphasized the benefit of being able to spend more time focusing the business needs instead of technology.

 

For small companies under 100 million dollars, it is reasonable today to build and execute a strategy to replace all or most in-house systems as evidenced by a sharp presentation by Tom Kelly CFO/CIO at Kardia Systems. In a former position at 2nd Wind, an exercise equipment company, he was able to replace virtually all the in-house systems with SaaS solutions and reduce costs by 61%.

 

 

The bottom line:

 

This is the time for many companies and in particular for IT Leadership to understand and begin to take advantage of Software as a Service to benefit their companies. SaaS is not simply a plug and play in most organizations. But instead requires all the consideration and diligence required in the selection of traditional in-house applications.

 

As early adopters give way to mainstream implementations, SaaS vendors need to raise the bar in the level of services they provide, while IT needs to step into a leadership role with regard to SaaS to improve business processes and insure strong vendor management.

  

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This “Thinking About SaaS” article is one in a series produced by Terrosa Technologies’ President, Kim A. Terry. Each article address a different knowledge area of applications delivered via the SaaS subscription model.

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About Terrosa:

Terrosa Technologies was born out of the recognition that software provided as a service produces greater efficiency, value and benefits over traditional site installed solutions. Enabled by a fast reliable Internet and the ever increasing sophistication of Saas offerings, many companies will be able to reduce their cost of operations and afford to do more with less. In uncertain and financially challenging times, it is more important than ever that Terrosa is helping our customers deliver products and services more efficiently and with less risk.

 

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