Monday, November 5, 2007

Why SaaS will become the preferred solution over On Premise.

I just answered a linkedin question about what will become the predominant solution SaaS or On Premise. I thought it worth posting about.

Firstly lets have a look at why some organizations may have a natural resistance towards SaaS. An Article in CIO magazine lists a number of these reasons which I summarize here.

1. Service levels cannot be guaranteed by SaaS vendor
2. Lack of configurability
3. Sharing functionality with hundreds of potential competitors
4. Elimination of CIO role

I will add a couple more here

1. Hosting data outside of firewall.
2. Loss of control due to business units running "rogue" IT projects using SaaS.

Lets take a look at why these 'inhibitors' become non-issues for SaaS.

1. Firstly SaaS Service levels. Gone are the days where a startup SaaS vendor will try to host their own service. This is not a core competency, as such SaaS vendors follow their own value proposition ie find an expert to handle Hosting and service levels. Companies such as Rackspace and Opsource will handle this side of the business with guaranteed up times.
2. Lack of configurability. SaaS obviously enables you to implement a system which can be used in a very short amount of time, bypassing on premise challenges such as server provisioning and software installation. However SaaS does not mean the end of configuration. as an example provides a very flexibility platform for building your own custom objects and UI, as do many other vendors. This enables you to model the 20% of your business process which is unique to you.
3. Sharing functionality with other organizations. This works both ways, sure you may have had an idea which the SaaS vendor has taken and made available to others. But this means you too will benefit from other organization's ideas. Furthermore the uniqueness of your business process is part of the configuration model mentioned in item 2 above, it is not part of the standard functionality of the multi-tenant single instance.
4. The CIO role will not be eliminated. In fact I see it going the other way, where it becomes even more a strategic organizational role. The CIO must make decisions on what is SaaS and what is on premise, they also need to determine how these systems integrate and how information is conveyed within the organization.
5. Data outside of the firewall. This continues to be a major topic in the news. But as the trend of utilizing data center experts such as Opsource and Rackspace increases then the risk continues to reduce, as these companies' entire success hinges on security and reliability.
6. Rogue Projects. Many time business units within an organization will look to a SaaS solution as they have been told by IT that their needs cannot be serviced in a timely manner internally. As SaaS becomes more widely accepted and recognized by Internal IT not as a threat but as an asset then SaaS projects will not be seen as rogue projects but rather an IT recommended solution. This will enable CIOs to adopt SaaS in a more structured and integrated approach.

The current generation of CIOs may have these inhibitions towards SaaS and will take time for these 'fears' to be overcome.

However what ensures the longevity of SaaS is the next group of CIO's who are in college or have recently joined the workforce. This crop will see Web 2.0 as a totally natural way of doing business as its what they do in their personal lives.
Storing files and documents, in Google, in Microsoft Live, social networking, wikis all are ingrained in this new generation and SaaS will become the obvious choice.