Now, suddenly everyone is SaaS?

I am very grateful for all the attention being paid to the SaaS market these days. It takes a great deal of stress off our marketing budget. SAP, for example, is spending lots more than we could to educate ERP buyers about Software as a Service. Ditto for Salesforce.com.

What fascinates me is the traditional ERP software vendors who compete head-to-head against Plexus claiming that the on-demand or SaaS model is not proven or is just too scary for the customer to contemplate. Then, when the customer says they prefer SaaS, these same software vendors turn 180 degrees and explain that their tired old client-server software can also be delivered on demand. They go on to say that when the customer changes their mind or grows (or something) they can take the solution back in house.

My first question is, if SaaS is a good idea now, why would the customer later change their minds and bring it in house? Some thoughts come to mind:

• The software vendor is not committed to the concept. They see it as a passing fad, just like that world wide web thing they have read about.
• The software vendor does not have a real SaaS solution and is buying time until they do have a viable offering.
• The vendor cannot offer a competitive price for a SaaS solution, probably due to an immature architecture.

The next question then is what is SaaS? There has been lots of writing about the concept. Wikipedia has a detailed definition. That definition is relatively generous saying that maturity level one is still SaaS. This is basically the same as an on-premise solution (individual customized copy of the software) except that it is on someone else’s premises. This only adds cost to the vendor-customer relationship. Whoever is providing the premises (servers, OS, DBMS, etc.) must make a profit too. When a new software version comes along, each instance must still be upgraded. This just shifts the pain and annoyance of keeping traditional software up to date to a third party.

Compare this with Maturity Levels 3 and 4. All customers run off the same core software which is updated constantly. Changes are automatically available to everyone. Upgrades for new DBMS, Operating System, Hardware, etc. are all done in the background. The software is also more bandwidth-friendly since it was written directly to the web. 100% of the screens are accessible via a browser, not just the ‘portals’.

Buyers Beware! Make sure you are getting a real SaaS solution that will yield all the benefits vs. a hosted legacy application that will just add cost and complexity to the customer-vendor relationship.

Mark Symonds, CEO of Plexus Systems, Inc., is an operations expert with 25 years of experience. His blog is about the convergence of ERP and the on-demand (software as a service) delivery model, and its impact on manufacturers.