SaaS applications are on the rise. Everyone’s moving to the cloud. But, pray tell, why?
What are the real reasons enterprises are selecting SaaS applications? We have had analyst interviews directly with 200 SaaS buyers in the past couple of years, and their motivations for buying SaaS are not as strategic as we would have expected.
Generally, most buyers have succumbed to marketing that promotes SaaS as faster to deploy, cheaper to run and generally has better functionality than its on-premise counterparts. All of which sounds terribly attractive when faced with a costly legacy on-premise upgrade that could take you up to 18 months to implement. Some enterprises even told us that they had a corporate-wide ‘cloud first policy’ that encourages all departments to consider seriously cloud options for all IT projects.
There is no doubt that SaaS applications can be deployed a lot faster than on-premises solutions, and yes, some have some fantastic user interfaces as well. Two of the biggest benefits of SaaS are predictable costs and the ability to stay current on vendor releases. However, the biggest operations business objective of recent times – cost reduction - isn’t automatically achieved by moving to the cloud. The reason for this is three-fold.
Firstly, buyers are investing in functionality they do not need. Most software providers bundle in as many modules as they can muster into a sale, regardless of which specific functionalities the buyer actually wants and needs to use immediately. It’s nice to have these extras in the bank for when you may want to unlock their magic but, in the meantime, do you really want to pay an astronomical monthly rate simply for having them?
Secondly, deployments are not the end, but the beginning of the SaaS journey. As SaaS applications have continual updates, new functionalities, and even new modules several times a year, SaaS services support becomes an ongoing cycle of consulting and implementation work. This, of course, costs money and effort, which needs to be taken into consideration. And, don’t forget one of the biggest drawbacks of SaaS, potentially you have less control over your data.
Thirdly, cloud policy must be aligned with defined business outcomes. It makes sense for this to be a strategy for IT departments, which are charged with providing cost-effective technology to the business. It should not, however, be a specific focus for any other department in the enterprise. As highlighted in The SaaS Buyers’ Guides: Five crucial steps to ensure you get it right, business line leaders should have defined business outcomes and objectives, and approach technology as an enabler for these. The actual technology used should be irrelevant.
Bottom Line: Deciding to switch to a SaaS model doesn’t mean you can abandon good business practice – you still need to weigh up the options and make the case.
SaaS buyers need to employ the same selection rigor to SaaS selection as they did when they evaluated procuring on-premise applications. This includes an in-depth cost analysis of the implications of deploying and managing SaaS on an ongoing basis, and the ability to read between the lines of the vendor marketing hype that does such a great job of selling the products. And most importantly, do these SaaS solutions help them achieve their defined business goals and outcomes? Buying technology for technology’s sake has never been the answer, and nothing has changed!