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SaaS: Red Light, Green Light: Page 3 of 5

Chart: Speak Up For SaaS -- In your company, who is the most vocal advocate for adopting an enterprise application delivered as a service?

Here's the bad news: Don't expect traditional vendors to be great at SaaS. Microsoft's recent announcement around its updated CRM SaaS offering, along with renewed efforts from Oracle and SAP, have put these industry giants back in the fray, but if history is any indication, size isn't a predictor of success. Remember Microsoft Business Web, Lotus Notes on demand, and Intel's ill-fated network monitoring service?

The big question is, will history repeat? Enterprise software companies must shift their revenue models from a larger license stream to a smaller, albeit more regular, influx of monthly revenue. What's certain, if a bit surprising, is that the question of whether pure-play SaaS vendors can survive is fading as an issue. Salesforce.com reported record revenue and profits for the second quarter in a row, while in February, Workday announced it would acquire Cape Clear, a move that should help it capture more European business.

No matter which route you take, don't skimp on due diligence, because the risk posed by a SaaS provider closing its doors is is bigger than that of the maker of a shrink-wrapped app failing. Look around your network--in all likelihood you'll find an in-house application that was created by a now-defunct vendor. It's painful whenever that happens, but when you own the software you can at least migrate gracefully.

  • Customization options: All SaaS vendors provide some customization of fields, screens, and logins. However, many have rigid workflows or incomplete data access models that may not fit within your company. How willing are business units to adjust their processes to fit the application?
  • Finally, when calculating cost, look ahead a few years; this will yield a more complete picture. Your baseline cost for any option should be a three-year total that accounts for licenses; monthly recurring charges; integration and setup costs; increased bandwidth; and ongoing support, both internal and consulting.