Are CIOs Ready for SaaS?

by Amit Tripathi    May 02, 2007

Today there are umpteen literatures that seem to suggest that software-as-a-service (SaaS) model is going to catch up fast among enterprises. Most of these discussions justify the momentum of the adoption, by pointing at instances of one or the other IT vendor organizations making some of their applications available on this model. A very interesting observation made by the CEO of Oracle, Larry Ellison, way back in 1999, was that 70% of Oracle’s revenues by 2001 would be from selling SaaS based software. It is a well-known fact that the database giant had not achieved this figure.

Incidentally, instances of enterprises using applications on pay per use basis are hard to come by at the moment in India, barring sporadic instances of some large multinational corporations thinking to deploy an application on the SaaS model, somewhere in its already complex IT architecture. So what ails full fledged and faster adoption of this mode of software usage?

The basic premise that IT vendors flaunt to pitch in a SaaS based offering is that it can be deployed for processes that are not mission critical such as HR, payroll, CRM and the likes. If one were to examine these so called non-mission critical processes, it can be easily found out that these are precisely the processes where enterprises bring in substantial amount of differentiation. The aim, usually, is to gain competitive advantage. Thus, for instance, the customer retention process of one retail house differs from the other. The human resource management philosophy and the processes thereof of one enterprise, especially in these times of attrition, are devised uniquely as compared to its competition.

So, an enterprise that decides to deploy, let us say a CRM engine on a pay per use mode, has to undertake customization of the application to suit its needs. At present, organizations that use customized applications for such processes gain that edge to incorporate desired features, which a SaaS application fails to do. Incidentally, vendors are betting big on the use of CRM solutions in an on demand mode. But even in that the uptake has been too little. Analysts observe that just 5-8% of the smaller and medium businesses (SMBs) have gone in for on demand CRM, which by an estimate bring in 50% of revenue on SaaS.

The fact is that today, customizing a SaaS based solution is well nigh cumbersome. Moreover, many vendors do not provide that facility in their offerings. And if at all, one were to customize an on demand application, won’t it amount to suffer the same agony associated with that of a packaged application?

Tags: SaaS