The SaaS Explosion of 2013: Part III – The Customer Pull

Customer demand for SaaS solutions is accelerating.  SaaS products must be evaluated when a new software solution is considered.  We are reaching a tipping point in customer demand further accelerating the growth of SaaS products.

Top 5 reasons why Customers are driving the SaaS Explosion


1) SaaS enables today’s agile business imperatives

In these uncertain times, companies need to rapidly respond to business challenges and opportunities.  The financial benefits to SaaS customers (reason #5 below) are secondary to the ability to facilitate business transformations.

IT systems must be able to respond quickly to changing business needs.  New business opportunities need to be responded to in weeks, not years.  Typical SaaS  implementation time for a mid-size company is two to four months while a large multinational rollout could take a year.  This is about half the time to implement a typical on-premise ERP rollout.  Companies with SaaS systems take advantage of new software capabilities immediately , rather than often being locked into dated releases that may be several years old.  Most SaaS vendors rollout new capabilities every two to four months.  SaaS vendors are able to deliver new software features to their customers much faster than on-premise vendors.  Since the upgrades happen quickly, SaaS vendors don’t have customers running software that is years old.

2) Everyone else is doing it

In the past SaaS was brought into companies through rogue user projects outside of the purview of IT, or through the rare bleeding-edge IT management.  It was a risky decision to put a high profile project on SaaS; now installing a major new system on an on-premise system looks like an outmoded business decision for all but the largest companies (which lag in deploying new technologies across a large organization).  The federal government is even driving adoption of SaaS within its agencies — the National Institute of Standards and Technology (NIST) is accelerating the move to Cloud Computing through its standards efforts.

Many of management’s concerns about cloud reliability and security are diminishing as the message is getting through (and hard to argue with) that the vendors providing cloud services such as Amazon, Rackspace, Google, and IBM, provide far better security and availability than most corporate IT departments.

SaaS has become safe.

3) SaaS choices abound

Most software categories have SaaS alternative; with the acceleration of new SaaS products currently being developed, 2013 will have an even broader set of SaaS alternatives to on-premise software.  Going forward, SaaS alternatives to on-premise software should be considered for new IT projects.  These SaaS products are likely to be more modern, have richer, more consumer-like (think Facebook) interfaces, and have inherent support for mobile platforms superior to their on-premise competitors.

4) You can ease your way into SaaS

As mentioned in the prior post, SaaS integrations with legacy systems are becoming easier and more prevalent.  SaaS doesn’t have to be an all or nothing proposition.  A hard cutover to SaaS would be impossible for large companies, but incremental capabilities to legacy systems such as analytics, marketing software, or mobile support can be added with SaaS applications.  SaaS vendors can “Land and Expand” to gradually displace legacy systems.  We’ve seen this movie before with minicomputers applications eroding mainframe applications at the end of the mainframe era, and then Novell applications eroding minicomputer applications at the end of the minicomputer era.

5) Oh yes, and the economics are compelling

The hard dollar benefits of SaaS are compelling.  The desire to eliminate large capital IT commitments that lock in expense levels for years is great.  The cash flow benefits of the “pay as you go” approach are compelling.  The ability to reduced fixed IT costs associated with maintaining on-premise applications is big.  The ability to reduce the large implementation services costs are enticing – the days of spending millions for an SAP upgrade are waning.

Coming Next — Part IV, “Software Vendors Move to SaaS”