Gartner published Gartner Fact Checks the Five Most-Common SaaS Assumptions this week. Let me share some of my experience driven insights on this subject.
“Assumption 1 — SaaS is less expensive than on-premises software. Gartner Fact Check: True during the first two years but may not be for a five-year TCO.”
In my experience, for on-premise implementations the devil is actually in details. Especially, in large enterprises adding a new enterprise application to the existing complex IT support context may mean steep learning curves, long lead times to procure, install and configure the necessary infrastructure components and hefty opportunity cost, exacerbating the risks and delays in launching the intended value to the organization. So, to compare apples to apples, the TCO for on-premise implementations also need to account for quantification of these risks, say the opportunity cost if the solution is delayed by six months due to the delays in procuring necessary infrastructure components multiplied by the probability of risk.
“Assumption 2 — SaaS is faster to implement than on-premises software. Gartner Fact Check: True for simple-requirement SaaS, which will be faster, but growing complexity and other factors are coming into play.”
While the business process standardization challenges are the same for both of these modes, I see that most of the on-premise infrastructure risks are jettisoned with SaaS, contributing to the shorter implementation times. So, when time is essence, say immediately reaching out to a underserved consumer market, in my opinion SaaS is the clear choice.
In addition, I noticed that most of the SaaS vendors have sound understanding of their product functionality and clearly defined interfaces to the major external systems, further shortening the implementation critical paths.
“Assumption 4 — SaaS does not integrate with on-premises application and/or data sources. Gartner Fact Check: False.”
While some big players, such as SaleForce and Workday, are successfully embracing web services and mashups for real-time and frontend integrations, many SaaS vendors are still paddling with FTP style full load batch interfaces. Integration capability is one area that is often overlooked by many SaaS vendors. Also, in addition to knowing about one/two primary systems that the solution must integrate with, SaaS vendors have imminent need to develop a comprehensive understanding of systems context that the SaaS solution should interoperate with.
“Assumption 5 — SaaS is only for simple, basic requirements. Gartner Fact Check: False.”
I totally agree. If solution is too simple, why go SaaS when it can be easily accommodated with simple forms-based internal solutions.
Also, without reading Garner’s detailed report, not sure whether they accounted for the pricing model differences across SaaS vendors/segments. For example, Talent Management/employee self-service style SaaS vendor pricing may be quite different from CPM style SaaS offerings. Perhaps, the TCO by segment may provide better insight into SaaS vs. on-premise value conundrum.
Overall Gartner findings are good read for customers considering SaaS solutions, and more importantly for SaaS vendors to reflect on their offerings and identify opportunities for further improvements.