Many companies, and especially enlightened CIOs, see this limitation as a welcome constraint on the unrealistic and unproductive customization efforts of the past. Most industry studies have found that software customization projects have generally been unsuccessful, often taking longer and costing more than expected while producing far less functionality than hoped.
Rather than withstand continued frustration, many companies are willing to accept the more standardized SaaS solutions because their limitations are outweighed by their ease of deployment, lower total cost of ownership and quicker time to value as a result of higher utilization rates and lower subscription fees.
At the sametime, a growing number of SaaS vendors are offering a wider array of reconfiguration, or meta-customization capabilities which permit users to modify the look and feel of their on-demand applications to cater to their specific needs. Some companies, such as Salesforce.com, are even permitting users to manipulate their software code and build their own applications on their platforms.
With concerns about reliability, security and customization fading, todays greatest concerns center on software and data integration. These concerns are rising because there has been a proliferation of SaaS offerings aimed at addressing nearly every functional and industry need. Many companies want their SaaS solutions to link to their existing legacy applications or to other SaaS solutions so they can fully leverage corporate data and even create new software capabilities. In response, many SaaS vendors are leveraging Web services or offering application program interfaces (APIs) which enable third-parties to link to their applications. Web services and APIs permit SaaS vendors to link their on-demand applications together.
There are also a growing number of integration tools and consulting companies targeting the SaaS market. The tools vendors include companies such as Boomi, Cast Iron, Hubspan, Informatica and Pervasive Software. The integrators include Appirio, Astadia, Bluewolf and SaaSpoint.
Leading SaaS vendors are also creating partner ecosystems which encourage tighter integration between multiple on-demand applications. The most prominent of these ecosystems is Salesforce.coms AppExchange. While these ecosystems dont eliminate every integration need, they significantly reduce them and enable customers to gain greater utilization more quickly from their business applications.
Customers have also expressed concerned about the hidden costs of SaaS. Theyve feared that they will pay more than originally intended for their SaaS solutions as their usage levels rise or subscription prices go up. In reality the cost of todays SaaS offerings is far easier to control than traditional on-premise software. Unlike the uncertain costs of deploying and managing legacy applications, the fees for using SaaS solutions are clearly stated. And, legacy application maintenance costs can continue to escalate even as utilization declines.
The SaaS pay-as-you-go subscription pricing model permits companies to calibrate their fees in response to actual utilization levels. They are also in a better position to terminate or downgrade their use of a SaaS solution if they arent satisfied or have less need for the on-demand application.
Given the short-term subscription commitments of customers, there are very low barriers to customer defection if a SaaS solution isnt meeting their needs. Therefore, successful SaaS vendors must continuously enhance their solutions, carefully control their fee structures and deliver quality support to their customers.
A growing number of companies of all sizes are discovering the virtues of SaaS. The model shifts the burden for deploying and maintaining applications from the customer to the vendor. It removes many of the risks associated with legacy applications and is proving to be better suited to meet the challenges of a rapidly changing workplace in which enterprises have to be accessible by increasingly dispersed employees and operated in a more economical fashion.
Jeff Kaplan is Managing Director of THINKstrategies (www.thinkstrategies.com), an independent consulting firm focused on the business implications of the on-demand services movement. He is also the founder of the SaaS Showplace (www.saas-showplace.com). He can be reached at firstname.lastname@example.org.