A Blog About Software As A Service
This blog is all about software as a service (SaaS) for business. If it is in the cloud, you will find it here.
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Beware The Hype for Software As A Service- Business Week Article
Posted on April 3rd, 2009 No commentsAs I’m just getting started with this blog, I’ve been doing some research into the coverage of software as a service in the majors, and found this article in Business Week from July of 2008. It’s called “Beware The Hype for Software As A Service” and it is by Gene Marks. In the piece, Marks immediately lets his opinion be known in the subheadline: “What’s called SaaS, or on-demand software, needs some debunking. For starters, it isn’t cheap, and your data aren’t secure.”
The article’s setup:
The biggest bucket of myths I hope to bust centers on a technology that many business owners are hearing a lot about these days. It’s known as Software as a Service (SaaS), or the idea that you can get your software delivered conveniently, and at a low price, via the Web. Unlike buying software the old-fashioned way, by paying a big licensing fee up front, you pay for SaaS—also referred to as on-demand software—in pieces, spread out over time.
But as with most IT innovation, there’s a lot of hype surrounding this technology—so much so that many of us don’t know what to believe. Is this a viable thing? Should we be using this stuff? Don’t worry, folks. I’ve done some research into this SaaS thing. Let me debunk a few myths.
Gene goes on to tackle the myths one by one.
Myth 1: SaaS is cheaper. No, it’s not. In fact, it can be a lot more expensive. Most service providers charge each user by the month. If you’ve got 10 people using a product, and they’re costing you 50 bucks a person each a month, that’s $6,000 a year. Most in-house systems have one-time licensing fees and optional support agreements. Spreading out the payments is nothing new, either; tons of software leasing companies will finance your purchase and spread out monthly payments over time. When you look at SaaS over the long term, it’s usually not a cheaper option.
Well, in my opinion, that depends. First, it depends on the type of software you’re talking about, how much it costs, and the support and upgrade costs involved. Let’s use a CRM for example. Let’s pretend you have a CRM that you have installed within your company’s network. Then compare that to a salesforce.com account that charges by the seat per month. It’s likely that the salesforce instance will be cheaper, and ontop of that, you don’t have to dedicate time, resources, or money towards upgrades, custom integration, etc. But again, that really depends. I’m sure there are instances where SaaS will cost more based solely on the pricing structure (per user/month rather than a one-time hit). But I don’t think you can categorically dismiss SaaS as a cheaper option.
Myth 2: SaaS reduces hardware investment. Well, this is only half right. Sure, the SaaS providers deal with the servers, and all the Windows headaches and patches and builds and versions and whatever. That’s their problem. But you still need fast access to the Internet. And that means workstations running versions of up-to-date operating systems, which generally means up-to-date computers. And they’ll need to be tied in, by wire or not, to hubs and routers to access the Net. And there will still be internal security and firewall issues. So you’re really not completely eliminating the IT guy. He’s like the smell from your cat’s litter box. It kind of never goes away.
I may be out of touch completely here, but I see fast access to the Internet as a given for most businesses today. While this point is not something to scoff at, I view internet access as a cost of doing business anyway, and not something new as a result of SaaS.
Myth 3: SaaS is quicker to set up. This is like Ikea saying its furniture is easy to assemble. One look at the lopsided bookcase in my den proves that little theory wrong. The same goes for software. Sure, if you’ve got a basic setup, then no problem: Just flick the switch and go. But what if your needs are more complex? What if you need customization? Snazzy reports? Integration with other systems? Now you’re adding complexity. And whether an application is sitting on a server in Taiwan or a server in your office, someone’s got to do the work.
I’m not sure about this one. I mean, I agree that there will always be a learning curve involved with setting up and customizing any piece of software. But the example myth here is that SaaS is “quicker” to set up than the alternative. So with that said, I’ll agree that there’s nothing inherent in software as a service that makes it faster to set up than installed software.
Myth 4: Your data are secure and backed up. Baloney. They’re about as secure as the personal data on 650,000 customers lost by GE Money (GE). Or that confidential Al Qaeda data left on a train by a British intelligence agent. Or Willie Randolph’s status as the Mets’ manager until about a month ago. I don’t care how many redundancies and data centers and encryption are baked into the system. Accessing your data over the Internet in 2008 is fraught with risk.
Interesting one here. I think I feel pretty secure about the backup side of this issue, but the security point is interesting. I don’t have the figures, but again, I think it all depends on the type of SaaS you’re talking about. This is probably the most valid point the article makes.
Myth 5: You’ve actually been using SaaS for years—look at your bank account. Right. And when my SaaS vendor is backed by the Federal Deposit Insurance Corp., maybe this story will hold. But in the meantime, what if I’ve got a billing dispute with you, and you decide to shut off my service? What if you send me my data on a CD, and I can’t even open the data because I don’t have your application? What if the government or some competitor subpoenas you for my information? What if the unthinkable happens and, gulp, my Internet connection goes down. Gasp. How do I get my work done? Yes, I realize that we’ve “hosted” our financial data with banks for many years before SaaS. But we’re talking a totally different set of rules, so let’s not even go there, girl.
Another good point, but one that can be alleviated by clear export and data rights contracts. First, unless the SaaS gives you export options that let you push your data to other applications, why would you sign the contract?
All in all, I think this is a really good article, as it shows the risks and fears associated with software as a service. While I don’t fully buy into the SaaS bashing completely, these are the kinds of issues that must be resolved by SaaS vendors.
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