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8 Myths of Software-as-a-Service
abb_road writes "BusinessWeek looks at the current state of software-as-a-service, arguing that the model is well established and is distinct from failed ASP/Hosting models of the dot-com era. Far from a passing fad, the model is starting to see large-scale adoption, and traditional vendors are having trouble revamping their applications and financials to get in on the action. From the article, 'As SaaS gains mainstream acceptance, it is becoming an important disruptive force in the software industry. And as long as the quality and reliability of SaaS solutions continues to improve, the appeal of SaaS isn't going to go away.'"
they have had disservices for a long time... just look at windows. it's a huge disservice.
Anons need not reply. Questions end with a question mark.
To condense the article down: SaaS is a fancy term for outsourced business operations. The only difference is that companies provide communications about these services through... (wait for it)
...
(wait for it)
(keep waiting)
the INTERNET!
Are you impressed yet? It's very Web 2.0, I'm sure. Some of them might even use AJAX and Social Networking and Portal Technology and Peer to Peer Business to Customer relationships and
Javascript + Nintendo DSi = DSiCade
You mean if quality and reliability continue to improve that you appeal will continue to grow???
Why didn't someone let me in on this secret a long time ago!
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Most all software EULAs say, "No Warranty" in terms of being good, doing what it says, or whatever. That is not a service, that is software, "Use at your own risk".
Service includes maintenance releases, updates, support, installation help, onsite repairs, telephone support, etc.
If I don't pay for software, odds are I can still use the software, but my service is going to be minimal at best. If I don't pay for service, it would take a real philanthropist to provide service to me.
"Software as a service" is almost as old as the public internet. Many banks, hospitals and government institutions have been running remotely hosted mainframe apps for over 2 decades ... it's quite proven successful business model.
"We have not changed our strategy. We have this mixed environment and run a hybrid model. We do it for good reason. Our customers want flexibility, so, over time, they can make the decision to source us in, or upscale the functionality and integrate us into the back end.
You can do this on-demand for certain areas and certain functions, but not for everything. Everybody starts with salesforce automation because it makes sense since it's not very structured. It's simple and more office-like. But the more you come from this type (of system) to the core of CRM (customer relationship management), the more difficult it will become to do it on-demand. People don't want to share the data with others."
If you look at the fact that no code is ever flawless, and always has bugs, so there's always patches and upgrades. Most people in the regular software industry are passing off intermediate versions of flawed software as a product, and then giving the service away for free. This is just the opposite of that model and it makes more sense. Continuing to support, and making bug fixes to past versions of software is part of the service, clients have a real voice in the future of the software package by communicating what their future needs are. As they pay per period versus per version, software development companies don't have to guess anymore what their clients want to get them to "buy the new version" instead, the clients can have a real voice in what features are important to them in the future, without the need for pushing stuff off to a higher version versus an incremental update. It's a better model because instead of selling "why you have to ditch this old one and buy this new one" you are instead saying, "we have an established relationship in the past, and if you enjoy this, we can continue." Resulting in less useless bells and whistles in new versions, and more of the actual needed functionality. Instead of inventing things you dream they will want, you take care of their changing needs instead. That's why I think it's a winning model (if companies followed it correctly).
Judges and senates have been bought for gold; Esteem and love were never to be sold.
http://itmanagement.earthweb.com/columns/entad/art icle.php/3598831
Which seems to imply at least some backlash and return to 'on premise' models of software.
putting the 'B' in LGBTQ+
This message brought to you by Salesforce.com This article reads like a press release from Salesforce.com, the biggest player in the "software as a service" marketspace. I tried Salesforce when I started my VoIP business; if they're the market leader, this industry is too immature to be taken seriously.
First off, it isn't cheap--Salesforce.com is $65 per month, per seat and it has to be paid 3 months in advance. This makes it quite a bit more expensive for small businesses than say Goldmine or ACT. Secondly, the reliability was horrible. CRM is the lifeblood of any organization. *Any* downtime results in all of your customer facing people (sales team, customer support staff, billing, etc) basically sitting around on their hands. Sales leads were lost and customers were pissed off. The worst part about it is that we couldn't do anything about it. I couldn't reboot a server, rebuild table indexes, sacrifice an intern... nothing. I wasn't told what the problem was when the system came back up, nor was I even notified *when* they came back online. And I wasn't given an apology or a service credit.
After several very public blackeyes Salesforce finally released a systems status page. In a pure act of corporate hubris they named it http://trust.salesforce.com/. You know know something's deeply wrong when a simple status screen is given that hard of a PR spin. Sorry, but they already blew my trust. I don't care what BusinessWeek says, I wholeheartly recommend that an organization keep their key systems in-house!
Entrepreneur : (noun), French for "unemployed"
...is apparently now writing for Business Week.
Absolute Michigan
This is crap. It's not even well-written crap, which makes it pure bullshit. There's more nonsense "terminology" in this article than I've seen in a long time. The belief that the "legacy applications" are the reason that the dot-com boom failed is unjustified. Business don't fail because of software, good, bad, or indifferent. And they're sure as hell not going to succeed because of it, either. From the article, "Now Oracle, Microsoft (MSFT), and SAP (SAP) must respond to the SaaS movement while trying to avoid cannibalizing their existing software business in the process." This is a bald-faced attempt at spreading fear, uncertainty, and doubt. Microsoft produces the operating system that most home/business clients use, and Oracle produces one of the most common commercial databases, both of which are staple products, and are required for this "software-as-a-service" to function. They won't be "cannibalizing their existing software business[es]" any time soon. So, I feel it is necessary to add another "myth" to this page: Myth #9: This article is a reliable source of information
Software as a service is great if you have some way to export your data. My company has (not my choice) bought into an online ERP system which looks good from afar, but is apparently far from good.
Now that all our data is in the system and we are running our operations off of their system we are pretty much screwed...they can jump the price at any point and we just have to pay it. The sales people lie (no surprises there) about having ways to export your data, but there aren't any really there.
Just be sure before you jump into something like this that you have a way to get your data back AND get it in writing that said tools will always remain and be current.
(and, yes, since we bought into their system they have moved to only allowing Internet Explorer....D'oh!)
Are there any software products from major software vendors who boast EULAS which don't effectively state AYBABTU?
The Christian Right is Neither (Christian nor right). See: Matthew 23, Matthew 25, Ezekiel 16:48-50
It being tax time in the US, I've had experience with an online-tax-prep service. I've also dealt with some online business-scheduling software (Fusionary IMS, similar to Basecamp). Being on Slashdot, I've taken a look at some of the Online Word Processors from a few days ago, as well. My prediction: things like online tax-prep, relationship management, or project management will prosper, while things like the online "Office App Replacements" will continue to endlessly struggle for relevance.
The office-app replacements are the proverbial "cure for which there is no disease". There is little reason that a composition program needs the network to function better, and certainly not enough reason to justify the hurdles involved in presenting these programs online. For something like tax-prep, it makes perfect sense to offer a "use" payment plan. The software is, by its nature, only ever used once a year, and the functionality needed (basic fill-in) is no real stretch for the Web. Something like customer-management is a task that is there to benefit the outside world, so having it tied into the network is an obvious choice. Something like internal project-management software depends more upon internal communication, but with the widespread connectedness of the Web, it makes sense to use the already-existing network to present the function, and get the peripheral benefit of being to check in on the road.
That said, the article read like a press release.
Information wants to be free.
Entertainment wants to be paid.
You just want to be cheap.
Ah, the dreaded "software issue" problem. Maybe they should contact AOL; it might be related to their recent software glitch incident.
Somehow I think not. Unless you can outsource EVERYTHING to a common vendor, integrating the various "service providers" is a formidable task.
Once upon a time we bought an ERP system. We had the choice of buying our own server hardware and hosting it ourselves, OR we could choose the "service on demand" option. The "on-demand" option was pitched by a fanatic salesman who sent these nifty glossy brochures (via FedEx overnight/signature required, no less). Lots of cost justification charts to explain the ROI that you get by going this route; more than enough to fool the average golfer.
But in our case, it turns out that any year in which we did not fully replace the hardware, we would be better off self-hosted. And even if we upgraded everything every year, it was a break even deal for us. So every year, I get a another set of glossy brochures as the fanatic salesman tries to pitch (unsuccessfully) to the CFO and CEO. There must surely be some cost efficiency in combining a bunch of customers onto a huge box, but none of it would be coming back to us in the form of savings.
Of course we could have gone with lower-cost outsourcers, who would cheerfully save us some money and give us the exact same ERP software (with company "X" hosting the product instead of the ERP vendor). But I have to question the technical expertise of the low-cost competitors. The lower the price, the more questionable the whole proposition becomes.
The way you save money is to find an outsourcer who runs a tight ship and accepts thin margins. But how tight and how thin? In the nightmare scenario, the outsourcer goes bankrupt, access is cut off, and our confidential data ends up for sale on E-bay. What exactly is the contingency plan for that?
Back to SaaS, though...We're in the process of implementing some new SaaS at my current company. Having done some work on it, I'm not impressed. It's clunky, slow, and difficult to navigate. It has nowhere near the performance of the current local app we use...and that's with only a handful of users on the server for testing. I don't even want to think about what it's going to be like after rollout to the rest of the company.
The other facet of SaaS is going to be companies trying to get this out to consumers. I don't see it replacing hard-copy software sales just yet. (...For which I am thankful - I'd rather have something physical for my purchase, or at least a download or something I can put on physical media. How do we know how long the service will keep going? With hard-copy at least you can reinstall and use the last good version.) First, performance and features will have to exceed current desktop software in order to convince people to give up their local versions and move to a web-based solution. Some applications will be better at this than others - it's going to take a lot of convincing to get people onto the web-based word processors, I think, while something communicative like XBox Live seems to be a natural fit. Second, we need more broadband penetration. This goes hand-in-hand with performance. People need to be able to get to their application 24/7, and that means web access everywhere, for everyone with a PC/laptop. We're not even close to that.
It makes sense for a lot of software applications to move online. For instance, I filed my taxes online using TurboTax.com today. The application was easy to use and worked just fine in Firefox. It makes sense to the companies behind these applications because instead of having to deploy multiple versions for every possible obsolete platform (from Win98 to Mac OS 9) that customers may have, they can deploy to specific browser configurations. Plus, as another poster mentioned, bug fixes are built in.
In 10 years' time, I doubt we'll use CDs or DVDs for much. I don't have a CD drive on my current laptop and I have only missed it once since my initial install -- and that was to install an older version of Quickbooks (newer versions are available for download instead of on a CD.) CD-ROM only drives are quickly becoming as obsolete as floppy drives as we move to the Internet for software, music, and movie distribution. As online storage and backup services take over, the idea of backing up to a CD-RW or DVD-RW will also become obsolete. We'll be able to "jack in" anywhere, from any PC/Mac/Internet cafe terminal, authenticate ourselves, and have instant access to all of our data. TurboTax, SalesForce.com and other services like it are just the beginning.
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My company uses Netsuite as its accounting application. It is a web-based accounting and salesforce automatication suite that does many things well. There are some things that it does not do well, but can be worked around.
Companies like Netsuite and Salesforce may tout 99.99% uptime, but we have often run into scenarios where the service was running too slow to be unusable. Unfortunately, strictly speaking, the system was not experiencing "downtime", thus allowing the vendor to maintain their statistic, even though for us the system was as good as down.
The "lower cost of ownership" claims may not pan out over the long term. The article talks about SaaS being metered by usage levels. Netsuite charges by the named user, and I believe Salesforce still does, as well. The pricing model is similar to "normal" softawre. The TCO measurement depends largely on the size of an organziation, i.e. do they already have the pieces to implment a full-fledged CRM/SFA, (enterprise database, email and storage servers)? If you have these things in place and are used to supporting them, a traditional CRM or accounting package may cost less than an SaaS.
Other metrics that are missing are customer support response time. The unfortunate part of SaaS is that if the system goes down, everybody will call at once, and when you need the vendor the most they will be the most inaccessible. In general, though, I would love to see metrics of quality of customer support not only for SaaS but for regular vendors as well. When you deal with an SaaS, you typically don't have a VAR helping you out, it's you and the vendor directly. If their call center is understaffed or undertrained, it's painful
The article, itself, reads like a press-release and is horribly vague, especially when mentioned the "new 'Live' version of [Microsoft's] Office suite" - which does not implement Word or Excel, and treats on-demand updating of anti-viral software as SaaS. It isn't.
What we've found as a past user of Salesforce.com and current user of Netsuite is that you really need to do the upfront due-dillegence to make sure that these SaaS systems conform to your business model. Netsuite, especially, is awkward to deal with if your company provides services as opposed to sells widgets. Get a strong consultant on the front-end to make sure the product is a fit for your organization, and be prepared to do significant customization. Also, be careful to get specifics on how much it costs to import and export data to other systems. In Netsuite, for example, you have to have certain versions of their system to import/export XML records of your data (their webservice based pricing is, at the moment, still free depending on how much data you move through it). Make sure you have access to your data.
The article declares that ASP is totally different from SaaS and then completely fails to justify this statement.
Why can't they just say "it's the same thing, but the business climate is more ready for it now?"
+++ATH0
At IBM we called this (with much skepticism) "Maintaining an on *grunt* going *grunt* customer *grunt* relationship".
Being able to charge a subscription fee for your software and continue to get paid, rather than have to make money by continuing to get unit sales, is the holy grail of any software company.
Microsoft tried to force all their customers to this model without a heck of a lot of success. In my opinion, it's not because they couldn't have had this model, it's just that they tried too late - and found out that once something is "good enough", people simply don't spend the money to "upgrade" to something that's the software equivalent of road bed materials: an OS exists only to permit people to run applications, and once they run, you're done buying OS's.
Frankly, I think the best thing that has happened to Microsoft upgrade sales in a couple of years has been that iTunes doesn't run on Windows 98.
-- Terry
Actually, Microsoft wants it because enhancing Windows is no longer very effective at convincing people to upgrade and thereby pay them more money. If they could get their OS on a subscription model, they wouldn't have to constantly invent important new features, yet would still get a yearly fee out of you...
SaaS brings up a whole lot of serious questions.
First: information security. The customer has a whole new group of people, the SaaS organization, with actual or potential access to the customer's data. How is the customer to evaluate the real security of the SaaS organization? What about the link between the customer and the SaaS facilities?
Second, as the SaaS organization possesses the customer data, who is the actual owner of said data?
Third, can the SaaS withhold the customer data in the case of a disagreement? How quick is a resolution to any disagreement? Can the customer get a satisfactory dispute resolution? What stops the SaaS provider from sitting on a customer's data until the customer buckles?
Fourth, should the SaaS provider have a problem, can the customer data be seized and/or sold as an asset?
Fifth, should there be mis-behavior on the part of an employee of the SaaS provider, can the customer data be seized (intentionally or incidentally on a server)? What happens if an SaaS employee sells customer data?
Sixth, who owns any copyright/patent/trademark. Can the SaaS patent customer data or develop patents from customer data?
These seem to be rather daunting problems. Specifying answers in contracts is good, but resolving problems through contracts are slow and expensive. The customer is in a particularly vulnerable position, while the SaaS provider is in the catbird seat.
"It's a trick. Get an axe." - Ash Housewares, Army of Darkness
We are probably going to switch away from Salesforce to an open-source package. Why?
1) The open-source tool is cheaper. MUCH cheaper, as in $0.00 vs around $12,000 per year.
2) The open-source tool is not as good as Salesforce, but it does everything we need.
3) The open-source tool runs on our internal network, so it's faster and more reliable than Salesforce.
4) Although Salesforce has a pretty decent API for developing custom apps, nothing beats having the source.
5) Our data is OUR DATA, and we don't want lock-in.
The good thing about Software As Service, is that instead of spend a few million dollars and a year figuring out some very expensive proprietary system is not going to work for you, you spend a few million dollars and six months finding out the software isn't going to work for you because systems architecture and setup are out of the picture (there is still upfront work involved of course in training and customizing, if the vendor allows that...).
:-)
Thus the true innovation is that Software as Service allows you to holve wasted time on failed software rollout, and since time is money it literally pays for itself!
"There is more worth loving than we have strength to love." - Brian Jay Stanley
The problem with SaaS is that you are using virtually proprietary software. In a 3-Tier architecture you have the Data layer, Logic layer, and Presentation layer. You can access the Data Layer by numerous methods, ie. multiple applications can interface the data layer. With SaaS (from what I've seen) it is difficult or impossible to access the data layer.
I believe what's needed, and may even be a good idea for a start-up, is DaaS or Data as a Service. Your data is securely (I hope) stored and backed up through a DaaS provider. Available to you and your SaaS provider 24/7.
Feel free to email me with ideas...
are we overlooking the main point?
:-s)
Lets say my company requires a customer relationship managememtn software. Among my options would be to buy a pre-deveoped, customizable software SoftwareA for whatever amount of money.
Now the problem is I'll have to set it up, set the whole damn environment up. Servers, backups, networks, databases, user accounts, etc etc. Now i miht be able to get the guys who sell me this to set it up initially at probably a huge amount of money. Then ill have to get them to train my IT guys, who'll probably need documentation and baic training programmes, and some kind of structure ot account for employee rolloffs and new recruits etc etc..So thats a huge IT maintenance budget, with a whole lot of maintenance and training overhead.
So instead the guys who make SoftwareA says, you pay us rent, we have this SaaS version of SoftwareA. You and your team can access everything using browser over the internet. We take care of installation 9its htis side, you wont even know it) and support. Here's our site, here are your login IDs, Here's our support number. Usr access policy sould be through a easy to use GUI, or in complicated cases through a authenticated request from authorised users to support. We have guys who's expert at htis sotware and were here 24/7 coz we have lots of customer who need the same thing. Our overhead is shared, and we have a lot of advatage in terms of training and maintenance.
All you need is a reliable net connection. besides your travelling employees could access it anywhere.
Ofcourse net connection gone = boom. and its a big risk for critical software. But reliabilty of the net is increasing and this will be critical, reliabilty of the SaaS companies would hopefully improve. if you can have redundancy (dialup to their data center? local backup systems would prboably defeat the purpose
looks like it could work, esp in SMEs...
I think your last point is a fairly important one. There are all of these "services" springing up, but there's a little demon waiting at the end of the tunnel, should one decide to look for an alternative. That is, how do you get your data from one service provider over to another one? Granted, the same thing might apply to software, but when you figure in this cost, SaaS doesn't appear to be as good as people might be let to believe.
You're running that open source software on your own servers with 0.00$ per year? Your sys admins must be really cheap... Otherwise your list is pretty convincing.
The oldest such applications I've had to deal with are time logging application. My employers have had to charge by the hour for my time with the clients. So they always have some sort of web based time logging application. Usually there is also a way to enter expenses and such for reimbursement.
... how hard is it to write a web site to enter hours and tasks.
Every one of these application that I have had to deal with has been very difficult to use. My theory is that they sell the application to one of the bosses based on the way the reports look. They make the user interface for the reports work well. That helps two people per company and saves their time. The people who enter time get the short end of the stick and 200 people waste their time and energy trying to enter hours.
I mean
The first one I had to use only worked right if you used the "right" screen resolution. You were supposed to change your screen resolution to run their application. And, if you didn't, the windows would be too small. They wouldn't scroll. They wouldn't resize. And you couldn't see the OK button at the bottom.
Another one, two years later, would lose everything you entered if you tried to print it at the wrong time.
The one I am using now (in 2006 after 5 years of these sinister felons) makes you go through 5 screen clicks to add more than 40 hours. If you go in to enter your hours after 6 pm on Friday it will default to next week. The first time I didn't know it and entered and submitted all my hours on the wrong week.
I think the it shows the real problem with the business model. There is no incentive to improve the time usage for the people that do the work. The word comes down from on high because the sales doesn't have to convince more than a few people that use the application. This makes the choice of such software a burden on the company's bottom line because, by choosing it, they waste their employee's time.
time is money
Give a man a fish, he'll eat for a day
Teach him how to fish; he'll eat forever
Sell him fishing-as-a-service, and pretty much his entire physiological development is subject to the vagaries of *your busines model, because he wanted to concentrate on his core competencies
My turnips listen for the soft cry of your love
Indeed, for word processing this doesn't make the slightest sense. I can imagine this for certain specialized and/or database-based applications that have to be run centrally. I worked in a small office for a while, they had an underpowered dsl connection and had put cytrix client on their standard pc's, so we had to use the word processor on some server in another part of town and were not able to use any of the local resources. Of course, this was amazingly slow and very bad for productivity as a whole. If you use thin clients and central applications, smart idea, but use it on a local server with a quick connection.
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He means SugarCRM. It's an OSS Salesforce-a-like.
We deployed it at 3.5.1 (about six months ago) and it has improved significantly since then. Overall I guess it's OK but still has a way to go, particularly on the documentation front. Reliability has been good in a kinda "we haven't lost any data" fashion. Performance is shoddy, but we're running it on a fairly slow box. Quicker than Salesforce though. The source is a bit scary and while there is a SOAP API the documentation (again) is shite.
BTW, you can export from Salesforce in any one of a dozen ways so I wouldn't get tense about that.
Sugar themselves are a bit weird. It took a while to be able to buy support queries ($95 a pop or $295 for five, IIRC), the organisation being set up a bit *too* focussed on upselling to Sugar pro or whatever it's called. They seem to be an organisation that learns, however, and hopefully people like me ringing up and trying to give them money for support queries will change their tune fairly quickly.
With any luck it turns into a big OSS success story.
Dave
I write a blog now, you should be afraid.