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The Connected Web

Phil Wainewright

Recession Pushes Enterprises to Adopt SaaS

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There seems to be a consensus emerging that SaaS thrives in a cost-conscious, capex-constrained economic environment, such as we're currently experiencing. A couple of reports just out from analysts at Forrester Research reinforce this message.

First of all, a comparative cost analysis by Ted Schadler, provocatively entitled Should Your Email Live In The Cloud? has found that hosted email systems are more cost-effective for enterprises with up to 15,000 users. Taking into account costs for staffing, spam filtering and message archiving, the total cost per user per month for hosted Exchange came out a few dollars less than a conventional on-premise implementation, while Google Apps came out almost two thirds less costly at $8.47 per user per month.

Meanwhile, Ray Wang has produced a report that recommends software buyers to Shape Your Apps Strategy To Reflect New SaaS Licensing And Pricing Trends. It was a real pleasure to read a mainstream analyst endorsing what many SaaS providers have been saying for so long. Points such as:

  • "Rich user experiences and intuitive Web 2.0 approaches reduce the overall cost of user training compared with fat-client user interfaces that reflect older user-experience practices."

  • "True multitenant SaaS users experience frequent upgrades with minimal downtime and minimal reduced testing resources — leaving business users time to get value from the software. "

  • "Forrester's Total Economic Impact (TEI) studies show that in most cases, SaaS delivers better TEI and lower cost."

  • "Constant innovation with quarterly and even monthly product updates deliver product road map predictability."

Of course, for balance, the report also counsels buyers to beware of lock-in and take steps to mitigate vendor risk. But the main thrust of the report is that, in the current economic climate, buyers can't afford to ignore SaaS as an option any more.

1 Comment

Not surprising, but it's good to see the analysis from folks like Forester also.

There is one note of caution for SaaS vendors (or those software vendors thinking of moving to SaaS) however: Just as it is easier for buyers to sign on to a SaaS service than a high priced software license in hard economic times, it is just as easy for them to cancel a service.

So SaaS vendors shouldn't dance for joy too quickly. Make sure there's another way of ensuring customers use your product, create data, and realize value from it as soon as possible. That way the vendor can make sure they are "locked in" to continue the service long enough for them to realize the profit from it.


Joanna Lees-Castro
"Providing marketing, sales and business planning guidance for software and services vendors"

Phil Wainewright blogs about how businesses are using the Web to get better plugged into today's fast-moving, digital economy.

Phil Wainewright

Phil Wainewright specializes in on-demand services View more

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