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SaaS blogger Bob Warfield made a bold statement the other day. In an interview with Concur CEO Steve Singh, he suggested that conventional software is inherently built on bubbles, whereas a SaaS model would have moved forward quicker without the ebbs and flows that plague old school ISVs.

Not surprisingly, that raised a few eyebrows. ZDNet's Steve Wainewright was taken aback by the statement, pointing out that the implication for conventional software then becomes akin to that of subprime loans -- great idea during boom times, but somewhat less awesome when the music stops. But then again, he conceded, there were some strong arguments in favor of this view.

Indeed, there's a common sense aspect of SaaS that tends to hold true during boom and bust alike: Flexibility is very, very nice. Buying a seven-figure solution that is two sizes too large and hoping you eventually grow into it is a risky move any day of the week.

Furthermore, it's money up-front, not just for the license but whatever implementation hassles your consultants plan to wring out of you. There's a reason Larry Ellison doesn't like the low-profit SaaS business, and that in and by itself is a good sign as far a cost-conscious small and midsize businesses should be concerned.

Having said that, is SaaS an inherently stronger model that is destined for eternal greatness by inherent design? Nope. There's a reason SAP has an iron grip on the S&P 500 crowd, and that isn't just because of size although that certainly is a factor (anyone want to run GE's global payroll using SaaS?)

The nature of the business plays in as well. A midsize firm specializing in the latest personal electronics gadgets that chase fickle customer tastes need maximum flexibility. They drop the ball once in a while, but next year they may have the next Must Have holiday item. These guys need to be able to turn on a dime, whereas a manufacturer of canned corn can be fairly certain their business won't fluctuate much in terms of workforce, product innovation, economic cycles and so forth. Why would they spring for a SaaS solution when they can call a local ERP vendor, eat the initial cost but then run on the same system for 15-20 years with bare-minimum, in-house maintenance?

The point I'm trying to make is that it's easy to get caught up in the high-speed pacing of the tech sector and have that become the norm, while the majority of real-life companies that actually use the stuff just don't move that fast nor have any desire to do so. Of course, a big percentage of them are likely to benefit from a full or partial SaaS approach nonetheless, but in order to get there they need to be convinced -- which is a completely different discussion.

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[...] SaaSWeek picks up on the theme.A Their penultimate question and conclusion: “Is SaaS an inherently stronger model that is destined for eternal greatness by inherent design? Nope.” [...]----- -------- [Read More]

Tracked on September 27, 2007 04:34 PM