This is part two of a three-part series on Software as Service from Barney Beal, news director at SearchCRM.com.
TABLE OF CONTENTS
• Software as a Service: Working with Web-based apps
• What constitutes Software as a Service?
• Tackling Software as a Service integration issues
• Everyday challenges and the future of Software as a Service
As many companies have determined that privacy, security and reliability are not the nagging issues they once were, the big questions about Software as a Service (SaaS) applications concern integration. Yet that, too, is not the deal breaker it once was.
"[Integration questions] are being answered," said Jeff Kaplan, the managing director of Wellesley, Mass.-based THINKstrategies.
That, Kaplan said, is thanks in large part to a growing number of integration tools vendors such as Informatica and Pervasive Software Inc. that have worked to address the integration issues.
Additionally, some integration vendors are SaaS-based themselves, such as Cast Iron Systems Inc., Boomi and Hubspan Inc., which offer Web-based alternatives and have established partnerships with SaaS application vendors such as Salesforce.com and NetSuite. A new breed of integrators focused specifically on SaaS, such as BlueWolf and Appirio Inc., have also cropped up, Kaplan said.
Additionally, some companies have found that integration is not as difficult as they once thought, particularly when it comes to applications like sales force automation. SaaS vendors, whose technologies are built on more modern architectures, can more easily take advantage of functionality such as Web services.
According to Kristin Ferrara, an associate director of HRMS at Inverness Medical Innovations Inc., getting the company's HR data structured correctly and ready to move was far more challenging than the task of actually putting it into a SaaS HR application. Inverness is in the midst of consolidating its many divisions onto the Workday system.
"We spent a majority of our implementation getting data structured," she said. "If I call someone an accountant and someone else calls them a finance manager, we needed to rectify that. We made sure our data looked similar. Just getting the data was harder than getting it in."
The leading SaaS vendors have also built out their customization capabilities, allaying fears about their products being inflexible. In fact, some, including Salesforce.com and NetSuite, have offered themselves up as a development platform.
Care Rehab, for example, had to adjust its Salesforce.com implementation to track inventory. Its medical devices are considered drugs by the U.S. Food and Drug Administration and must be accounted for. As the products move from the warehouse to sales teams to physicians' offices to patients, Care Rehab has to track these changes. Care Rehab built the inventory tracking capabilities into Salesforce.com, using the application's customization tools.
The costs, benefits and ROI of SaaS
Historically, SaaS has been considered a cheaper alternative, and certainly young companies starting fresh with enterprise applications have seen the advantage of not having to worry about the hardware and infrastructure costs that implementing a new on-premise application deployment requires. In the early years of SaaS, an oft-cited rule of thumb was that SaaS was a cheaper alternative in the first three years, but over the long term it was better to own and manage the software yourself.
But now the thinking -- and the math -- has changed on SaaS' long-term return on investment. Indeed, SaaS can provide return on investment (ROI) in the long term as well.
"For some clients, they find that it's more cost-effective long term to go [with] SaaS," said Liz Herbert, a senior analyst at Cambridge, Mass.-based Forrester Research Inc. "It really varies on a case-by-case basis. So there's not always a crossover point. Sometimes it comes within one year, [for] some three years, [for] some five or 10. It depends on the size of deployment, type of application, breadth of functionality and the characteristics of your IT department."
SaaS applications, in general, provide a few key benefits over on-premise software. For one, Software as a Service offers quicker deployment. Organizations don't need to buy their own hardware or conduct their own testing and can spend minimal time on configuration.
While this is attractive to small businesses, large enterprises seeking to get a small division or far-flung office up and running quickly have proven a significant customer base for SaaS vendors. In fact, Gartner's Ben Pring estimates that 75% to 80% of the overall SaaS marketplace comprises divisions of large businesses.
For Inverness Medical Innovations, the speed of deployment and flexibility of Workday made it a useful HR system for a company on an acquisition spree. In 2006, Inverness acquired Biosite, where Ferrara had worked in HR and which ran Workday. She convinced executives at Inverness to stick with Workday as the HR system of record, and a year later it bought a company with another 1,000 employees. Now, Inverness is moving all 70 of its companies and their 8,300 employees onto the Workday system.
"When you're a company that acquires 3,000 people on a moment's notice and then says, 'We need to change this around,' you need something that's going to react very quickly," Ferrara said.
The link between SaaS and CRM
SaaS applications are also typically more user-friendly and therefore foster better user adoption. This is particularly true for customer relationship management (CRM) applications. Salesforce.com launched its business as an alternative to Siebel's notoriously cumbersome and complicated sales force automation application. In its early years, CRM was beset by tales of failed deployments as sales reps, one of the most fickle and difficult groups within an enterprise to dictate process to, refused to enter data into the applications, effectively rendering it useless. With its friendlier interface, Salesforce.com won and kept customers by promising user adoption.
Other SaaS applications borrow their Web–friendly consumer applications design from companies such as Google and Amazon.com. In fact, when SAP launched its on-demand CRM application, it created a user interface (UI) similar to these consumer Web-type applications and made it the basis of its new UI in its business suite moving forward.
Finally, SaaS requires less effort in the way of support. Because the vendor handles updates, a company's need to make patches and bug fixes is usually eliminated. Additionally, because SaaS applications are usually more standardized, training and built-in materials are more relevant.
"It sounds like a joke, and some days I wish it wasn't true, but we have no IT support," Ferrara said. "I'm the only one dedicated to IT administration. We're able to pull it off where a lot of it runs with not a lot of work. As far as IT goes, they don't need to take back ups of any servers. They were thrilled to find that out."
ABOUT THE AUTHOR:
Barney Beal is the news director at SearchCRM.com. Write to him at email@example.com.
Editors' note: This chapter on Software as a Service is the third part of an e-book on cloud computing that also includes chapters on CIO strategies for the cloud, development for the cloud and Infrastructure as a Service.
This was first published in August 2010