News from the Cloud: Don't make assumptions about SaaS, says Gartner

@Dennis - I'll be in touch shortly with some details. There are some items in our accountingweb partner page relating to this, but I'll send you the research we did.

@jc - I agree, most SaaS applications today are provided on a "vanilla" basis - although not everyone uses the same ingredients, so some vanillas might taste a bit off! :-) e-conomic is 100% focused on SMEs and the accountants that work with SMEs, and while we're not looking to serve the needs of large companies I look at the history of computing and have the gut feel that it is only a matter of time before all that you state can be delivered for large ERP systems using multi-tenant cloud computing and subscription-style charging (i.e. the two things that really define SaaS - one without the other doesn't count), which is bound to lead to economies of scale and cost savings. For instance, could the consultants needed to implement large scale ERP work remotely without having to travel? There will almost certainly be savings and effects that we can't yet imagine.

Some aspects of this are not new - SAS Institute is one of the world's most successful mainframe software vendors and they've been charging for their software on a subscription basis for decades. (Note for those who may be unaware: The name of the company SAS Institute is not related to Software as a Service.) At the software licence level, SaaS is just a way of charging for software which may lead to some savings in the finance area. Real savings come from new ways of working and reduced infrastructure costs, leading to increased efficiency and lower overheads. That's what we're providing for over 17,000 SMEs and their accountants, I see no reason why cloud computing can't bring the same benefits to big businesses, it'll just take longer to come to fruition.

The analysts are in a better position to assess the general picture and, as mentioned in my original comment, they say that 61% of CIOs are considering it, which must mean big businesses.

Mark
e-conomic

@mark - can you send me the proofs for your cost reduction assertions? I"m interested because I have seen many models along those lines but have yet to be convinced that we have a model that is sufficiently credible. [dahowlett AT gmail DOT com] - thanks

Mark

I think you should be rather careful about sweeping generalisations

The question is whether the main stream SaaS products are customisable to the 'n'th.. degree; which is generally a requirement for a large ERP system.

For instance which current SaaS solutions have the following driven by metadata:

• infinitly scaleable data fields & associated labels (we are not talking about adding 6 extra fields to each table to ensure a margin of customisation but rather tables driving tables providing unrestricted expansion/customisation)
• infinitely customisable screen layouts
• user defined report writing facilities
• etc

Of course all this is possible but I would suggest that most SaaS systems do not implement this approach - even if they did the time/cost overhead of setting the whole thing up would probably negate some of the claimed benefits of SaaS

Apart from anything else, the overheads adopting this metadata approach can be prohibitive in terms of setup, maintenance, response times etc.

And once you get into large customiseable systems one has to incorporate the consultancy costs for detremining what the client wants and setting up their specific requirements etc - all of which rachets up the cost

It really boils down to 'horses for courses' and at the present time SaaS products are targeting 'vanilla' deployment rather than a customised scenario

I agree. ERP installation can cost millions, take months if not years to roll out, and require teams of technical staff to manage it. While this might be cost effective for a small number of the large UK companies, for volume SMEs it has not proved viable to provide the same level of high service required. In October last year SAP began testing its own SaaS based online accounting product called Business by Design, but it has found it hard to migrate its existing portfolio to the SaaS format and make it profitable. At the end of the day SAP can charge far more for traditional software packages than it can for SaaS.

In a recession companies will be looking to cut costs and increase efficiencies in any way they can, and the cost benefits of SaaS are clear. Based on our price comparisons of a number of leading traditional accounting software providers, small businesses can save on average up to 59% on the basic cost of their accounting software by using an online solution.

According to Gartner over a third of all software will be delivered by SaaS within 3 years, and a recent report by McKinsey said that 61% of CIOs are considering SaaS. Figures like these, and the growth of SaaS vendors over the last 12 months, not to mention the very vocal satisfaction of customers who have realised the benefits of security, cost and value-add to their businesses from SaaS, show that SaaS applications like online accounting are here to stay.

Freedom from Evil