Software as a service 'gives power to the user'

John Stokdyk, 2003by John Stokdyk
Just a couple of weeks after IT Zone published its guide to application software providers (ASPs), two recent events helped to raise the profile of software as a service (SaaS) on AccountingWEB.

First, Sage told us it was about to unveil its strategy for delivering its accounting products online and then, at the beginning of November, Microsoft a

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Comments
david_terrar's picture

It's more than just pricing

david_terrar | | Permalink

Paul Stobart's comments are quite illuminating. Obviously we have to wait to see the announcement, but he sounds more concerned with maintaining the status quo for Sage with this "hire to buy" idea. That doesn't sound like anything more than leasing the software over 5 years. It highlights how the traditional software houses will have a major problem in shifting their business model from up front licences, to the "pay as you go" SaaS approach. He also has to realise that the new approach is more than just pricing, but will need changes at all levels of his organisation, from the way the sales force is commissioned, through product development, to the way customers will need to be supported.
David Terrar
mail: dt@d2c.org.uk
web: http://www.d2c.org.uk and http://www.twinfield.co.uk
blog: http://www.businesstwozero.com

david_terrar's picture

The "big deal" is SaaS not pricing

david_terrar | | Permalink

David,
There's a lot more to it than just pricing. The "big deal" comes from the way the application service you are buying is delivered over the web, rather than installed on your hardware or on some ASP/outsourcing company's hardware. The ASP/outsource approach gives some benefits, but the real benefits come from a true SaaS approach. I recommend you read the Tripletree report to find out more.
David Terrar
mail: dt@d2c.org.uk
web: http://www.d2c.org.uk and http://www.twinfield.co.uk
blog: http://www.businesstwozero.com

dahowlett's picture

SaaS - not ASP

dahowlett | | Permalink

Sage's model sounds suspiciously like ASP and is rooted in the idea that firms only change software every 5 or so years. True - because once you're locked in, it's a heck of a lot of work ot get out.

Microsoft's model is as clear as mud. I've not seen anything yet that persuades me they will offer SaaS for accountants anytime soon, unless they make a change of direction in development of the MBS product line. Even then, there's no guarantee of success as they're betting the farm (at present) on wiping out Google/Yahoo! That's not a great strategy because the way Google works is entirely different to MSFT.

This is not about just pricing though I like the idea of 'free' as it reflects the commodity nature of recording debits and credits. It's about a mindset that delivers a double whammy. 1. customer value 2. a sustainable business model. Sage isn't showing any signs of change there - at the moment.

What's different today is that SaaS represents an attractive alternative at the right time. As the old saw goes: "We live in interesting times."

what's so special about this?

David Carter | | Permalink

So, maybe some package vendors will allow you to pay a monthly rental for their software rather than buy it outright.

One of the packages I install is a courier package where you can rent it monthly.

It's just a different pricing model. The vendor takes longer to recover their development costs, but within a couple of years they have a very cash generative business. Bit like your typical reseller who has to build up a sufficient number of customers who are on annual maintenance.

The idea of "starting small" sounds good but bears no relation to reality. If you're installing an integrated package it's always going to be a massive upheaval.

What's the big deal?

Tripletree here I come

David Carter | | Permalink

OK, I'll read the report

SaaS the future ....

JC | | Permalink

The concept of SaaS has been around now for quite sometime - unfortunately the market seems to be taking a lead from the vendors such as Sage who should be regarded as 'also rans'

Any software house with a SaaS product will have had to make critical business decisions a number of years ago to ensure sufficient lead time. In our own case http://www.SureBooks.com the decision was made 4 years ago to develop SaaS software as the future.

At the time everyone had the same information and some chose to act upon it whilst others deferred any commitment.

Those who deferred now wish to throw their financial muscle and resources to acquiring some form of SaaS model in a attempt to avoid missing the boat. The route of 'least resistance' will probably result in a host of legacy applications being ported to citrix/terminal services, allowing them to be re-badged as web enabled.

'Hire to Buy' is just hedging whilst trying to maintain the current pricing model. Sage has some real issues with approx 40% of their annual revenue is derived from support contracts as well as fully paid box prices

The question is - Can Sage provide a SaaS application (Line 50 equivalent) available via the browser (not Citrix etc) and priced at £20 per month for unlimited users in an SME company?

The un-recoverable development costs alone would render this pricing model almost unachievable to the likes of Sage. Once the established players move away from the desktop they will have lost their traditional lead and be on the same footing as other suppliers with a version 1 product.

Also there is no excuse for a migration path that does not integrate or have a consistent 'look & feel' (i.e. Line 50/100). Proper integration and scaleability are fundamental attributes of the SaaS approach; in some cases this would mean a complete re-design as well as re-write to deliver a new solution

From past experience the market can expect those who have missed the boat to go on a 'buying spree' to achieve a market presence with SaaS. Sage are no strangers to this approach and have used it in the past to expand their share in a saturated desktop market

But this is an entirely different 'ball game' and all those with no SaaS offering must either evolve or die!

david_terrar's picture

Starting small is perfectly possible

david_terrar | | Permalink

David,
The other comment you added was that starting small bears no relation to reality. I don't agree with that. One of the key advantages of a SaaS offering in a finance, ERP or CRM environment is that the cost structure makes it easy for you to start with a small, controlled pilot, and make it work for a small group or department. Once the pilot is proven successful, you can then roll the solution out to a wider community or the whole company. This kind of approach would be too costly with traditional software, where there is a significant initial investment in software licence and hardware. It also means that you need a different style of consulting approach, with an organisation that is prepared to work in this way, rather than expecting a big initial project. It is one of the ways that SaaS is changing the balance of power from the vendor to the client. SaaS vendors are motivated to make the pilot succeed, because their real revenue comes when the solution is in general use, rather than with upfront fees.
David Terrar
mail: dt@d2c.org.uk
web: http://www.d2c.org.uk and http://www.twinfield.co.uk
blog: http://www.businesstwozero.com