I agree with Andre Yee’s point of view on SaaS (Is SaaS Dead?). Andre makes some great points to refute the conclusions made by Neil McAllister in his post, Is the SaaS experiment finally over? In fact, I would go as far to say that the problems that we are seeing now should be expected as part of the transition from delivering Commercial off the Shelf (COTS) applications to delivering SaaS solutions by traditional ISVs. Andre Yee highlights three points in his post: bad applications, reliability and performance, and shelfware. As he correctly points out, these problems are not endemic to SaaS, as suggested by Neil McAllister, but a function of poor execution by many SaaS vendors.
To summarize Yee, problems with SaaS typically fall into three categories:
1.) Many ISVs try to migrate an older or niche product to SaaS instead of their most successful offerings to prevent competing with themselves and “killing” their license revenue.
RESULT: Bad SaaS solutions that do not sell.
2.) SaaS solutions require a mature provider organization with extensive runtime operational capabilities (monitoring, provisioning, etc). Many traditional ISVs do not have the operational skills or knowledge in house and their applications do not typically have the runtime support required.
RESULT: Poor reliability and performance
3.) SaaS can actually solve the problem of shelfware. If the pay-per-use model is used, then businesses do not accrue the costs for SaaS solutions that are not adopted by the organization. This allows organizations to try new technologies and solutions with low risk. The problem is that many SaaS solutions are being offered with pay-per-seat models derived from the COTS software licensing model.
RESULT: SaaS shelfware costs are equivalent to COTS shelfware
I documented the pressures that result in this poor execution in my last post, ISV Model: Evolution at Play? These problems indicate that ISVs are trying to cross the chasm between the old paradigm and the new SaaS paradigm. Whenever new paradigms occur there are always more losers than winners as the transition is under way. The current problems are just a confirmation of the transition.
In order to not only survive the transition, but to thrive, organizations need to be aware of the issues and have a strategy for selecting those SaaS solutions which provide greater value and will still be around once the market completes the transition. My earlier post, 10 Factors to Consider When Selecting SaaS Solutions, documents what SaaS users need to look for. It is also helpful for SaaS vendors to grade their solutions and get an objective assessment on how favorably the market will view their offerings.
For both the ISVs and SaaS customers, the issue is not “Is SaaS Dead?” but who will be the winners on the SaaS battle field?