Do you buy software as a service?

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Permalink Reply by Mike Seidle on June 29, 2009 at 11:39pm

Brian - Open source doesn't require that a license be inexpensive, or that a client can disclose your code to anyone. It simply requires that source code be included with the software license. There are many very expensive and successful packages that include source code with the license. Open source has grown considerably over the past few years and Oracle (via their Sun purchase), IBM and SAP are leaders in delivering open source based solutions (not all of their solutions are open source, but many components of their solutions are).

There are a couple of very valid points in this discussion that really tie to vendor lock in and lowering IT costs by leveraging scale. SAAS solutions aren't much different than traditional software when it comes to vendor lock in - some make it easy to migrate out of their solution and others make it extremely tough, using incompatible and incomplete exports to prevent you from leaving the family. When you buy an SAAS solution, just like when you buy a traditional software solution, you should understand how to migrate out of that software. Vendor lock in is bad news as it causes costs to go up and limits the options your business has as it needs functionality that a software package does not provide.

That said, SAAS is a great way to take the focus of technology for the sake of technology (we need the SAN to support the new database server that supports...), and get it on production. IT is a pure cost in most situations, and SAAS does two things very well:

1. SAAS gets an honest cost for implementing, maintaining and using a software package. Because you know costs and don't have to argue what costs are applied to supporting it, it's easier to see a return on investment (or a failure).
2. SAAS is a great work around when an IT department has too much power and prevents business units from getting things done.

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Permalink Reply by Robby Slaughter on June 30, 2009 at 5:38pm

The number one server operating system in the world is Linux. The number one blogging platform in the world is WordPress (sorry, Chris!) Four of the top five programming languages are open source.

The only advantage to closed source is that the entity who is providing the software can have some control over how it is used. The customer benefits from open source because they can modify the code, run it any way they want, and be assured it can be maintained even if the original creator is no longer available.

Open source software can be "ready to use"---consider Firefox. Although virtually everyone who uses this application is not concerned with the open source code, it is freely available and easy to install.

Finally, the ultimate demonstration of the open source phenomenon is Wikipedia, which is already larger than all of the private efforts to create a single compendium of knowledge.

It's hard to imagine a future where open source doesn't take over. I'm looking forward to finding out what happens!

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Permalink Reply by Chris Baggott on June 30, 2009 at 6:33pm

Hey thanks for a least using Compendium in a sentence :-) And don't forget, Compendium is built on Open Source too. We just package it to make it easier for the users than having to configure on their own while adding our own bit of intellectual property to do things that individual organizations can't do on their own.

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Permalink Reply by Robby Slaughter on July 1, 2009 at 11:33am

I'm happy for Compendium Blogware and want your business to continue to succeed. Go Hoosier companies! But I also want to help people understand the business issues surrounding technology in the network age.

I agree that virtually all open source software could be easier to install and use. However, the gap is closing. Firefox is a great example of an open source application that is as easy to use and install as closed-source competitors. This issue is interesting for the software-as-a-service debate because if the software is open source, you can move to another provider. Compendium Blogware has the legal right as well as the technical ability to prevent a customer from installing your software on other equipment.

Of course, organizations can improve software on their own, they might just not want to.

The debate over software-as-a-service is not really about what is easier or cheaper. Certainly, it is easier to set up an email account with Gmail than it is to purchase and configure Microsoft Exchange; it is easier to set up a blog with Compendium Blogware than it is to install WordPress. Rather, the debate over SaaS is about what is possible.

If your software is hosted remotely by a third party, than that party has the final control over the software. If that company adds features, goes out of business, increases performance, changes their pricing, or loses your data, you go along with them. There are reasonable arguments to be made about the probability and expertise of this third party, but in the end, your success is tied to their success.

If your software is hosted internally, than you are responsible for keeping it alive. I visited a company recently running code that is over 15 years old and was produced by vendor that is long out of business. There are reasonable arguments to be made about the costs of having the expertise to maintain this in-house and run high-availability infrastructure, but in the end your success is not tied to the vendors success.

The debate is further clarified by open source. If software is closed, your ability to make changes or fix problems is limited, whether you host it or not. But if the software is open, then you are assured that you always have this ability.

It makes great sense in some cases to rent software from a third party, and even more sense if that software is 100% open source. But there are risks to doing so, and before you break out the credit card or checkbook you should understand how these risks stack up to the risks of other options so that you make the decision which is right for you.

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Permalink Reply by Brian Wolff on June 25, 2009 at 10:41am

These are all great discussions - From a Purely Economic perspective, the fact is we've always been in love with a "payment plan" rather than paying for the whole thing (think car loans - no money down, $149/month!) - so when given a choice, companies and individuals alike will go that direction.

SaaS makes so much sense on so many levels - more efficient delivery, certainly more profitable for the software company, ease of use for companies, no need to get IT involved to gain business value from an application.

There are downsides - data integration is a challenge with any two systems that weren't built to run together - removing the application from your control will make that even more of a challenge. But there are companies out there like Right On Interactive that are solving those problems.

If anyone is interested - The Softletter is holding a SaaS University conference next week in Chicago. I will be presenting on Cloud Computing (June 30, July1). http://www.softletter.com/pages/market_and_selling_saas_agenda.shtml

We've attended numerous conferences that Rick Chapman and The Softletter have put on - tons of great information about the nuts and bolts of building a SaaS company.

Drop me a note if you're going to make the trip - it would be well worth your time and effort. Finally, we do have a discount code "bluelock" for $100 savings for "Friends of BlueLock" who register for the event.

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Permalink Reply by Robby Slaughter on June 30, 2009 at 10:01am

Let's be clear: SaaS is not financing. When you make monthly payments to buy a car instead of buying it out right, you are still making a purchase. But if you sign up for a SaaS, you are just paying an access fee. You do not and will never own anything, except (in most cases) your own data.

Also, Brian points out that there is "no need to get IT involved to gain business value from an application." This is a a common refrain---Compendium writes that if you sign up for their product you "won’t have to involve the IT department."

But from my perspective (as someone interested primarily in workflow and business culture), I have got to ask if getting your IT department to make changes is like pulling teeth---you may have bigger problems than not having the right enterprise software solution.

That doesn't mean so-called SaaS isn't a great solution or doesn't have lots of benefits, but it does have drawbacks. Anyone interested in pursuing these solutions should understand the pros and the cons.

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Permalink Reply by Brett Atkin on June 29, 2009 at 9:28am

Not sure if any of you have already seen this but...

http://www.readwriteweb.com/archives/why_enterprises_dont_like_saas...

Brett

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Permalink Reply by John R.(Dick) Troll on June 29, 2009 at 3:55pm

Pat:
The legal implications of information sharing pique my curiosity as an intellectual property attorney. Recently
I read an article by a staunch advocate of software as a service who commented on how confidential information/intellectual
property often leaks out when employees and outsiders share/exchange information.

The author also mentioned that,
by accident rather than design, information that should be deleted is preserved and thus within the scope of
electronic discovery if a company is involved in litigation.

These two issues are not to be dismissed lightly.

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Permalink Reply by Arik Flanders on June 30, 2009 at 11:40am

Forget about how much time and money SaaS, Open source, On-premise, etc. saves us. If more time was spent on actually working, then debating an un-winable topic, all businesses would be much more effective in influencing their bottom line.

Am I right?

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Permalink Reply by Chris Lucas on June 30, 2009 at 12:22pm

I wont reengage on some of the points covered here, as I think Robbie, Chris, and Brian have covered a lot of them. But what I will say (and yes I work for a SaaS company called FormSpring), a good SaaS solution should allow flexibility for an organization.

What SaaS does, more often than not, is allow companies to not have to employ a single "expert" on a certain piece of software. It opens up control and usability so all aspects of an organization can use it, be effective in their role, and produce ROI for their organization.

Is it the end all be all? No, but it is quickly helping organizations buy pieces of a solution to fit their needs and scale as they scale. Which in turn makes growth more affordable and manageable.

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Permalink Reply by Robby Slaughter on July 1, 2009 at 11:11am

Using so-called SaaS does not prevent companies from needing to employ a single expert. You can still outsource that expertise to a third-party IT service provider. The advantage is that it's usually much cheaper to use a service provider that offers both the software and the expertise to run it.

Furthermore, so-called SaaS does not open up control and usability so everyone in an organization can use the tool. The IT department ultimately controls what websites and services you can or cannot access. As I have said before, if your biggest problem is that you can't get your IT department to install a simple, free software application, than you have bigger problems than not having that tool.

That being said, there are many so-called SaaS offerings that are easier to manage and have a lower total cost of ownership than corresponding installed solutions. If these benefits outweigh the risk for your organization, than go for it!

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Permalink Reply by Chris Lucas on July 1, 2009 at 11:24am

"The IT department ultimately controls what websites and services you can or cannot access." Maybe in large organizations, but in small to medium sized orgs who do not have IT departments it allows companies to employ flexible solutions to all areas of their business.

Big corporations are also finding this out as well. Some of our customers are large corporations who want to use our software within a department so they do not have to go through IT! They want everyone in their department to have capabilities once under the walls of IT and their web dev team.

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