Here is a short excerpt from my upcoming book (to be published next month by Tata McGraw-Hill, India) on software-as-a-service, commonly known as SaaS, and how companies can gain competitive advantage using online tools for marketing, building a brand and running their day-to-day business. Shaw runs a hypothetical company that is ready to take the SaaS plunge. At this point Shaw and his team love the notion of SaaS but still have certain myths that they need to discuss and dispel.
Myth #1: New, Unproven, and Hyped
Shaw: “So, firstly, let me start off the question round. Am I wrong in assuming that SaaS is still very new and unproven? Is it more hype than reality? My team tells me that this is the general word on the street.”
Like a soldier guarding his fortress I began using Google as an example - simply because of people’s sheer familiarity with the brand and its applications. I asked, “How many people use Gmail, Hotmail, Yahoo or any other typical email service to check mail everyday?”
Like good kids in school, everyone in the room put their hands up. There, I had already proved my point. They were already using SaaS.
Salesforce.com (provider of online CRM service), the granddaddy of all SaaS companies was founded in 1999, and by late 2009 supported more than 2 million subscribers worldwide. NetSuite Inc. (Provider of ERP, CRM, and order management for small to medium companies) has been in business for more than eight years with a global base of approximately 70,000 subscribers at approximately 7,000 companies.
Myth #2: Loss Of Control
The techie looked unconvinced and shot out another question. “Yeah, but we don’t want to lose control of our systems. We are used to managing our own servers and things have gone pretty smoothly for us. How do we trust the SaaS vendor to run the system as efficiently as we do in-house?”
This is another classic myth. Sometimes losing control is good because you really don’t need that delusionary control. It’s just that we are not comfortable with parting with some things and try to hold on to them as tightly as possible. Deprivation makes us feel insecure. We tend to fear losing control, do more than we can take up and then ultimately fall on our own weight. But when we change, we discover new possibilities and alternatives. We have gotten used to leasing bandwidth, power, books, movies and even our own homes! Banks provide us the services to access our money at any time. At the end of the day, the money is still ours (even if it is not in our possession) and we pay the bank a small fee to store and manage the money. If you are not a technology company, then it really does not make sense to own IT and the overheads that come with it. What is important is to focus on your core competency and outsource the rest to a specialist.
Myth #3: Threat To IT
The tech guy was afraid that his job would become redundant if his company started using web-based software.
The truth is that you still might need the techie who can evaluate different SaaS offerings, build relationships, ascertain they are technologically sound, have the correct security policies in place and in some cases can be integrated with existing systems in-house. The technology team can work on strategic business objectives that are closely linked to the company’s bottom line instead of setting up servers and worrying about software upgrades.
Besides IT, SaaS can free up resources in other areas of your workplace too.
Myth #4: SaaS Is Expensive
“But you talk about cutting costs and increasing efficiencies. Isn’t SaaS expensive in the long run?” The accountant asked and scribbled something on paper and handed it to me.
I wondered why he had not taken into account the cost of managing their servers on which the packaged software would run - including cost of bandwidth, security, encryption, personnel to manage the servers/ computers, upgrades, back up/restore, downtime etc. Every time there would be an update, you would need to set aside time and manpower to upgrade the software. Imagine running an accounting package on 5 computers in your office and each time there was an update to the software, calling in the IT guy and asking him to upgrade everything. If something were to go wrong, that would mean downtime for the accountant working on that computer and for your business as a whole. If something were to crash you would lose data that probably is not backed up. With SaaS, this responsibility is shifted to the vendor. Updates and backups to the software are free, taken care of by the provider (you wake up one morning and see new features in your app without having to do anything), you pay a monthly or yearly subscription, and the software remains fresh and up-to-date from month to month.
Myth #5: SaaS Is Difficult To Customize And Integrate
The techie chimed in once again. I began to wonder if his excuses were aimed at derailing Shaw’s vision of leveraging SaaS applications. Somehow, this guy was too attached to the old traditional model and was not willing to let go. “But, isn’t SaaS difficult to customize and integrate with other apps and systems?”
I wondered what kind of customization a small company like theirs would want. The rule of the thumb is that if you need heavy customization (software that is so specific to your working style) then you probably should custom develop it and not go for something out of the box. Of course, this would be expensive depending your requirements. What’s happened in the past is that people have customized applications so much that they have now become bloated and unmanageable (even by the original vendor that developed it). Instead, why not choose an online application that is closest to what you want to accomplish and start using it? Over time the application will evolve - all good SaaS applications evolve on a month-to-month basis and even provide an application programming interface (API) that you can build on (for the more technically inclined).
Myth #6: SaaS Is Not Feature-Rich
“Aren’t SaaS applications really simple and not very feature-rich? Would we need to switch applications as we grow, and need more features and complexity in the application?” The project manager was speaking from his point of view.
I decided to explain with the old familiar example. Google Apps look simple in the beginning. So, does Gmail. Under the hood, they are packed with powerful features that you uncover as you start using the application.
Almost all SaaS vendors listen to their customers every month, and add features that are relevant to their audience. Being web-based, updates can be easily rolled out for customers to enjoy without downloading or installing anything.
Myth #7: SaaS Requires A Steep Learning Curve
Shaw’s secretary was quiet through the earlier part of the discussion. Suddenly, she voiced a concern. “But, is the learning curve high when using a web-based application? ”
Just like Web 2.0 tools, SaaS applications are built on the assumption that its end-users will be non-technical people like you and me. Adoption is a huge challenge for any software company so the easier they make the application (I looked at the project manager) the easier would it be for the average user to get used to the application. SaaS applications are built to give the user a near hassle-free experience since they are judged every month (as opposed to the one-time fee you pay for your software that you download or install on your computers). If a service I use fails to provide my team and me a positive experience I will stop using it and move to the next best competitor. It’s as simple as that.
Did you ever remember Google sending any of their representatives to get you started on their Gmail project? This is a new era of sophisticated, simple yet powerful self-service applications that you can start using almost instantly!
Myth #8: SaaS Is Not Secure
“Compared to hosted software, SaaS is not secure and reliable. I am probably better off hosting the application in my own workplace rather than having sensitive data sit on someone else’s server.” I was surprised that it took so long for the IT guy to ask this particular question. Normally, security concerns were always the first thing that cropped up during a conversation. Perhaps, he thought he would leave his ace card for the end.
He was grossly misunderstanding the concept. When you pay a SaaS vendor, you not only pay them for using the application, but you also pay them for security, backup and their infrastructure. Security is something they understand (and have to understand) as it is so tightly tied in to their business model and therefore they are likely to do a better job of managing your data than you can internally! Isn’t it the same reason you put your money in the bank, or hire a guard to man your home while you and your family sleep soundly?
Also, there is a whole lot that goes behind securing a SaaS application. Security is also about data privacy, encryption, intrusion detection, password policies and disaster recovery. Are you prepared to monitor your servers 24/7 and take the responsibility of making sure you have the right intrusion detection tools? Is your business ready to dabble with setting up firewalls, replacing server parts if something were to go wrong or provisioning a daily data backup plan? Do you currently have sufficient expertise to take this up or would you rather spend your cash flow on customer acquisition and growing your business? I looked pointedly at the accountant.
The room was quiet again.
Get in touch with Sahil Parikh via Twitter @sahilparikh or by visiting his blog sahilparikh.com.
“Reprinted by permission of Tata McGraw Hill Education Private Limited. Excerpted from 9780070680746: PARIKH: THE SAAS EDGE; Rs. 425.00. Copyright © 2011, by Tata McGraw Hill Education Private Limited. All Rights Reserved.”