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Can I.T And SaaS Live Without One Another?

Feb 6, 2008

SaaS (Software-as-a-Service) is a rapidly growing way of delivering business applications in companies. Today, there are over 120 vendors providing solutions across more than 40 business areas, everything from sales force automation to accounting, web development to dispatch management.

Initially, SaaS appealed to small and medium-sized businesses that were constrained by people resources and the level of investment required by large software vendors. However, a recent Forrester research showed that SaaS is no longer just an SMB play; large enterprises show significant interest in SaaS. Around 15% of SMB and Enterprise companies across North America and Europe are already using one or several SaaS solutions. The era of the ship it on a CD, load it on a server enterprise software is over

Its popularity is growing because companies can be up and running in a matter of weeks not years, running costs are predictable and business units can eliminate dependence on I.T.

However, the first wave of SaaS adoption was driven by end-users, not IT. Next wave will need an end-user and IT message.

Why is I.T Uneasy About SaaS?

For many reasons is the short answer. Perhaps the biggest of all is the perceived loss of authority, control or importance because the rest of the business can potentially by-pass I.T altogether.

I.T would also have other concerns; security, compliance, integration with other systems and the rest.

I.T leaders want to ensure their teams are seen to add value to the businesses they support, rather than be the hurdle that their colleagues have to jump over to get things done. They have aligned their work to business strategy and do everything to prevent being associated with another failed or late IT project.

Understandably they feel threatened that they will be blamed yet again if others make a mess of a SaaS implementation. Quite rightly so, because there have been many cases where business went ahead and started using a SaaS solution without even involving I.T only to demand integration or support services 6 months down the line.

Why I.T Needs To Fully Embrace SaaS

The role of I.T is changing rapidly. Long gone the days when "keeping the lights on" justified existence. Business wants more and they want it faster. Outsourcing and off-shoring have had mixed results in keeping up with business demands.

A conventional CRM or ERP implementation requires significant resources to define business requirements, design, develop, test, acquire hardware and network infrastructure, operate, support and of course project manage the whole thing. Costs invariably exceed budget. Deadlines become missed milestones. Users struggle to adopt new ways of working. More than 50% of projects fail to deliver benefits on time or the planned ROI. This cycle starts again during major upgrades and releases. Often minor but important changes have to wait until they can be consolidated into the next release

On the other hand, SaaS implementation places a dramatically reduced demand on the most valuable IT resources who can focus their efforts on ensuring rapid configuration and deployment actually enables their businesses to win more business faster and at less cost.

No need to buy or lease hardware. Security is taken care of. Do you have enough system and database administrators with right skills? Well, who cares? It's all done for you. Reliability? Most well-established SaaS solutions offer 99% uptime or above. There is no need for additional backup storage. Someone else worries about designing and developing enhancements and upgrades or retaining expensive programmers or expert support staff.

Software-as-a-Service lets companies use their valuable resources on simplifying business processes, building interfaces to other systems and most importantly on proper change management. Investment can be channelled to improve user experience and adoption and eliminating inefficient workarounds.

With careful planning and execution, implementing a SaaS business application across the company is much faster. Partnering with business will help IT to shake off its labels like 'bottleneck', 'slow' or 'unsupportive'.

A SaaS deployment for around 100 users takes 2-3 months to set up and costs 250,000 over 4 years including upgrades. ROI greater than 100% are commonplace. This is compelling when compared with the convention of 1 million internal custom application development or packaged software deployment which delivers an order of magnitude savings and benefits don't start appearing under 12 months.

Act Now - Recommendations

I.T must treat SaaS like on-premise deployments - collaboratively working with the business to define requirements, redesign business processes, selecting vendors to make sure integration and customisation capabilities can meet the needs, and doing business justifications for new projects.

But I.T must also adjust to the unique aspects of SaaS when thinking about:

- Re-skilling. This is a clear win-win for both I.T team members and the company. Moving away from traditional infrastructure skills and support model to business analysis and project management significantly increases the value-add of I.T and gets staff closer to the people who drive the business.

- Contracts. IT departments experienced with ISV and outsourcing contracts will be in a better position than most business users to negotiate with SaaS vendors, but additional considerations apply. Because SaaS solutions are usually down for maintenance and upgrades, firms must specify whether the SLA covers total downtime or only downtime outside the vendor's planned downtime windows. Firms must also consider data ownership issues. Make sure you get your data back for free at the end of the relationship, and make sure that you can get data dumps as needed for backup or analytics.

- Integration. Don't reinvent the wheel. Many vendors offer prepackaged integrations to systems like Oracle, SAP, and Siebel, including some integration-as-a-service offerings. Ask the vendor to provide customer references for integration and learn from their mistakes and successes. Also take advantage of online developer communities when you have questions. Most importantly, find out whether the solution can support the type of integration you need before you make a buying decision. Most customers that we've spoken with are not doing integration in real time but are doing nightly or weekly updates instead.

- Customisations. Unlike on-premise or outsourced software where you own the code and have full liberty to modify it. But design and testing can take a long time, needs high skills and carries some risk. With SaaS you are limited to the customization tools exposed by the vendor, add-on solutions, and custom scripts that the vendor supports. SaaS applications are less configurable than the packaged applications most enterprises run in-house, but changes can be implemented and tested very quickly. That's often a blessing in disguise because it forces the business to use standard processes rather than invest resources in customizations that have no real value.


SaaS will account for an increasing proportion of IT implementations. It will change the profile of skills that IT has to deliver and reduce operational overhead. A strategy to adopt SaaS will require an internal programme to change IT organisations.
About the Author
Alp is an internationally experienced senior executive with a track record of successful creation of I.S strategies and delivery of global/regional/local I.S solutions and change management programs. He is the Professional Services Director for Xenogenix, leading UK CRM Consultants.
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