(7 votes, average: 4.29 out of 5)
Loading ...I had a good conversation with Chris Cabrera, the CEO of Xactly Corporation, last week. We spent an hour talking about Software as a Service (SaaS) and why people should care. He is definitely one of the people most passionate about this topic that I know!
For those who don’t remember, I wrote an article called “Buy the Car, Rent the Car or Take the Bus” which explains the difference between on-premise, single-tenancy and multi-tenancy.
“Many people are confused about what SaaS is, and about the benefits of a pure SaaS solution” said Cabrera. “Many companies use the term incorrectly to be buzzword compliant. That’s too bad because some people start to believe it is only a marketing gimmick.” I asked him why people should actually care about if a solution is SaaS or not. Playing the devil’s advocate, it would seem like most potential customers would not care if a solution is really a SaaS solution versus hosted, or multi-tenancy versus single-tenancy.
Chris mentioned 6 reasons why potential customers should care:
- It is in the client’s interest for the vendor – their technology partner – to be around long term. On-premise solutions are not cost effective because they have so many technology stacks and versions of the software that need to be maintained and supported. With SaaS solutions, some of the savings are passed back to the client, and a significant portion of the revenues are reinvested into the infrastructure as well as in the development of new features.
- SaaS vendors can focus on improving a single software version, used by every customer. Every engineer is dedicated to improving a single source of code. This allows the vendor to release new features and improvements much more quickly than is typically feasible with an on-premise solution.
- Upgrading a SaaS solution usually happens ‘behind the scenes’. New SaaS software releases are tested extremely rigorously before being released. A quality problem would impact thousands of customers and hundreds of thousands of payees. On-premise solutions often transfer the quality ownership to the clients who must perform their own regression testing after an often labor intensive upgrade process.
- Non-SaaS solutions are not always scalable. For example, with 10, 100 or even 1000 customers, an on-premise solution might work. But the real test will be when a solution is used by thousands of customers – will a non-SaaS solution really be able to scale up? “Probably not” said Cabrera.
- SaaS vendors constantly measure and monitor their environment. They make a significant investment into that infrastructure to ensure an optimal performance for all of their customers.
- SaaS solutions are usually sold on a basis of $ per payee per month. Solutions such as Xactly Incent all of a sudden become cost effective for even small companies which can avoid a high upfront infrastructure and license cost.
Chris Cabrera is convinced of one thing: SaaS is the future. “On-premise solutions might still be appropriate for a very small share of the market, but SaaS is appropriate at least 98% of the time.” Looking at the market trends, I would say he’s right. Most vendors realized the benefits of SaaS and are rushing in that direction.
Chris’ points are very good, but I disagree with #4, or perhaps I don’t understand it. How does the number of customers using a piece of on-premise software affect its ability to scale? Or, is Chris referring to the vendor’s ability to scale? If the former, I think it’s a non sequitur. If the latter, companies like Microsoft, Apple, SAP, Oracle, Novell, MySQL (before it was purchased by Sun, and then by Oracle), Electronic Arts, Adobe, etc. all seem to have done very well even though they support millions of customers. (Admittedly, some do it better than others.).
Just my 2 cents, of course.
Great article Julien. I think Mr. Cabrera’s points are good ones, although he is (understandably) biased towards Saas. On his first point, “It is in the client’s interest for the vendor – their technology partner – to be around long term” I agree. However, I don’t see how a solution being provided as Saas vs on-prem has any bearing on the stability of the vendor. If it’s referring to financial stability, on-premise vendors typically provide software plus services, giving them stable recurring revenue just like a Saas vendor. And, any vendor worth their salt is reinvesting a significant portion of revenues back into R&D which will pass along value to clients. Also, while the costs of supporting and upgrading an on-premise solution may be significant, typically a client can count on less expenditure from an on-premise solution than a Saas solution in the long run. Those monthly fees add up over time. I think that a truly forward-thinking vendor would do well to provide flexibility at this time, rather than pushing just one deployment method over another. Some industries, especially those that are highly regulated such as insurance, are sometimes concerned (whether with good cause or not) over the security of their data when using a Saas solution, and favor the control that on-premise software provides. Saas may be the future, but it’s still important to address our customers’ present concerns. Offering both Saas and on-prem gives the customer the freedom to weigh the pros and cons of both options and make a decision for themselves.