Will Saas disappear in the cloud? ..talk about the problems in Enterprise SaaS
There were two very interesting SaaS
discussions organized during the Always On Summit at Stanford. One session was
titled, Will the Next Salesforce.com Please Stand Up? and the other was titled
- Will SaaS Disappear in the Cloud?
The discussions are focused on the
future of SaaS and where the industry is heading. The discussions surrounded by
the important questions of - Why is SaaS having trouble entering the enterprise
space? And in particular, Why hasn't there been another breakthrough company
like Salesforce.com who has penetration in the enterprise?
Also Read: SaaS is bad?
For the first session, Will the Next
Salesforce.com Please Stand Up?; the panel consisted of executives from
Lithium, Intel Capital, nGenera, Zuora and LiveOps. In an attempt to tackle the
question, that why there hasn't been another big enterprise play in SaaS. CEO
of nGenera Steve:
Firstly, there has been, in large part,
a failure to innovate. In my view, there has been a lot of me-too solutions
moving to SaaS taking initiatives, point applications, similar functionality,
and simply moving it to a SaaS environment. It changes the technology paradigm
and billing cycle, but it doesn't change the game for the customer. And if you
are not changing the game for the customer, then you are not providing a
disruptive change in a positive sense. If they can find a way to run and lead
their business very differently, then you are really not providing breakthrough
value for your customer than before.
Managing Director Lisa Lambert from
Intel Capital believes that the broad acceptance of SaaS is still being
validated. To be honest, they haven't overcome some of the issues around
security, integration, customization or even around flexible pricing models.
Later on, Lisa adds, I think the real reason is fundamental that the value
proposition really appeals to small businesses. In the end, small businesses
were excluded from enterprise software fundamentally, and SaaS answered that
question. It makes a lot more sense for small businesses to buy software as a
service.
During the other session (Will SaaS
Disappear in the Cloud?), execs had a different opinion of why the enterprise
hasn't fully embraced SaaS. Hewlett-Packard's VP of Cloud Services, Russ
Daniels believes that the enterprise is over-regulated and that the sheer
complexity of regulations and compliance is the true barrier to entry for SaaS.
He explains You can look at an enterprise business and think they are a
dinosaur and think they are slow. But what they are in fact saying is hey look,
I have to deal with regulatory compliance, I have to deal with data
portability. It's nice if I can back out of a deal three months later. But I
got three months in there and how do I get it out? And when I get it out, its
in the form of the application. The second is process transparency. How do I
know that this stuff is working? And finally, you'll have all the fine-grained
data security if I take an HP confidential powerpoint deck. And I put on any
free place to store it. I am violating HP's security policy, and I could be
fired.
The general consensus was that SaaS is
still a hard sell for the enterprise. It requires a longer and more complex
sales process and thus leads to higher customer acquisition costs. The
companies that will really succeed are the one that can provide value beyond
what the SaaS delivery model already promises. So in a sense, lowering the cost
of ownership or automatic upgrades are just not compelling enough. It is easy
to convince a small company without any software to purchase a SaaS
application. Its a no-brainer decision of
I don't have a CRM, and I need one. In contrast, vendors face a tougher
challenge in the enterprise because they have to convince their customer to
replace an application that may already do the job reasonably well.
- Drew Clark from IBM Venture Capital puts it succinctly, What we are
talking about is fundamentally a service. It is not software. What comes
with a service is a set of characteristics; about the delivery, the performance,
and so our customers are going to hold us accountable for service level
performance. They are not looking at how many bugs are in the code — they
are going to look for performance against an SLA or the quality of
service.
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