SmoothSpan Blog

For Executives, Entrepreneurs, and other Digerati who need to know about SaaS and Web 2.0.

What SaaS Adoption Strategy Should Enterprises Pursue?

Posted by Bob Warfield on September 17, 2007

As usual, the Unreasonable Men blog has posed an interesting question.  After reading my missive about how all Enterprise ISV’s SaaS and otherwise need to think hard about SAP’s A1S announcement, Paul spun the whole thing 180 degrees on its head and wondered what customers ought to be thinking and doing about it all.

For the world of small and medium sized businesses, SaaS is already a big piece of their IT fabric, often through necessity.  At their size, they’ve needed to streamline and stay focused on their distinctive competencies.  For them, the SaaS strategy is pretty baked, but for most larger Enterprises, SaaS is still relatively new.  That doesn’t mean focusing on their distinctive competencies isn’t still a great strategy for Big Enterprise.   What that says to me is that larger businesses ought to look for low hanging fruit.  I’d be looking for areas that are relatively easy to move forward with, that carry very low risk, and that can show almost immediate benefits.  That’s point one of our SaaS strategy for Big Enterprise.

Point two is to use SaaS to improve your budget.  Given SaaS’s typical lower Total Cost of Ownership, consider that by subsituting in low risk low hanging fruit, an IT department may be able to free up significant funds to tackle more important issues.  Even if you believe the long term TCO is higher, most folks put the breakeven out past 3 years or so.  Why not take as many non-strategic projects as you can and move them in this direction just as a scheme to finance the big stuff and provide relief on your internal staff and key vendors so they can focus?

I love applications like Concur’s Expense Management solution.  CEO Steve Singh (whom we’ll have more to talk about soon!) has said he can cut a company’s cost to reimburse expenses from around $60 per expense to $10 or so.  This isn’t strategic.  It doesn’t have to be part of a Grand Strategy.  But, it works and can save a small fortune for reinvestment in other areas or to take to the bottom line.  That’s an ideal SaaS success story.  A lot of Sales VP’s I talk to feel the same way about Salesforce.com, especially those that got burned in a hugely expensive Siebel implementation that cost a fortune, took forever, and didn’t seem to really change the sales process all that much.  Maybe the low hanging fruit aspect is one reason why these two SaaS companies have been so successful.

As for a deeper SaaS strategy, why define a grand strategy at this point?  It may be impossible, as Unreasonable Thoughts seems to say, or it may simply be premature.  The assumption by Amy Wohl and the Unreasonable Men that Enterprises would never tackle “dozens” of SaaS point solutions seems unlikely at best.  Really, think of all the Services a big Enteprise is likely already paying for that qualify as SaaS in one form or another.  Sure they’d like to rationalize all these vendors.  That’s a pious thought I’ve heard echoed by almost every IT group I ever talked to.  But they also need to solve business problems, and that’s a more pious thought most of the time. 

Heck, I’ve done business with a number of well known large Enterprises that have dozens of disparate systems just serving one function–usually as a result of their having pursued a strategy of acquisition and having to maintain the legacy systems of the acquirees.  Trying to rationalize all that with a Big Bang On-Premises project is a recipe for a lot of pain.  Moving those legacy systems piecemeal over to a SaaS vendor is a recipe for maximizing the chances of success and minimizing the disruptions to the business. 

Moving to SaaS creates its own grand vision in another way too.  It forces companies to do more than talk about Service Oriented Architectures.  SaaS is in the Cloud and begs to be connected to using SOA.  If your organization sees SOA as a part of its grand strategy, SaaS may be exactly the catalyst needed to move off the dime and start doing something about it.  But of course I already mentioned that in a comment to Amy’s post.

I like Stowe Boyd’s concept that the path of least resistance often dictates the architecture of choice.  SaaS is definitely the path of least resistance.

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