SaaS: Will the Large Enterprises Accept it?
Richard Adhikari reports on a recent summit of SaaS executives in his article Are Changes Coming in the SaaS World? The direction the industry should take was discussed but with little consensus. It seems that those assembled see the huge potential in acceptance of SaaS by the large global enterprises, but no one can quite figure out how to break through the barriers. Adhikari has done an excellent job of presenting the plethora of diverging views on why or why not the SaaS vendors should target the large enterprise market and how to go about doing it. I am not privy to their marketing research nor have I suffered the trials and tribulations that some of the participants relate. It just seems to me that sometimes it might be best to let the sleeping giants sleep. Will these large enterprises come on board sooner or later? Adhikari cites Maynard Webb, CEO of virtual call center company LiveOps who states:
It's a vicious circle: SaaS vendors can't sell to the enterprise because they haven't solved many of the concerns IT has with on demand software, so they don't try. Most SaaS vendors target the SMB market, while the rest aim "at niches in the enterprise such as human resources"
What becomes apparent when reading Adhikari’s article is that there isn’t just one reason for the reticence of large enterprises to accept the SaaS model.
In my research in this area I have come across varied opinions and insight into just what exactly SaaS is and who should take advantage of it. In my February 10, 2008 posting to this Blog SaaS is the Future software developers were scrambling to meet the demands of their market. At that point their market was the SMB enterprise.
A further explanation as to the non-universal acceptance of SaaS can be gleaned from an insightful comment by Sybase CEO John Chen:
“ … But the reality is that every new technology and every new method will have its audience – but it won’t wipe out the previous ones.” For the full story and an interesting perspective see my May 1, 2008 posting What Customers Want from their Software Vendors.
Of course there also is the other side of the coin. The SaaS software developers themselves have their own internal hurdles to surmount. In my June 1, 2008 posting Growing Pains of OnDemand I highlight one of the problems of managing a subscription business:
“Simply put, the business processes needed to run a subscription business do not yet exist, and when these new business processes do come on line, they will be incompatible with the existing business processes for a large enterprise software company.”
Perhaps it is best summed up in Adhikari’s article by Lisa Lambert, managing director of the software & solutions group at Intel Capital:
Intel's Lambert thinks the notion of selling to the enterprise is a red herring. "I don't think it's a question of enterprises not being ready to buy SaaS, it's that it makes more sense for small businesses to buy SaaS. The value proposition of SaaS really appeals to small businesses, which were excluded from being able to buy legitimate software infrastructure that's enterprise ready because they couldn't afford it, it was too expensive and complex, and had long implementation cycles."
