But none of these advantages matter if the application area is highly integrated with or dependent upon other applications and processes. A SaaS application must address a fairly isolated function, says Ken Harris, CIO of Shaklee, a manufacturer of health and cleaning products. “That’s when SaaS is easy to do for the larger enterprise,” Modruson adds. Accenture deployed a recruiting management application via SaaS because it doesn’t interact to any great degree with other systems. Only after someone is hired is the data on that new employee sent to Accenture’s in-house ERP system, which manages the employee’s permissions and other attributes from then on.

Another key criterion for choosing SaaS is that the application isn’t one that differentiates the company competitively, such as improving customer service or enabling higher margins relative to competitors. Thinking about SaaS makes a company ponder these issues, which in itself is helpful in determining an IT investment strategy. “Companies have an inflated view of how unique their processes are. You always think you need more customization than you really do,” says AMR’s Bois. “No one’s going to care who you’re using for payroll or Web conferencing, or even office productivity applications,” adds Martin Perry, CIO of IT staffing firm Sapphire Technologies, which uses Bullhorn’s SaaS software for front-office staffing and recruiting.

Accenture’s Modruson notes that SaaS applications are less configurable (not simply uncustomizable) than the packaged applications most enterprises run in-house. 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.

But using a standard SaaS tool does not necessarily mean that every enterprise gets the same results from it, says Modruson. “The tool is the enabler of your processes. The business processes are what you control,” he argues. Several CRM tools, such as Salesforce.com, are praised for enabling enterprises’ individual processes while delivering them through a standard but highly configurable code base. “The configuration and how you use it is the secret sauce. Your process differentiations then come into play,” says Sapphire’s Perry. SaaS is best known in the CRM space, thanks to Salesforce.com’s aggressive marketing and its ease of use for salespeople compared to CRM offerings from companies such as Oracle and SAP, aided by the fact that sales groups often have discretion as to the applications they use, notes AMR’s Bois. But SaaS also is widely used in the human resources and procurement spaces, both of which have a history of being served by outside firms in a service bureau model. Examples include Concur Technologies’ expense and travel management software, SuccessFactor’s employee performance management software, ADP’s benefits management software and Ariba’s procurement software. SaaS applications also can be found in a wide variety of specialty areas, such as Web analytics, container allocation analysis for shippers and help desk management—all of which have histories of being handled by outside service bureaus. Applications in these spaces typically rely on batched data exchange and widely deployed, standard interfaces to internal applications, making SaaS an easy fit, notes Tier1 analyst Mankowski.