A third area that has seen broad SaaS adoption is Web conferencing, offered by WebEx, Citrix Online and Adobe. Applications such as Web conferencing and surveying work well with a SaaS approach because they let IT offer users functionality without having to invest in expertise and operations. “It’s a scale play. I wouldn’t build a survey tool myself because I don’t do that many surveys,” says Accenture’s Modruson.

Where SaaS Doesn’t Make Sense
If applications touch upon the core of the enterprise—typically ERP, financial, business intelligence and manufacturing systems—then SaaS should be approached cautiously, if at all. The main reason is that these applications are usually highly customized as they reflect the fundamental processes that differentiate a company from its competitors, says Shaklee’s Harris.

For example, equipment distributor Zones wanted to add a series of custom BI applications to analyze sales and distribution, but CIO and Senior VP Anwar Jiwani didn’t want to build the system in-house or dedicate staff to managing it. He considered SaaS-provisioned BI tools but realized their reports would be too generic to be useful. So he hired SeaTab Software to design and host custom BI apps. The idea was to keep Zones’s internal resource investments to a minimum while still getting the desired technology. “My goal was to outsource the BI development,” Jiwani says.

Another reason to avoid SaaS applications is that the functions you’re looking for are so key to your operations that you must own them. “We have extremely high standards in terms of availability, and we run things on a global basis from one instance,” says Dan Murphree, vice president of enterprise business applications at chipmaker Texas Instruments. “If a SaaS application weren’t available even for an hour, it would cause a major business disruption,” he says. “I’m not saying there aren’t service providers that could do it, but if we do it at our level of stability and control, we know what we’ve got.” Thus, Murphree reserves SaaS applications for noncritical functions, such as the IQNavigator, a tool for managing contractors, where downtime doesn’t halt operations.

A third issue that typically rules out SaaS is integration. When Mark Brewer, CIO of disk drive maker Seagate Technology, was pitched on-demand ERP by Oracle, he said no. “It would be wonderful if I didn’t have to manage the software patches, but the number of integration points to the rest of my environment is very high. Managing that would be a big problem,” he says. But he had no problem deploying several SaaS-delivered HR applications, because the integration effort was simple.