Eight Reasons Why Companies Still Say 'No' to SaaS

Amid growing SaaS hype, many enterprises have discovered sound reasons to ignore software-as-a-service. Here are the top eight, according to Forrester Research.

The enthusiasm for and growth in the software-as-a-service (SaaS) market cannot be discounted. SaaS has become a viable and cost-effective (initially, at least) means of application delivery for the small, midsize and even large businesses.

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A sampling of recent CIO headlines and article themes tells the tale: "Enterprises Adopt SaaS Aggressively"; "CIOs Embrace On-Demand Software. Really, They Do."; "SaaS CRM has gone mainstream"; and "On-Demand Software: SaaS Appeal."

And yet, according to Forrester Research survey data, not everyone has jumped on board the SaaS Train. (If you want a "cold SaaS shower," see "The Truth About Software as a Service.")

A late 2007 survey of North American and European software IT decision-makers found that just 16 percent of respondents said they were already using or currently piloting SaaS applications. Conversely, more than 80 percent were still on the sidelines—curious, for sure, but not yet completely sold or running SaaS apps right now. (Forty-six percent said they were interested in SaaS or planning to pilot; 37 percent said they were "not at all interested.")

So what's the holdup? "The SaaS market is still shaking out, marked by an abundance of startups, acquisitions and even some early examples of companies having to shut their doors," write Forrester analysts Liz Herbert and Bill Martorelli in the April 2008 "SaaS Clients Face Growing Complexity" report. "Many firms are hesitant to invest in SaaS, particularly if there is no on-premise option to migrate to or other clear exit strategy." (See the top eight reasons, below.)

Why North American Enterprises Aren't Interested in SaaS

According to a Forrester Research survey, these are the top eight reasons why companies say "No Thanks" to SaaS.

Percent Reason
66% Integration issues
61% Total cost of ownership concerns
55% Lack of customization
50% Security concerns
42% "We can't find the specific application we need"
39% Complicated pricing models
39% Application performance
34% "We're locked in with our current vendor"
(Note: Multiple responses accepted)
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