SaaS Perception Versus SaaS Reality

Think you know SaaS? There are several things about the fast-evolving, on-demand software model (such as customization and integration issues) that might surprise you. Here's what you need to know.

Think you know SaaS? There are a few things about the fast-evolving, on-demand software model that might surprise you. For starters, SaaS is becoming more flexible and more customizable than ever before. And while IT is usually stuck ironing out messy integration issues, this time there's help from new tools, strategies and specialists.


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Control issues are another surprise -- some IT execs are finding that giving up control of upgrades and changes actually frees up time to innovate. Plus, columnist Jeffrey Kaplan busts a few more common myths about SaaS. What's your take on software as a service? Share your experiences with other readers.

It's a case where perception doesn't match reality. The phenomenal success of NetSuite Inc. and Inc., two high-profile public companies with Silicon Valley roots that offer CRM suites, has given software-as-a-service technology the image of a one-trick pony -- merely a tool for marketers and sales teams. But scratch the surface, and you'll see that SaaS is becoming a strategic tool for users large and small with an array of IT needs.

Getting SaaS-y

Are you using SaaS now?

Yes 64%

No 32%

Not sure 4%

SOURCE: Exclusive Computerworld survey, March 2009; BASE: 70 respondents

Take Medco Health Solutions Inc. in Franklin Lakes, N.J. The $45.5 billion prescription benefit management company has more than 20,000 employees, and compliance is a strategic part of its business. Jayme Antonoplos, director of compliance management, says employees must heed and monitor a broad range of regulations, including internal ethics mandates, prescription drug laws and the Health Insurance Portability and Accountability Act.

Until 2006, the company oversaw its compliance efforts with a patchwork of internally written applications. Since then, Medco has begun shifting to on-demand services from Cleveland-based Axentis Inc. One of SaaS's key advantages -- speed -- has already proved its worth during some recent acquisitions.


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"Compliance activities have to start quickly," usually within 30 to 60 days of absorbing a new company, says Antonoplos.

Trying to integrate an organization's compliance efforts with Medco's homegrown software would be tough, she says. But with Axentis, the acquired company can immediately adopt Medco's compliance services.

Surprised that such a big company is using SaaS for something other than customer-facing applications? In the early days, SaaS was, by design, confined to cookie-cutter applications. But now subscribers can configure the software to suit end users' needs. Here are a few things about SaaS that might surprise you.

It's Not Just for Small Companies

SaaS advocates often point to the speed at which on-demand applications can be deployed. Keitaro Shigemasa, CIO at Link Theory Holdings Co., which produces the Theory brand of women's apparel, says time was a key factor in its decision to adopt Sky IT Group LLC's SkyPad business intelligence dashboard for point-of-sale analytics. And like Medco, New York-based Link Theory is a large company with multiple stakeholders in the system.

SaaS by the Numbers

  • $6.8B: 2008 SaaS revenue (Source: Gartner Inc.)
  • 76%: Percentage of U.S. organizations with at least one SaaS subscription (Source: IDC)
  • 30%: Percentage of programmers in North America working on a SaaS project (Source: Evans Data Corp.)

"We could have done it ourselves," Shigemasa says. "But we lacked the staff and the data warehouse tools. Plus, it would have taken three months or so to get it done."

It only took four weeks to deploy SkyPad, he says. And Shigemasa praises the service because it requires little effort from his staff to train or support users.

Across the continent, Recreational Equipment Inc. (REI) in Kent, Wash., which reported $1.4 billion in sales for 2008, also had a need for speed. John Strother, director of merchandising operations, recalls that PivotLink Corp.'s eponymous BI service received data from REI on a Thursday and "by Tuesday, people saw it as a vital tool."

"I never saw anything happen that quickly," Strother says.

At first, 12 people in his department used PivotLink; now more than 200 employees throughout the company depend on it. REI likely will expand PivotLink into its supply chain group by 2010.

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