5 Questions to Ask Before You Say Yes to SaaS or Cloud Computing

With the global economy in turmoil, SaaS vendors of all stripes (ERP, CRM, supply chain, BI, you name it) will be pushing their fast-to-implement and less expensive products even harder. But do you know how to look before you leap into the cloud? Consider this five-step checklist.

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Ganly points out that many companies today believe that SaaS ERP is "instant on," which means that it can be implemented with little or no intervention. "You just turn it on," she writes. "However, the business still must be re-engineered, processes redefined, integration points defined and so on." (See "SaaS's Impact on the Enterprise ERP Market" for more on this.)

Even the mighty SAP and its ambitious Business ByDesign on-demand offering has run into technical and integration challenges, and its plans for an SaaS software offering have been drastically scaled back.

4. Have You Calculated Total Cost of Ownership?

A late 2007 Forrester Research survey of North American and European software IT decision-makers found that "total cost concerns" was the second-most cited reason for why companies were not interested in SaaS.

In the rush to adopt SaaS, some companies may forget about potentially conflicting total cost of ownership figures. For example, TCO of "SaaS ERP suites likely will be significant and may not compare favorably with on-premises solutions," writes Ganly, in the Gartner report. This problem applies to vendors as well. SaaS vendors "often have unrealistic expectations of their operating costs," she adds. "The multitenant architecture needed for SaaS ERP suites results in high internal efforts and costs for the initial setup and the ongoing maintenance and upgrade of the system."

Bottom line: If the SaaS deal seems good to be true and the TCO calculations too rosy, the overall deal may be just that: Too good to be true.

5. Have You Considered All of the Integration Issues?

While SaaS applications can be implemented much faster than on-premise apps, there are still lingering and tough integration issues that don't magically disappear with SaaS applications (like, how does IT connect that new standalone SaaS CRM app to the existing legacy infrastructure?). The Forrester survey, for instance, found that "integration issues" was the top reason (66 percent) cited by companies that had said no to SaaS applications.

One critical integration challenge for companies is deciding just what kind of a SaaS integration provider they're going to use. An October 2008 Gartner report on the topic noted that "no single approach to SaaS integration will meet the needs of all, or even most, SaaS customers," writes analyst Benoit Lheureux, adding that "the range of choices can be overwhelming."

The four choices, outlined by Lheureux, include: a SaaS vendor's application programming interfaces (APIs) and technology; a third-party vendor's SaaS integration technology; an integration-as-a-service (IaaS) solution; and a professional services or a system integrator. "The challenge for customers is to know when to choose one approach over another," he writes. "The answer depends heavily on each customer's particular situation, including factors such as internal integration skills and overall B2B strategies."

Of course, not all of this can be figured out by business stakeholders, eager as they may be. SaaS analysts note that an IT implementation team that takes the time to build a strong business case for the SaaS application and implement it correctly will, in the end, deliver the most value to the business.

Copyright © 2008 IDG Communications, Inc.

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