SaaS vs. On-Premise Apps: Can’t We All Just Get Along?

We live in a society that relishes competition and taking sides: Republican or Democrat? Anti-abortion or pro-choice? Red Sox or Yankees?

Philosophical allegiances are equally pervasive in high-tech, where debates over Mac vs. Windows, Oracle vs. SAP, and proprietary vs. open source rage on and on.

Now, the “us versus them” mentality is engulfing on-premise software and SaaS/on-demand applications, and the bitter and misleading debate between the two licensing models threatens to both undermine the strength of SaaS applications (and in some cases, of on-premise software, too) and to cheat CIOs of the benefits of both models.

Fanning the SaaS vs. on-premise flames are tech journalists, IT analysts and the software vendors themselves. Salesforce.com CEO Marc Benioff, the maker of SaaS CRM apps, has said that his company can’t be compared to “mature, dying models like Oracle and SAP, which are maybe already dead.”

But let’s stop the incessant chest-thumping and unnecessary hyperbole for a minute.

Instead, let’s look at a recent trend piece from Gartner that essentially condemns the future of SaaS, and dig a little deeper for some much-needed perspective.

A recent Gartner survey of SaaS users and prospective customers in 333 U.S. and U.K. enterprises “found that the apparent acceptance of SaaS as a viable model has not entirely translated into satisfied users of SaaS.” These users were said to be “lukewarm” and “underwhelmed” by SaaS, the Gartner analysts pointed out.

Really?

In that very same report, Gartner noted that “58 percent of organizations will maintain current levels of SaaS in the next two years, 32 percent will expand, 5 percent will discontinue and 5 percent will decrease levels.”

So just 10 percent were going to decrease or discontinue investment in SaaS, and the other 90 percent were going to maintain or expand their SaaS use, yet SaaS is suddenly “underwhelming” companies? The report goes on: “Survey findings showed that overall, organizations are somewhat satisfied with SaaS, with an average score 4.74 on a 7-point scale.” To me, 4.74 on a 7 point scale isn’t so bad.

Nevertheless, Gartner offered the following divisive conclusion: SaaS is flawed and overhyped, so on-premise software—what else is there?—is the key!

For too many years, big-vendor FUD has driven home the perception that SaaS enterprise apps simply can’t scale to meet the mission-critical needs of the Fortune 500. Interestingly, SAP CTO Vishal Sikka told me in an interview that many of SAP’s applications aren’t currently able to scale to meet the needs of many of its massive customers’ computing needs, and that’s fine with many of SAP’s customers.

Sikka is right, of course. Some companies don’t want anything to do with a multitenant product offering right now. And that’s perfectly OK.

But those industry watchers who make blanket statements about what SaaS or on-premise software can and cannot do and which industry segment can and cannot use either software product are foolhardy, at best, and dangerous, at worst.

Just ask GE CIO Gary Reiner: GE’s supply chain has 500,000 suppliers in more than 100 countries. Each year, the company spends some $55 billion among its vast supplier base.

Big company? Yes. Mission-critical? Absolutely. And Reiner uses a SaaS supply chain partner application to manage it all. (And there are plenty more examples just like GE’s.)

Rest assured that Reiner has plenty of on-premise enterprise apps running his global company. In this instance, however, SaaS just made more sense.

In fact, the big-versus-little debate was recently debunked by CIO‘s May 2009 “Economic Impact Survey” (pdf) of 171 IT leaders: Large company CIOs (59 percent) are more likely than their small (31 percent) and midmarket counterparts (38 percent) to consider alternative IT models, such as SaaS or on-demand applications, as a result of current economic conditions.

Let’s not make enterprise software any more confusing than it already is. In these financially turbulent times, I’m advocating for a reasoned viewpoint that encourages hybrid and well-strategized enterprise software plans that take into account all the gray areas that exist in a world that’s no longer black and white.

We all have choice now. It’s not the time to blindly and stubbornly take one side and ignore the other.

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