Over the last few years we have seen a shift in software industry. Traditional software companies offering on-premise/ packaged software are now competing with alternatives that are SaaS based business and delivery models. (GoogleApps vs. Microsoft, Monster vs. Corporate internet, Salesforce.com vs. Siebel), Netsuite vs. SAP, WebEx vs. ….)
Like any new technologies, the question is who are the target customer and early adopters. One of the simplistic answers has been that SaaS is a preferred delivery models for the Small to Medium sized businesses (SMB). However, I think that is a very simplistic answer. In this post I am trying to hypothesize around when one model is preferred over the other. Here’s a framework/ set of guidelines that I believe can be used to evaluate the potential success of products that are launched using the cloud computing/ SaaS paradigm.
On-Premise/ Packaged software is a better fit if….
…if the application supports some unique processes (eg: forecasting) that are competitive differentiators either internally (eg: procurement/ operations) or externally (go-to-market)
…if the application (eg: online order processing) requires integration to one or more internal applications. On-premise implementations are a better fit if the application requires integrations to financial or other backend transaction system that have been customized to your needs.
…if you need to deal with issues like data security (think SOX!!!), compliance, regulatory (think FDA)…. then on-premise software is probably a better fit.
..if you need very high levels of customization to implement the product/ package (think SAP) within your organization, then on-premise software combined with professional services might be a better alternative.
On-Demand – SaaS is a better fit if…
…if the application supports some very common (eg: salary comparison think salary.com) or adhoc (eg: sales, think Salesforce.com) or very simple processes (document collaboration, think Google Apps). The processes that are supported by the application should not be a source of competitive advantage for the company.
…if the customer can adjust the process to match with the vendor provided configuration choices.
…if the application supports workflows or processes where implementation speed and good enough functionality is acceptable, then SaaS is a better delivery model.
…if for continuous and incremental changes are ok. This is often not the case if you have to deal with regulatory, training, compliance related issues.
…if the application requires relatively low levels of integration with internal applications.
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