Why is SaaS so attractive to Businesses?

I’ve said it a few times before, and think its worth repeating. It is my belief that in SaaS IT is actually delivering on its promise. That is meeting the business objectives.

The more i think about it the more i realise that the key part of the Acronym  SaaS is the word “Service” and what this actually means to the business. To select a SaaS provider the IT department has realised that their business is after a service. The business want an outcome not a bunch of technology.  SaaS is about an outcome and in choosing a SaaS provider (assuming they’ve got the correct one) the IT department has actually connected with and understood the business and their requirements..

Having just spent the last 2 days at a CIO conference it is appallingly apparent that many IT departments fail to make the connection between the business strategy and needs and what they do!

By choosing to go with the SaaS model, the CIO also has to do a sales job on the business. “here’s this new thing, it will be better than the old way and you will get that outcome and make / save  XYZ / be more productive / have better customer sat / retain your staff”. You will notice that the language above is the same language as the business uses, not techno mumbo jumbo (as is often the case). So by using the language of business you have also connected with the business. They understood you, what you were proposing and what they will get! Nice work! Another major barrier broken down between IT and the business. (as an aside, personally i think SaaS are better at articulating business benefits and selling to non IT people than your traditional company – any one else think that?)

Another core drive for SaaS is undoubtedly cost. Check out this graph of the top 5 reasons for SaaS.

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Clearly when undertaking this research, they only spoke with the IT part of the business because no where on it does anyone mention a business function, benefit or outcome. All of those metrics are important to the CIO and don’t really mean much to anyone else. No one said “ SaaS companies can do it better than we can”, “speed to market”, “flexibility” or (ouch) “at least with the SaaS company we will get something delivered”. Ok, i’m being provocative but if you sat in the CIO conference i’ve just been in you’d be a little disillusioned too.

Back to cost, it is important but for different reasons. IT is only now getting a handle on the lifetime cost of some of their assets. Let me explain. In IT there is an universal truth that components commoditise and then get cheaper. The cost of storage, a server or a notebook is much cheaper now than it was 3 years ago. This means that IT departments have the cash to buy more of these items. (same budget, cheaper cost per unit = more units). But there is a catch to this proliferation, the spiralling cost of management! Here are some stats for you. Since 1996 the total global spend on server hardware has remained static in real terms. We are simply buying more cheaper units. But here’s the killer, the total spend on Server management over that same time has increased 8 times. More power, more cooling, more systems management licenses, more DBA’s more sys admins. This isn’t a one off either, its well known that while storage is cheap, storage management isn’t. This massive increase in cost is also mandating the investigation of a new approach. Enter SaaS (grid computing and storage in the cloud). Other companies are simply better at this now than you can ever be, have the economies of scale and understand the business benefits of what they do.

Finally I also think that business (not IT) have had enough. They (through experience) are over IT not delivering. They are also very clear on what is critical to the business success and they aren’t very interested in the how, but the what. SaaS come on down.

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