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Feb 20 2009

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Five SaaS myths debunked?

At ITPro, Nicole Kobie writes about Gartner’s warnings to businesses about Software-as-a-Service (SaaS). The IT analysts say firms need to take a good look at the delivery model before jumping aboard the bandwagon, despite the apparent attractions of the model during a recession (Gartner’s views also covered by Brian Tinham at Manufacturing Computer Solutions).

Myth One – SaaS saves money – Gartner said that, because there is no initial capital investment, SaaS deployments are often cheaper in the first two years, but over five years, the total cost of ownership (TCO might outweigh traditional software models.

My response: Much will depend on whether organisations fully account for the people costs involved. I wrote about TCO (SaaS: the business solution) in late 2007, and still think organisations tend to overlook the savings they can achieve by outsourcing application support to the vendor. It is also worth looking at the software upgrade options; with SaaS, the software can be upgraded incrementally incurring little or no user retraining or hardware costs, while upgrading to a new version of an on-premise application may involve new hardware, substantial training and another hefty license fee.

From a construction collaboration technology perspective, it is also worth considering the total costs of alternative approaches to managing such information (say, relying on email, CDs, couriers, etc). If you properly account for the costs of all the different systems and processes employed in running a project using more traditional communications, collaboration solutions nearly always work out cheaper – the paper and postage savings alone used to justify their use. And, again, if you look at the manhours saved in managing information, at the avoided costs of rework, at the avoided disputes, and at the re-use of shared information, the final cost savings can be very substantial indeed.

Myth Two — It’s faster to deploy SaaS – While SaaS is an easier and quicker way to rollout simple systems, that may not hold true for more complex solutions – especially those being customised. Despite vendor promises about 30-day deployments, Gartner say some can take over seven months.

My response: From a construction collaboration technology perspective, SaaS is undoubtedly quicker than rolling out, say, an ERP system. Most of the current collaboration platforms are already extensively focused on supporting typical construction processes and few will require customisation; the sophisticated solutions are extensively configurable and their consultants have years of experience of fine-tuning them to meet different company requirements. The platforms can be quickly implemented, usually within days, and training requirements are low – experienced industry professionals will quickly recognise how the electronic system replicates conventional processes.

Myth Three — SaaS is utility computing – Gartner called this assumption “false in the vast majority of cases”. Most SaaS users are not charged by use, but on a set contract, regardless of whether the software is used or not.

My response: In the context of construction collaboration, ‘SaaS as utility computing’ is something of a myth. Most vendors charge on a per-project basis, regardless of the number of users or volumes of information to be handled. In effect, the customer pays a ‘standing charge’: a fixed monthly subscription allowing the project team unlimited access to the system for the duration of the project.

Myth Four — Integration is difficult – According to Gartner, SaaS can be integrated with office-based apps or data using batch synchronisation, real-time web services or mash-ups – so it’s no excuse not to use software-as-a-service.

My response: Nonsense, as Gartner agrees. The reason construction collaboration platforms became popular was that they offered easy integration with existing applications, both Windows Office tools and software more peculiar to the architecture, engineering and construction (AEC) space. Incorporating home-grown or third-party viewer tools, the leading UK project platforms make it easy for construction professionals to publish, share, access, comment upon and mark-up documents and drawings produced by other systems. Moreover, particularly where organisations are looking to integrate their collaboration platforms with back-office systems (eg: building asset registers, project cost management systems, etc), web services interfaces are making integration a breeze.

Myth Five — SaaS is best for basic systems – While Gartner noted that complicated end-to-end systems may not be best served via a SaaS model, the analyst firm said the ability to configure means highly customised applications are possible, especially under application platform as a service (APaas) systems.

My reponse: I agree with Gartner. While it has yet to penetrate the construction collaboration sphere to any great extent (perhaps because it has taken time for the market leaders to emerge), some vendors have begun to offer utilities (some developed by third parties) that augment existing functionality. If this process continues, we may see more sophisticated applications offered by third party developers being integrated into the core offerings of the leading collaboration vendors.

(My thanks to Glyn Jones of Bovis Lend Lease for forwarding the ITPro link)

Permanent link to this article: http://extranetevolution.com/2009/02/five-saas-myths-debunked/

1 comment

  1. Nathan

    wonderful article. you have come up with excellent rebuttals for the Gartner “myths”. in our case, we are a small law firm and use SaaS application HyperOffice for our collaboration and productivity needs, and have experienced live what you have written in your rebuttals (which is why i can relate to them exactly)
    1) SaaS saves money – it does save money, especially if youre a small company. the implementation of some systems like Exchange is just not financially possible (also considering the cost of hiring IT personnel). a SaaS based application breaks down the costs into monthly installments which is at least within reach financially. gartner has also not considered the cost of opt-out. If circumstances changes, and the company has to change an owned software, it still has to bear the costs. with saas, you simply stop paying the rent, and no sunk costs will accrue to you.
    2) faster to deploy – it took us just a day to get started with our collaboration platform with HyperOffice, which included intranet and extranet workspaces, document management, forums, permissions management, contact management, webmail and Outlook synchronization etc. Can one say the same for MS Exchange and SharePoint?
    3)SaaS is utility computing – it IS utility computing in a sense. you can plan costs according to planned usage. although the costs arent exactly proportionate to every minute the solution is used or not used, but you can plan the number of users expect to use the solution, space usage etc, and pay accordingly, and upgrade later if needed. with purchased software, you are always bearing the costs of underutilized capacity.
    4) integration is difficult – we use HyperOffice to synch and share our Outlook accounts, as well as collaborate with MS Office files, and also manage online files from our desktop using the “web folders” concept. so a basic level of integration has been very easy.
    5)SaaS is best for basic systems – i would not know about advanced systems. but in our case, it has been very good for basic systems.

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