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Thursday, November 30, 2006

SaaS & The Enterprise Software World

eWeek has a coverage on the emerging on-demand vs on-premise model of business applications. The article while noting the rising subscriptions of salesforce.com points out that Oracle differs from other on-demand players in its definition of software as a service. It's not about multitenant software—the practice of putting each company's software installation on a shared architecture—or subscription licensing where users pay for software on a monthly basis. It's about whether or not Oracle takes the responsibility for hosting and upgrading a user's software. Nicholas Carr attacks established players of overlooking the potential of SaaS as it may affect their existing streams of revenue.
As I highlighted earlier,SaaS needs to immediately address amongst other things:
Integration Choice: Provide multiple paths and methods to integrate seamlessly through web services, which helps remove any location constraints.
– Customization Choice: Go beyond providing a richly configurable environment by providing an architecture that supports customization (e.g., user interface) within the context of a multi-tenant environment.
As I wrote recently, the biggest risk that can hurt advances could arise from a mismatch between the hype, adoption and actual benefits. To be fair, it is still not a settled issue whether the TCO calculations of SaaS are better than on-premise applications. Even in the case of simple(as in less complex) applications deployed across the enterprise and accessed by multiple users, cost benefit comparisons between the models are still a matter of debate and inference. There's also a lingering feeling amongst business users that buying cheap may not be necessarily the best option - particularly in a fact changing technology arena. A clear trend on cost benefits when using the SaaS model is yet to emerge. As a result, the usage driven subscription cost of SaaS applications can tilt the tables and hence the cost advantage scenario looks somewhat blurred.
There may not be a single right answer to the on-demand vs. on-premise argument. The answers would be specific to organization al needs, but doubts about the economics of SaaS applications still remain. With passing time, on-demand applications may increase their share, but the range of increase shall remain an open question. The application architecture, schema, the business model including dealing with channel partners and switching costs for existing customers are major impediments. Overwhelming organizational changes would have to be managed in the transition to on demand model-It is highly unlikely that existing software vendors could manage the transition smoothly. It is also too early to make a conclusive call on whether the software vendors are going be more comfortable with annuity revenue stream not to speak about the hit professional service firms may be forced to take – In all, not a very easy path lay to embrace Software-as-a-Service model.

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