Software as a service (SaaS) generally has been viewed as an SMB play, for a variety of reasons. But as enterprises crawl out from their bunkers to face a budding economic recovery, SaaS is gaining currency as an ideal way for large enterprises to quickly rejuvenate their applications.
It's a done deal, according to Jeff Kaplan, principal of THINKstrategies and developer of the SaaS Showplace, a free directory of more than 1,300 SaaS applications. "Siemens AG (NYSE: SI; Frankfurt: SIE)in Germany replaced SAP AG (NYSE/Frankfurt: SAP) with a SaaS application to do human resources management," he notes.
You don't get much more enterprise than that.
Meanwhile, Salesforce.com Inc. 's customer list now includes Motorola Inc. (NYSE: MOT), Dell Inc. , Google (Nasdaq: GOOG), NBC Universal , and more along with its thousands of SMB customers.
Of course, these large companies aren't running all their applications as services. For one reason or another, however, they each decided to rent particular functionality rather than license and run it in-house or build it from scratch.
Large enterprises have two main concerns with SaaS: 1) the pricing model; and 2) security, governance, and compliance. They have other issues too, including "not invented here" and "we don't do that," but pricing and security are what I hear about the most.
SaaS typically is priced by subscription or pay-for-use. SMBs like this model because they get a predictable price and know the functionality works. However, many SaaS providers charge extra for bandwidth, storage, and other services. In a large enterprise, though, these charges can add up to hefty sums.
Kaplan, however, dismisses enterprise price complaints. "There is no price higher than buying expensive shelfware. If SaaS reduces risk and increases utilization and productivity, there should be no problem." In addition, SaaS prices often include volume discounts and may have negotiable wiggle room on top of that, especially for large enterprises with thousands and thousands of users.
Security, governance, and compliance present trickier complications. For starters, large enterprises like to keep their primary production data close at hand, on the premises. They aren't flocking to the cloud storage providers for just that reason. And while big enterprises haven't always proven rock solid at protecting their data in-house -- just ask TJX -- they still get justifiably nervous when it sits beyond a porous firewall.
Governance and compliance, on the other hand, may be easier to address. This is mostly a question of negotiating appropriate service agreements, building in both rewards and penalties for SLA performance (or the lack thereof). Then, of course, you will also need tools to monitor and enforce the SLA.
Today, it just doesn't make sense to let SaaS's fading association with small and midsized businesses keep enterprises from taking advantage of it as well.