The Economy: Good or Bad for SaaS Business Intelligence?

By Joseph Schramm / June 8th, 2009 / Comments Off

With the economy continuing to struggle, many people I speak with in the industry feel optimistic that the Software-as-a-Service (SaaS) business model is holding up well and is, in fact, poised to benefit.  If one were to look at the SaaS bell weather, Salesforce.com, it would be easy to support that argument.  The problem, however, is that while Salesforce.com is doing well in recent times (despite the gloomy economy) the vast majority of other SaaS vendors are either:

a) Privately held and therefore hard to gauge in terms of “how they are doing”, and

b) Are still too young in their evolution…meaning that even if they were growing at a healthy clip in the down economy (ie: double-digit growth), it is hard to tell if “they are doing well”.

Also, what metrics would one look at to assess growth for these firms?  What might be a meaningful metric to measure some of these firms may be far less meaningful for the others.

Measurements aside, here are some thoughts about why the SaaS Business Intelligence segment should be doing well:

• It’s faster to deploy vs. on-premise, therefore, can provide faster business benefit
• It offers a better economic model vs. on-premise….lower TCO
• Customers can “stretch” their existing budgets more (the SaaS model usually means little-to-no capital expenditure) and still get a solution
• An already over burdened IT staff can off load much of the low-value work associated with hardware provisioning, software provisioning, software configuration, database tuning, backups, etc. to the SaaS provider…therefore freeing them to focus on higher-value tasks to support the business
• Some SaaS Business Intelligence offerings are geared to specific functional areas and business problems and can therefore drive some tangible business benefit (ie: Inventory Cost Reduction, Increased Customer Retention, Lower Transportation Costs, Improve Gross Margins, etc.).

These points all make sense to me.  If you were to say to a CFO…”you can have a BI solution up and running in 8-10 weeks, with little-to-no upfront investment, minimal disruption to your IT staff, and it would be well aligned to your strategic business initiatives…” why wouldn’t he/she not want to give it a try?

Here are some reasons why many organizations are still not making the leap to SaaS BI:

• The SaaS model is disruptive to many of the traditional ways of procuring and deploying software….it’s different, therefore, it requires change and a lot of people don’t like change
• The “trusted advisors” of many organizations are not recommending SaaS solutions yet because they don’t fully understand the benefits and/or they have a vested interest in doing things the old way (meaning they make a lot of money from that)
• Control…the nature of SaaS is that if you are going to use a SaaS solution, a lot of things are no longer going to be in your control
• Trust…you need to take a leap of faith in your provider to trust that your data will be secure, your solution will be available/responsive and recoverable should there be a “disaster”
• Misplaced Fear…Many IT organizations are resistant to the SaaS model because they perceive it will impact job security.

But times are different now (didn’t General Motors just go bankrupt?) and doing things the old way may not always be working anymore.  Can we afford not to look at new and different ways of doing things?

COMMENTS (archived)

I don’t think anyone can afford not to look at new and different ways of doing things. SaaS is a good example. Although they’re not suitable for all organizations, they are for many and usually cost a fraction of large scale server/client solutions. Deployment is usually a child’s play, so IT resources can be spared for something else. That said, business intelligence software or SaaS is something that should not be cut in order to save money. Actually, BI software helps save money, among other things, when used wisely. A better solution could be to find a cheaper product, maybe, but getting rid of a BI solution isn’t quite a wise decision.

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I believe Travis is spot on in his comments. Properly designed and deployed BI can provide organizations with enormous leverage and business benefits that far outweigh the costs. One big challenge is transitioning the discussion from a cost-basis to a value-basis. Yes I know this sounds a bit like “motherhood and apple pie” but this really is the dialogue that technology decision makers and leaders must engage in.

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There needs to be some context set around the economics of any new innovative solution, like SaaS BI. Engaging in a total cost-of-ownership comparison of a build it yourself with traditional BI tools, versus say using a SaaS model, is interesting but only half of the story. Folks need to dig in with as much vigor to determine which solution will do a better job driving the value or “Return” in the ROI equation. There are differences and fundamental questions to be asked:

1. Which model allows more universal access to the solution by the community that counts — the internal business users (and perhaps even external supply-chain partners and custoemrs if appropriate) to help drive informed decision making?

2. Which approach does a better job leveraging functional best practices and domain expertise and who does a better job exposing these concepts into specific reports and analytics?

3. Which appoach is more of a business relevant solution solving a specific business challenge and driving specific initiatives?

Too often the question asked in traditioanl deployments with tarditional tools is “What does the tool do and what is it good at?. The common response is “That really depends what you want it to do.” I would sugegst this becomes a circular dialogue chewing up precious cycles and proloning already long production deployment times.

So Travis I agree folks need to be specific, ask the detailed business questions, and make certain that whatever approach is taken really solves the domain specific business challenge.

Borrowing from the dated, but still entertaining movie, Blazing Saddles: “We don’t need no stinking general reporting tools.”