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Re: Is SaaS just throwaway software?

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http://weblog.infoworld.com/realitycheck/archives/2008/05/is_saas_just_th.html

I’d like to rephrase Schwartz’s question: given the different allocation of, and overall reduction in, costs associated with migrating to and between SaaS solutions, are there any long-term implications for the SaaS providers?

I think Schwartz has an interesting point although it is presented in such a way that it is hard to agree with. Personally I disagree with the term ‘throwaway’ if only because you can’t throw away what you never had. With SaaS you never actually ‘have’ the software so how could you throw it away? A niggle on terminology I agree but there’s lots to niggle with here.

I think the point that he’s trying to make is that with less up-front cost and easier set-up it is easier for a customer to switch from one SaaS vendor to another compared with switching from one on-site license-fee based solution to another. The key here is ‘easier’ but still not necessarily ‘easy’. If its easier to switch then the threshold of pain/missed-opportunity that a customer needs to experience before they decide to switch is lower. Most of the other comments on this piece point out that the cost of the solution and the cost of switching solutions includes lots of other costs that might be significant in the decision making process.

I think Schwartz is missing something however: no-one switches solutions just for the sake of it. To be worth switching the cost of switching must be less than the pain caused by not switching. Most IT budgets are stretched thinly so only the biggest pain points get dealt with first. If my existing CRM solution is one of my biggest pain points I might switch to a SaaS alternative, open source alternative, or a different proprietary in-house solution. Once I have switched CRM systems I’m not going to switch again until the new system becomes one of my biggest pain points again. As long as the new CRM system stays off the pain-point radar it will remain as the incumbent – potentially ‘forever’.

SaaS, as with other subscription-based business models, encourages the providers to demonstrate their value-add on a recurring and frequent basis. If they can do this and keep pace with features available elsewhere there should be no reason for their customers to ever switch away.

Written by James

May 28, 2008 at 2:02 am

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