liz herbert analyst forrester research
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ForrTel:Using Software-As-A-Service To Gain Power Over ITLiz Herbert
Analyst
Forrester Research
March 31, 2005. Call in at 12:55 p.m. Eastern Time
Theme
Software-as-a-service puts control into the hands of
business users
Agenda
• What is SaaS?
• Advantages and disadvantages of the SaaS model
• How SaaS empowers the business user
• Trends in software-as-a-service (SaaS)
• Recommendations for user firms interested in software-as-a-service
What is SaaS?
What is Software-as-a-Service?
• Subscription-based software
» Pay as you go
• Low risk
» No large, upfront license fee (since you rent instead of buy)
• No hardware required
» Software vendor manages the infrastructure
How does SaaS differ from managed hosting?
SaaS
- You rent the software
- Pay-as-you-go, subscription-based pricing
- Software vendor takes care of the infrastructure
- Upgrades are automatic and seamless
Managed Hosting
- You own the software
- You pay a large license fee upfront
- You pay a third party to manage the infrastructure
- You worry about when to upgrade and how to upgrade
Advantages of SaaS
Reduced need for IT
• You don’t need to worry about . . .
» Hardware
» Database support
» Scalability
» Uptime
» Reliability
» Security
» Platforms (Windows versus Mac)
. . . since the software vendor worries about this for you
Shorter time to implement
No time spent acquiring or testing hardware
+
No time spent installing software
+
Shorter RFPs since the risk is lower
=
Implementation times ranging fromone day to a few months
More frequent upgrades
• Vendors release upgrades two to three times per year
» Versus once every one to two years for on-premise
• Upgrades happen automatically and seamlessly
» At off-peak hours, without you doing anything
• Upgrades are incremental rather than big-bang
» No need to re-engage consultants
» Reduced (or zero) need for retraining users
Additional advantages
• Easier to do an incremental rollout
» No more shelfware
• Quicker ROI
» Since shorter time to implement and reduced upfront costs
• Easier to use
» Familiar Web look and feel
» Point-and-click tools instead of coding
Disadvantages of SaaS
• More expensive in the long run
» Breaking point usually occurs around year three
• Less control over the app
» Customization and integration capabilities typically more restricted
• Vendor viability becomes even greater concern
» Since vendor controls your software, security, and your data
Summary of hosted versus licensed tradeoffs
Source: September 27, 2004, Best Practices “Hosted Versus Licensed CRM: Cost And Implementation Tradeoffs”
How SaaS empowers business users
Business users have more control over the purchase
• Line-of-business manager, such as vice president of sales, drives purchase
• Subscription model pricing reduces the need for budget authority at the executive level
• Firms don’t have to get IT approval
» Since they don’t need hardware or IT involvement
Business users have more control over the app
• Point-and-click wizards for:
» Setting up users and profiles
» Creating custom fields
» Creating new reports
» Setting up workflows and alerts
» Customizing the layout
No more waiting for IT!
Trends in SaaS
What types of apps are firms buying “as a service”?
Base: North American Firms (SMBs and Enterprises)
Source: Business Technographics® November 2004 North American Benchmark Study
39.80%
39.50%
35.70%
33.20%
29%
Sales force automation
Marketing automation
Procurement/sourcing
HR
Finance
Which vendors lead the trend?
• CRM
» salesforce.com
» Siebel CRM OnDemand
» RightNow
» NetSuite
» Salesnet (sales force automation)
» BlueRoads (partner relationship management)
Which vendors lead the trend?
• HR
» ADP, Ceridian, Employease
• Recruiting
» BrassRing, Recruitmax, Taleo, Ultimate Software
• Accounting
» Intacct, NetSuite
Where are the vendors focusing development?
• Vertical specific offerings
• Customization tools
• Integration capabilities
• Internationalization
• Mobile and offline access
• Workflow
Recommendations
What to consider in your contract
• Service-level agreements
» System uptime (and the payout for unplanned downtime!)
• Data ownership
» What happens to your data at the end of your contract or in the case of the vendor folding
• Support
» Hours of phone support
» Turnaround time for email support
Additional recommendations
• Form a council to test out solutions and ferret out requirements
» Take advantage of free trial offers from SaaS vendors
• Map tools to business processes
» And don’t rely on app to fix broken business processes; faster to implement can mean faster to fail
• Consider hidden costs
» Add-on modules, wireless and offline, integration can all cost extra
Liz Herbert
www.forrester.com
Thank you
Entire contents © 2005 Forrester Research, Inc. All rights reserved.
Selected bibliography
• March 16, 2005, Trends “Subscription Applications: Fad Or Future Direction?”
• January 10, 2005, Market Overview “A Buyer's Guide To Hosted eCommerce Solutions”
• September 27, 2004, Best Practices “Hosted Versus Licensed CRM: Cost And Implementation Tradeoffs”
• September 23, 2003, Forrester Brief “Jump-Starting RFID Initiatives With Hosted Solutions”