SaaS, the very cool acronym for “software as a service”, seems to have captured center stage in terms of mind share and marketing hype. It is a very alluring concept that also lends itself well to conversations about another overheated marketing concoction known as “cloud computing”. The bottom line is, and always has been, how does a business run its applications environment on a variable cost model rather than a fixed cost model. This was something that we used to call “paying by the drink”. It has certainly been tried before and with some notable successes, such as Salesforce.com.
But, of course, many questions remain as this is an unfinished canvass and the paint is not yet dry. Large software suppliers have a lot at stake in preserving their revenue streams in licensing, true-ups (unfortunately not true-downs), shelfware, maintenance, services, hosting, etc. Customers also have a lot at stake in terms of their customizations, integration, security and a well-developed and understood cost model.
At the end of the day, what will make this worth doing for suppliers? Obviously, the opportunity to generate incrementally more revenue and profitability. In other words, how can I charge you more for a service that costs me less to provide? For customers, it is obviously how can I operate more efficiently in terms of cost and flexibly meet the business needs in an increasingly dynamic environment?
To the extent that innovation is introduced, the market will reward those suppliers. Money-grabbers might “win” in the short-term but will lose-out in the long run as the value proposition becomes more obtuse.
For customers, cavaet emptor (“let the buyer beware”) has never been a more appropriate guiding principle. For IT Leaders, CIOs, CTOs get on board quickly and understand how you are going to handle this tidal wave. For some thoughts, read-up on implications of these technologies on your role.