Tuesday, April 18, 2006

"Software as a Service" Myths

There are a gazillion buzz-words (or "buzz-phrases" if you must) in the software industry, and new ones get formed quite often. But one that seems to have hung around in the shadows for quite a few years and still not become completely mainstream is "Software as a Service" or SaaS.

A reader on Slashdot has a nice simple explanation of SaaS:

Basically they mean to say that businesses are becoming more and more open to externalizing anything that is not the core part of the business.* So, a company selling cooking grills no longer has an employee or department who handles email. They simply contacted 'Turnkey Enterprise e-Solutions Ltd.' and had them handle everything about email for the cost of $5 per address**, per month. After all, this company is in the grill business (core competency) not in the email business. Why worry about maintaining a server, or setting up users, or doing backups, or handling spam? The executive just wants to make better grills and sell them to more people.

So, let's say something like that (email) is proposed. Let's say our grill company (GrillCo) needs about 400 email accounts. Since they are not buying email servers or hiring spam gurus, there's no large initial investment for them. They can test it out with one department (accounting) and if the ten people there like it, they can expand to doing everyone's email that way. It eliminates risk for the buyer.

Now, is this a better way to go? The truth is anyone that will provide a definitive answer either way is off their rocker. It may work for some things, it may not work for others.

But the reason things like these are discussed, and possibly becoming more and more popular, is simple; for better or for worse, cost-cutting is being highly rewarded at the executive level. If you run a publicly-traded company and do not appear to be "cost oriented" then you raise suspicions among boards, shareholders and Wall Street.^ There's a whole crop of companies whose only goal is to cut costs for their clients (for example, ICG Commerce [icgcommerce.com]). Of course, sometimes these pressures come other sources [fastcompany.com].

So, by performing a buzzword-ectomy on the above, we result with something like this, "It has become fashionable to look at costs above other parts of a company's overall performance. Software-as-a-Service can sometimes help cut costs, so it is being considered more widely as an option."

Unfortunately for the tech crowd, it has less to do with AJAX and new whiz-bang applications and more to do with the business side (shudder) of things.

* Whether or not this is true I don't know, but that's what they are proposing.
** I'm picking a number out of thin air.
^ I'm not saying it's good, that's just largely how it is.

Business Week has an interesting article on 8 Myths of Software as a Service which is what started the discussion on Slashdot.


Bill said...

Like it or not.. it's coming. Personally I'd never subscribe for many of the reasons the article mentioned.

The was some good info, thanks!