SaaS vendors who eat their own dog food

Should SaaS vendors be running a lean and mean IT group and utilize SaaS versions of ERP, CRM and other applications systems?  Mary Hayes Weier wrote on her InformationWeek blog that SuccessFactor has signed on to use NetSuite to run their ERP but Salesforce.com is still using on-premise Oracle applications to handle account receivables and payables.

I agree with Mary’s assessment that SaaS vendors should really be commended when they fully adopt SaaS software to run their own business operations.  After all, there are a few concerns with SaaS that this practice would help eliminate:

  1. SaaS still does not scale for a large corporation with huge amount of data.  It seemed that Salesforce.com may actually be struggling with this issue with their A/R and A/P system.   If SaaS companies can’t figure out how to solve this problem, then their own growth projections are in question as well
  2. SaaS is not secure enough.  Data hosted at the vendor can be leaked or  stolen.  I don’t believe mature SaaS vendors is less secure than many of the corporate IT infrastructure, but if a SaaS vendor can’t trust another trust vendor to run their business applications, we may not want to trust either of them to run our business applications.
  3. Complexity in integrating SaaS with other applications.  Vendors will  tell prospects that they have solved the integration issue.   Data exchange between SaaS and in-house applications can be taken care of.  However, if the SaaS vendors themselves can’t show that they can rely on such integration in-house, you may not want to believe their sales pitch either.
  4. Long term cost effectiveness of SaaS vs on-premise software.  There are economic models that show SaaS applications are cheaper to run in the short run, e.g. for 3 or 5 years but if you extend the payments out to 10 years or more, SaaS actually costs more than on-premise.  By using SaaS applications to run their own business, vendors of SaaS can show that using SaaS for the long haul is a sound business decision and they are going betting their own success on it.

I think these are in fact questions that you can ask your SaaS vendors.  The point is not to make your favorite salesperson squirm but it is to force the question that if I were to run my business with your application, can you concretely show that your company believes in the economic value of your solution?

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One Response

  1. Hi!

    Great question to ask – do SaaS vendors should really use their applications? Or should they choose SaaS over on-premise software?
    I think – sure they should!! And they are or they will – I’m sure. Example of Salesforce.com not using SaaS is missing one simple fact – they started in 1999 and there was no SaaS back then.

    I’m running series of article on my site ( smartupz.blogspot.com ) called “Lower costs are not enough” – maybe you’ll find then interesting. Some of the points (like security) are mentioned there as well.

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