The Promise and Performance Challenges of Software-As-A-Service

It’s a promise that seemed almost too good to be true: Overnight, one of the company’s enterprise-critical applications is updated to the latest version. In the morning, employees – at the home office and field offices across the country – are working along as usual, noticing only some important new features that help them get their jobs done better. Later, at a management meeting, the CMO reports that faster responses to opportunities have bumped their share five points. And the CIO reports that the technology spend is exactly on target, no additional budget needed.

Elsewhere, in a nondescript glass-and-steel building in northern Virginia, the CEO of a two-year-old tech startup reports to his team that the overnight upgrade to their core enterprise application offering went flawlessly. Monthly subscription revenue is up by high double-digits. Customers are happy. The press veritably glows about their cloud-based application’s wonders. And Google, Microsoft, and a host of VCs and investment bankers are lighting up the phone lines with offers of truckloads of cash

SaaS At Last?

After years of latency, software-as-a-service is moving to center stage, swept along with the bigger concept of cloud computing. On the software side, applications like Salesforce, Workday and Freshbooks – and yes, GoogleApps – have become serious players in enterprises of all sizes. And in the bigger cloud, services like Amazon’s EC2 Elastic Compute Cloud and IBM Smart cloud services – and yes, Google AppEngine – are changing the way IT departments approach their missions and their development tasks, enabling greater speed and flexibility than ever before.

We’ve seen this type of technology trajectory before and can recognize its course; think back to the Web itself, to early social networking, to the still-snowballing mobile data market. The dominant SaaS providers are still rising to the top; economics, standards and best practices are being sorted out; business models are being built and business cases made. The difference is that these sweeping technological changes keep happening faster and faster.

Many point to Salesforce.com as a success story and example of what’s possible. Indeed, a Gartner consultant recently put Salesforce’s share of the total SaaS spend at 14.6 percent.(Source: Gartner webinar, “Ensure Your SaaS, Cloud Investment Will Deliver Results and Save You Money,” 4/2010) But without certainty as to the potential, nor enough track record to know and avoid the pitfalls, how willing will enterprises be to trust their critical applications to cloud-based solutions that ultimately are out of their control? A few stories in the press about outages at Google, Facebook, and Twitter are enough to give any business decision-maker pause. Even so, the SaaS train has apparently left the station. The question is, at what stop will businesses get on, and for how long a ride?