Bill McDermott, SAP’s president and CEO of global field operations, spoke with InformationWeek earlier this month and covered some finer points about SaaS.  Two points in particular that caught my interest: many companies will be disillusioned by SaaS once they realize it’s more expensive and complex than they anticipated, and that SaaS won’t work for companies as a core platform.

On the first point about SaaS disillusionment: it is pretty clear that there’s a lot of hype and excitement about around SaaS right now, but that’s pretty normal.  SOA and BPM went through the same hype curves, and SOA in particular is currently at the tail end of what I would describe as a prolonged trough of disillusionment.  BPM, on the other hand, is finally mature enough to be providing companies with business value.

It’s certainly probable that some companies may get in over their heads and invest too quickly in SaaS without proper planning, but that can really happen with any kind of software initiative.  Just think about all the disaster stories you’ve probably heard about CRM or ERP deployments gone awry and how costly it ended up being.  But that doesn’t mean that all types of SaaS solutions and targets are going to end up being big disappointments.  As I wrote earlier, some target for SaaS conversion are inherently easier than others.  And smaller companies who are looking for new investments in CRM, ERP or other business productivity tools might find value right away in solutions like Salesforce.com, Zoho, SugarCRM or products from 37signals.

On the second point about SaaS being a platform: I think this is true for companies that still think of their business applications needing to be built all on a single platform.  The problem, as I’ve discussed earlier, is that a single platform almost always ends up creating a big data silo, where it’s easy to move data around on the platform but hard to write connectors to other applications.  Companies that have started to invest in SOA are probably less concerned about having a single platform – they may already be realizing the benefits of having loosely coupled systems that can interoperate regardless of the underlying development platform.

SaaS providers should certainly learn from what’s been through the hype curve before to try to prevent SaaS products from hitting an extended trough of disillusionment.  As I mentioned before, in part this can be done with data portability, but I think this also can come quite effectively by providing customers with tools to prove ROI.   For example, SaaS providers offering dashboard-like ROI calculators that can show a customer their SaaS usage.  SaaS providers could even potentially show aggregate data other companies of similar size and industry, that could give them an idea of how efficiently they are operating – akin to comparing site metrics in analytics tools like Google Analytics.

It’s true that some business software just won’t prove to be a viable SaaS offering at all, and some customers won’t be able to adopt it because of their business restrictions, but there are already SaaS success stories for both customers and vendors today, and there are likely to be many more in the future.

Filed under: Cloud Computing, Enterprise Web, SaaS