Need a business justification for SaaS?

by admin on December 30, 2006

in Cloud Computing/SaaS,Innovation

The Economist has an exceptionally well written explanation of how consumer thinking is entering larger businesses. Quoting Adrian Sannier, head of IT at Arizona State University along the way, it says:

In the past, innovation was driven by the military or corporate markets. But now the consumer market, with its vast economies of scale and appetite for novelty, leads the way. Compared with the staid corporate-software industry, using these services is like “receiving technology from an advanced civilisation”, says Mr Sannier…[who] is ahead of his time because most IT bosses, especially at large organisations, tend to be sceptical of consumer technologies and often ban them outright. Employees, in return, tend to ignore their IT departments. Many young people, for instance, use services such as Skype to send instant messages or make free calls while in the office. FaceTime, a Californian firm that specialises in making such consumer applications safe for companies, found in a recent survey that more than half of employees in their 20s and 30s admitted to installing such software over the objections of IT staff.

A heck of a lot of people, including yours truly, have been saying (or predicting) much the same thing for the past year.

Hat tip: Stuart Jones who referenced the Economist article in the context of my critique of AccountingWEB’s take on SaaS in 2006.

I say again: Ignore the youth of today at your peril. They have a voice. They have access to many of the base technologies that will be part of your business infrastructure if that’s not already the case. This story was built around Google Apps for your Domain. More important still, many more of those same young people are going to become clients in the next few years.

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Ignore the youth of today at your peril - agreed 100% but with one caveat born of my time in media businesses. Not ignoring them must not become a de facto legitimisation for ignoring the non youth, especially because they now represent the majority of the population and are shaping the zeitgist in a way that has not happened before. This, in turn, I believe, feeds into how the youth are thinking in certain areas. Bottom line - don't ignore anyone!

There is no doubt that SaaS is becoming part of the mainstream. Salesforce.com hit $500m annual revenue run-rate in the 2nd quarter of 2006. On the other end of the spectrum, as this Economist article points out, consumer-oriented software is going business class and is displacing the old work horses in large enterprises.

Ultimately it will not be about replacing horse carriages by cars (although that will happen), but about making a Model T affordable to a whole new class of buyers. I believe that the focus in SaaS will gradually move away from selling to large and medium enterprises to selling to networks of micro-firms. It will be about market expansion, not displacement. Growth, innovation and value creation will happen at this new edge.

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