It is not often I take notice of vendor produced reports, but this one from Access Accounting is worth the reading. If you’re not registered at AccountingWeb then it’s a pain to obtain. Although I believe CEO John Beech lacks clarity in some of his thinking, the investment trends are clear.
Most significantly of all – given the long-establishedconcerns about the costs of upgrading and maintaining software – there are signs of real enthusiasm about embracing ASP services. Not one of our respondents currently uses a hosted service in this way, but 30% plan to in the near future.
We asked the respondents to assess their company’s level of interest in such options,and a third (34%) report greater interest in shared service centres now compared with recent times,while a quarter (25%) declare a greater interest in outsourcing. The main reason why these two options seem so appealing is the chance to cut costs,mentioned by 68%
Earlier in the report, the research notes a continuing relative dissatisfaction with implementation, maintenance and upgrade costs which the report implies is a driver for alternative approaches to managing the finance function. The report also notes economic factors playing into what it sees as a relatively low level of investment in the past year. However, the report doesn’t pick up on observations made by others.
My ZDNet colleague Phil Wainewright in in his 2008 predictions on saas noted economic factors as a driver.
Economic factors favor SaaS…InfoWorld, counting down the “top underreported software stories†of 2007, goes as far as holding SaaS largely responsible for the pricing pressures ISVs will face in the coming year. Certainly, the low-risk, pay-as-you-go model will give SaaS vendors a big competitive advantage if capex budgets are slashed, according to Goldman Sachs: “The ability to quickly and easily turn on new applications with a significantly lower initial cost of ownership makes SaaS an attractive offering … these benefits are likely to be key in a slower economic environment where purchasers of software may be increasingly skeptical of significant upfront investments which we anticipate to characterize 2008.
Phil continues with:
It’s all about services. I’ll start my list by repeating the prediction I made at the beginning of last year: “SaaS is just part of a wider move towards Internet-based automated services.â€
Outsourcing is a service and for it to operate successfully requires products that run on the Internet. Whether entire processes are outsourced or parts of a service, there is no getting away from the requirement to run in this manner.
Phil references another saas enthusiast Jeff Kaplan who notes:
SaaS Solves SOX: A year ago, most publicly traded companies and other large-scale enterprises rejected the idea of SaaS because they thought they needed to take greater responsibility for their own compliance requirements. Now, they view the process controls, auditability and offsite hosting features common in most SaaS applications as a perfect solution for their Sarbanes-Oxley (SOX) needs. As a result, enterprise adoption of SaaS will accelerate.
This plays directly towards the report’s finding that:
One in five (20%) say that they will be looking for new software in order to handle Sarbanes-Oxley compliance requirements,but the proportion seeking specialist applications to address either IFRS needs (10%) or Basel II requirements (7%) is much lower. Those who do intend to make a special purchase say they are most likely to buy from their existing vendor (30%) rather than switching to a different supplier (8%).
Notice however the difference in thinking among those surveyed. It is clear the saas/on-demand story has yet to be fully articulated as a solution alternative and those surveyed do not have a full appreciation about what is possible or the economics that attach to the on-demand model.
What the report does not tell you is that Access is a Microsoft house. Microsoft has real problems coming to terms with the technical requirements of cloud computing such that vendors can offer a genuinely compelling economic solution. It prefers to see companies running applications internally. To quote from Phil:
Of course, it’s in Microsoft’s interests to see enterprises deploying SaaS internally (and thus having to buy more server licenses to do so) than it is to have them consuming SaaS externally (especially when the external SaaS vendors are typically running Unix-based data centers and using open source platforms). In my view there will also be a lot of the latter going on, because contrary to popular opinion, many IT folk like the low-cost, low-maintenance, low-resource profile of externally delivered SaaS applications.
That may not be so true in the SMB space where Access usually plays but nevertheless, if it is taking this report as a sign of the future then it cannot avoid the re-engineering issues that will arise. I’m not sure that Access has fully understood the implications of its own findings and I will be interested to hear John’s take on my analysis.
In a broader sense, vendors relying on Microsoft technology are all faced with the same problem. How can we leverage the best of open source in the development of infrastructure for saas/on-demand (which is what most pure play Internet service vendors are doing) yet still leverage our Microsoft expertise AND ensure our customers get an offering that delivers the value they are clearly seeking? Developing an offering that chips away at those implementation, upgrade and maintenance costs will be an excellent start.
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