VCs are betting on SaaS
I recently attended a panel discussion "Why SaaS Makes Sense in 2009" with participants from two of the leading VC firms in the Valley, Hummer Winblad and Emergence Capilal. What was clear from the event is that VCs are betting on SaaS and Cloud Computing as the future. This is where the action will be. It mirrors what leading analyst Gartner reports as well as our own experience where more than 80% of all our engagements are now around SaaS strategy and application design.
So if you have an existing solution that uses on-premise software, do you need to replace it now with a SaaS and cloud infrastructure? Yes and No.
Big companies are not likely to re-write core applications any time soon
First lets define what what I mean when I use the term on-premise. In its most basic form this refers to desktop software that was distributed via a company servers using only company infrastructure for hosting, and delivery. Big companies have invested enormous resources in developing the necessary infrastructure and the core on-premise applications and they are not likely to rewrite these anytime soon.
Deliver new services using SaaS and the Cloud
However all companies are continually developing new applications or trying to extend the functionality of their existing services (e.g mobile). This is where they can more easily implement SaaS and take advantage of the cloud infrastructure. For some companies SaaS will supplement their current services, for others it can be the way to deliver completely new applications. On-premise software will continue to exist, but rate of development and deployment of SaaS applications will be higher.
At the point where a on-premise solution becomes technically irrelevant or simply too difficult for a new generation of customers to use or too costly for IT to maintain, companies will have the option to replace it with a cloud infrastructure-based solution and design their application user experience with the SaaS LifeCycle in mind. For some organizations the move will be fast, and for some it will be selective and incremental.
The process of buying a new car offers a good analogy. You aren't too likely to replace your 2007 Mini Cooper with a 2009 Prius. It just doesn't make economic sense. But if one of your family members now needs a car, or your Mini Cooper starts giving you problems, you buy the hybrid.
Don't abandon what works. But start now to extend existing apps.
So the real question is not whether should you abandon your on-premise solution, but rather how can you extend your current applications to take advantage of SaaS or develop new services that are designed as SaaS. Look at SaaS as way to supplement your existing solution, achieve scalability, increase productivity, broaden reach and create competitive differentiation. Just keep in mind that SaaS is more than just a technical delivery model for software; it includes a new business model oriented around service and user experience.
One interesting side-note: While the SaaS model is famously known for being hosted in the Cloud, it is not mandatory that these apps be hosted outside of the firewall. Several large companies are deploying SaaS in-house, gaining the benefits of the SaaS LifeCycle as well as a centrally managed low-power, high-efficiency infrastructure.
Categories: SaaS