Businesses are showing a lukewarm response to SaaS, despite an economic climate that would seem to encourage take-up of the technology, according to a new survey by Gartner.
The survey of 333 enterprises in the UK and the US found that organisations were, on average, "somewhat satisfied" with SaaS (software-as-as-service), while only about one-third of those surveyed planned to expand their usage of SaaS, Gartner found. The survey was carried out in December 2008 and published on Wednesday.
Gartner researchers said they were surprised at the results of the survey, given that many — including Gartner itself — have been predicting a greater uptake of such services as a result of the current tough economic conditions.
"At a time when SaaS is becoming more of a consideration for more enterprises, the results of this survey will be somewhat disquieting for SaaS vendors," said Gartner principal research analyst Twiggy Lo, in a statement.
On average, respondents ranked their experience with SaaS at 4.74 on a seven-point scale, with all 16 aspects of SaaS receiving scores in this range, Gartner said. The aspects studied included, in order of highest to lowest satisfaction: functionality for business users, provider responsiveness, reliability of performance to technical specifications, service reliability and support compliance and risk management.
Respondents who had considered using SaaS, but decided not to, said they made this choice due to high cost of service (42 percent), difficulty with integration (38 percent) and technical shortcomings (33 percent), Gartner said.
"These findings contradict the general impression that SaaS could help alleviate costs and also that it does not require much integration and technical requirements," Gartner stated.
Fifty-eight percent of organisations said they would maintain current levels of SaaS over the next two years, while 32 percent said they would expand, five percent would discontinue and five percent would decrease levels.
Gartner said SaaS providers must find ways of delivering deployments that require less technical support, and must come up with integration strategies that work better with customers' heterogeneous IT environments. "Vendors must reaffirm the fundamentals of the SaaS model — that SaaS solutions are lighter, simpler, more intuitive, more agile and more modest," Gartner stated.
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The results are not completely unexpected, and are due in part to shortcomings with billing and provisioning, according to Soeren von Varchmin, vice president for SaaS at virtualisation company Parallels.
Current billing and provisioning systems used by SaaS providers create unneeded complexity for customers when they make adjustments to their services, von Varchmin said.
"End users must have 'self-service' SaaS, meaning they are free to administer their own services instead of constantly having to contact the vendor to purchase or remove applications," he said in a statement. "Without automation, SaaS is not only unprofitable for vendors but unattractive for end users, as it's difficult to realise the cost benefits."
Last month, Gartner recommended service providers to invest in SaaS as a delivery technology, as a way of cutting costs.
Talkback
While this may be true at the more corporate end of the market, SaaS is delivering significant benefits for SMEs, from sole proprietors to medium-sized companies who don't have dedicated IT resource.
For these customers, software acquisition under the SaaS model usually carries a much lower cost than traditional software - for example, a typical small business in the UK might spend £1,000 buying Sage accounting software with support cover, but could save 85% of that cost by going down the SaaS roue.
While you might think that buying traditional software is cheaper in the long run compared to paying ongoing SaaS fees every month, the savings go on in subsequent years at the level of 65% (more details here: http://tinyurl.com/saveoversage).
When you also take account of the surrounding costs associated with hardware, support and backups, the full TCO makes SaaS even more compelling. One SME we deal with says they save over £100,000 per annum by using SaaS. (Details here: <a href="http://blog.e-conomic.co.uk">Using SaaS to slash operating costs</a>).
While I don't doubt the veracity of Gartner's findings across the whole market, it ignores the great work being done amongst vendors to SMEs that's driving significant economies into a vast number of businesses.
Mark Davies
e-conomic
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