Thursday, May 03, 2007

SaaS: The Multiplier Effect

There are many well-known benefits of SaaS solutions such as subcription pricing, faster implementations and greater user adoption. One that is rarely mentioned is the multiplier effect for niche partner solutions.

As an example, take an HR application. If a niche vendor comes in to introduce a complementary application to say automate performance review approvals. With traditional on-premise, the niche vendor has to not only test the integration with the HR application but must do so for all possible platforms and configuration options. In addition, the actual integration must be performed on-site raising the cost of the solution to the customer. This means that certain add-ons are not worth being bought but can be better built as custom enhancements by the customer.

With SaaS, the integration is easier to develop using web services standards and is easier to test since the application is available to the partners. In my past role as an EAI specialist, I recall spending days and weeks waiting to get access to an instance of the application to integrate with. Once the integration is done, the niche solution provider need not repeat the exercise for every customer. This allows many small applications to become available with benefits to customer, partner (vendor) and the SaaS appliction vendor.

  • Customer: The customer can simply pick and choose the add-ons they need to conduct business. They do not need to wait for IT or the application vendors.
  • Partner: The partners of the SaaS application can bring a solution to the market faster, test it easily and roll it out at a lower cost per customer. This enables the long tail of solutions to become economically viable.
  • Application Provider: The greater the number of partner solutions enhances the value to the customer making the core application even more valuable.
In short, a solution integrated with a SaaS application enjoys the multiplier effect- enabling multiple customers simultaneously without incremental cost of integration testing and implementations like those involved with traditional on-premise applications.

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