Wednesday, August 27, 2008

The End of SaaS

Sometimes, there is nothing much to add. So I present to you - words of wisdom - as could only be articulated by the leader of a stagnating on-premise software vendor emotionally tied to the "cocaine" of endless upgrade fees and maintenance streams.

SaaS Market will Collapse in Two Years
Lawson's CEO, Harry Debes, doesn't believe in software-as-a-service (SaaS).

In fact, the ERP (enterprise resource planning) software company's top executive has put a two-year expiry date on SaaS' head.

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Q: All the other big players are going "on demand". Is cloud computing the next big thing?
Debes: This "on demand", SaaS phenomenon is something I've lived through three times in my career now. The first time, it was called "service bureaus". The second time, it was "application service providers", and now it's called SaaS.

But it's pretty much the same thing. And my prediction is that it'll go the same way as the other two have gone--nowhere.

SaaS is not God's gift to the software industry or customer community. The hype is based on one company in the software industry having modest success. Salesforce.com just has average to below-average profitability.

People will realize the hype about SaaS companies has been overblown within the next two years.

An industry has to have more than just one poster child to overhaul the system. One day Salesforce.com will not deliver its growth projections, and its stock price will tumble in a big hurry. Then, the rest of the [SaaS] industry will collapse.

Read more here...


My opinion - no comments. As Dana Carvey used to say - wouldn't be prudent. The truth is so self-evident as is the case with the inevitable transition to SaaS and PaaS that I don't need add my commentary. Readers can come to their own conclusions.

What do others have to say? (Update: More added.)
Here are some snippets:

Human Capitalist says

While I would agree profitability has been difficult to achieve for most SaaS vendors (Salesforce.com, Taleo and Concur are the only one’s that come to mind), the reason is actually good for customers….because these companies continue to focus on rapid innovation and are continuing to re-invest into their products frequently and creating new products at the same time.

Appirio says

The reality is that Salesforce.com, with 94% of its customers saying they'd refer the company to a colleague, has much higher than average customer retention. 74% of its customers say they have already done so. These figures are twice what most on-premise software vendors are seeing. SaaS solutions tend to be good because they have to be, to keep customers. On premise software can afford to treat customers as addicts - at least for the short-term, until the customers kick the habit for good.


4 comments:

Mohit said...

Could it be he was high on something when he gave that interview? tch tch.

Ryan Nichols said...

We certainly thought so... the Appirio blog post in the wee hours had a very different graphic before we woke up and thought better of it.

Honestly, its hard to figure out what was motivating that interview or his ridiculous prediction: the theory that any publicity is good publicity?

Anshu Sharma said...

I don't think that this is about publicity or PR. Lawson appears to honestly believe that the model is a fad. As expected, I disagree - and more importantly, would love to show to on-premise vendors like Lawson how they can successfully make this transition and why the model works.

Salesforce.com, my employer (but not any way officially related to the blog - see disclaimer) has helped and is continuing to partner with companies like Coda to help them figure out the new SaaS model. A recent book by Tim Chou (Stanford University Professor and former President of Oracle On-Demand) explains how this model works.

The SaaS mdoel is not panacea and is not the last change in model - but it certainly is an attractive model for customers and ISVs alike.

Daniel Druker said...

Based on everything I know this is what Lawson's CEO really thinks. Some of the other legacy ERP vendors may not have a strategy, or may be having a hard time executing, but Lawson really doesn't believe in it.

I also weighed in on the Lawson interview over on my SaaS 2.0 blog: How to Boil a Frog - Lawson's CEO Hates SaaS