SaaS - Not 'Xactly' a Risky Proposition

Recently, I flew to visit a potential customer – this prospect happens to be a good-sized bank, and as is often the case with financial institutions they are extremely cautious about everything having to do with risk and security.

As a matter of fact, an executive in attendance made a point of asking me if there are risks inherent in the SaaS architecture.

“It seems like one of the main advantages of your model is that it’s extremely low-risk; the initial investment is very small. Am I missing something, some catch?” he asked me.

I pointed out that, on the contrary, he had it right from the beginning – the real risk would come from getting locked into a long-term commitment to an on-premise vendor and having to do so *before* you know for sure if their solution will work the way you need it to (and the way THEY say it will).

A true SaaS solution gives the customer the ultimate amount of freedom and flexibility; companies have embraced the idea of a ‘try-n-buy’ – instituting a pilot program that allows the customer to dip its toe into the water before deciding if they want to get wet.

This freedom enjoyed by the customer forces us SaaS vendors to be nimble and requires us to focus relentlessly on customer service. However, it also comes with a built-in competitive advantage: customers can find budget for these projects so much more easily than with an on-premise solution.

Phil Wainewright, who writes a terrific blog for ZDNet, wrote the following in a recent post of his: “Certainly, the low-risk, pay-as-you-go model will give SaaS vendors a big competitive advantage if capex budgets are slashed…”

The title of that post is, “Eight reasons SaaS will surge in 2008”, and Wainewright goes on to quote Microsoft SaaS architecture expert Gianpaolo Carraro who compares the current SaaS revolution to the awakening companies had in the mid-90s around using an Intra-net as well as the Internet.

I like that word: “awakening”. That’s definitely what this feels like – companies are waking up to the possibilities in the SaaS world. I can almost smell the morning coffee brewing.