SaaS...a Market? Or a Market Advantage?

“SaaS is not a market. It’s just software,” reads the title of a recent blog post by Mark Everett Hall of Computerworld. He’s riffing on a statement made by Trisha Gross of SaaS-based Hubspan, who argues that “there’s a market for CRM, ERP, supply chain management, integration software and other markets, but not SaaS.”

These are common misunderstandings by folks who have not walked a day in both the shoes of an on-premise provider and a SaaS provider. But SaaS is not “just a channel,” nor is it “just a way to consume software.”

Unfortunately, these perspectives don’t recognize so many of the true differences between SaaS and traditional enterprise software. It would be like saying the difference between using a horse-and-buggy versus air travel is merely the “delivery model.” Of course the method of delivery is different, but the benefits to the passenger (and the provider) are far greater.

Beyond the means of delivery, SaaS doesn’t require customers to buy and maintain expensive hardware. It’s about reducing the risk of “shelf-ware” so common in the on-premise world. It’s about letting customers dip a toe into their software investments, rather than paying millions of dollars up front. It’s about keeping vendors honest: if customers aren’t happy, they will walk. It’s about not stranding customers on old and obsolete versions, and forcing them to do costly upgrades. It’s about allowing vendors to focus on a single line of code, meaning more efficient engineering organizations that can spend more time innovating.

The conclusion Mark draws at the end of his post is that “instead of SaaS vendors being measured against themselves, they should be compared in the same market as their packaged app competitors, which would greatly diminish their relative size and importance. I’m not sure a lot of SaaS players and their backers would want to go down that road.”

Completely agree. No SaaS vendor worth its salt should be shy of inviting such a comparison. If SaaS vendors are doing a good job, their on-premise counterparts are likely squirming - telling anyone who will listen why SaaS isn’t relevant or, better yet, starting to apply “on-demand” and “SaaS” descriptors to their on-premise applications.

Fortunately for true multi-tenant SaaS vendors, the genie is out of the bottle and it’s just a matter of time. So, while SaaS might not be a market in the traditional sense, it’s clear that, all other things being equal, it is a huge market advantage.