Users are already adopting Software as a Service (SaaS), often without the knowledge of their IT organizations. Left unchecked, this could become a huge problem for CIOs. You need to get a handle on SaaS before it swamps you.
IT managers are considerably less enthusiastic about SaaS than their users. They fret about availability, reliability and security. They also know that integrating applications from a service provider with their legacy base is no walk in the park. They know that the one-month deployment cycles SaaS vendors advertise are fantasy.
Both sides have valid positions, but it doesn't really matter. Users are already adopting SaaS, often without the knowledge of their IT organizations. Left unchecked, this could become a huge problem for CIOs. You need to get a handle on SaaS before it swamps you.
SaaS is on a track that looks eerily like the one taken by PCs, LANs, personal digital assistants, wireless networks and any number of other disruptive technologies of the last two decades. The pattern is for technology to come in under the radar and spread out of control. It's then up to IT organizations to come in and clean up the mess. By then, the technology is so entrenched in the business that IT's only choice is to figure out how to integrate it. The process is expensive and ungainly. Unfortunately, this scenario plays out again and again.
CIOs have to deal with SaaS because it's the fastest-growing segment of the software market right now. Consider:
- Boston-based AMR Research Inc. says the hosted segment of the CRM market grew by 60% in 2005. It also estimates that the market for hosted procurement software grew 125% last year.
- San Francisco-based Salesforce.com Inc. reported a 26% jump in subscribers in the most recent quarter, and its annual revenue should grow 55% in 2007, according to Morningstar Inc.
- RightNow Technologies Inc. in Bozeman, Mont., just signed up The Procter & Gamble Co. to use its customer-contact software across many of its brands.
- Software venture capitalist Ann Winblad recently told me that 100% of the business plans she sees for new applications and half of the business plans for new systems software call for hosted delivery. Almost no one is building software for on-premise installation any more, she said.
Clearly, this genie isn't going back in the bottle. So what can you do about it?
First, consider that SaaS might be a good idea for your organization. Nonstrategic applications like human resources management and sales force automation can be expensive to install and maintain, so maybe you should just outsource them to begin with.
If users are shortcutting IT and contracting for SaaS applications, make sure they know they're responsible for their actions. You'll need to enlist top management for support if you plan to take this bad-cop approach.
Perhaps a more desirable avenue is to engage users in a conversation about SaaS. Study up on the topic (two great resources are SaaS Showplace and its sister site, Managed Services Showplace), learn why it appeals to business users, build a preferred provider list and consider how to integrate it into your IT infrastructure. Invite some SaaS providers in to pitch their services to you and tell you how they can work with your legacy base. These companies are mighty keen to make the acquaintance of CIOs these days and the best time to extract concessions is before they've become embedded into your organization.