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SaaS cost savings impress CIOs

A new survey says midmarket organizations tend to be more satisified than larger organizations with the SaaS method of delivery.

Midmarket companies are taking to the Software as a Service (SaaS) method of delivery more aggressively than their larger and smaller brethren, a symptom of their desire to grow quickly through inexpensive means, a new survey has found.

"SaaS is a means to increase the capabilities of the company at a faster pace and at lower costs, and that is where midsized companies [are]," said Bruce Guptill, managing director at Saugatuck Technology Inc., the Westport, Conn.-based consulting firm that conducted the survey.

"They want to put money into growing," Guptill said. "What can we get out of it now? What can we get out of it this year?"

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Unlike in the midmarket, where SaaS is more likely to be a full-blown deployment, the size and structure of IT at a very large organization allows for more flexibility in the way of testing, Guptill said. Larger IT departments have more room to test a program in just one area or department. Small companies, on the other hand, just aren't focused enough on IT to tread too far into the SaaS waters.

Midmarket IT shops are in a unique position to employ a SaaS program across a business with the hopes of cutting costs and simplifying work operations.

In fact, CIOs and other business and IT executives at midmarket companies "indicate greater familiarity with SaaS than executives at other sizes of firms," according to Saugatuck's May survey results.

Eighty-six percent of those surveyed at companies with fewer than 500 employees said they were "familiar," "very familiar" or "extremely familiar" with SaaS. That's as much as 20% more than IT executives at companies of other sizes.

Thomas Lockwood, CIO at Car Toys Inc. in Seattle, would probably fall under "extremely familiar." He's been running a SaaS business intelligence program from Bellevue, Wash.-based PivotLink Inc. for five years.

"It's not our core business, and they just take care of everything for us and make it really easy," Lockwood said. "To the users, they can't tell the difference so it just takes one more thing off my team's plate that they don't have to deal with." Lockwood runs a 20-member IT department at the 1,200-plus employee mobile entertainment and cell phone retailer.

Car Toys also uses a SaaS version of Oracle Financials, hosted through a third party. Lockwood said he'll look at other SaaS applications when, and if, he decides to make changes in applications used by the company. He said he's happy with the two he's using.

"On the PivotLink side, it's the ease of use," he said. "And on the Oracle side, it's the cost savings."

In addition, 95% of IT executives at companies with 500 employees said they were satisfied with the SaaS programs they are using, up from the already high 84% at companies of all sizes.

"We're not trying to say, for example, that SaaS is a midmarket phenomenon," Guptill said. "But it is in that midmarket where we see the most aggressive SaaS adoption."

And across all company sizes, 40% of survey respondents said they use at least one SaaS application. Saugatuck expects that to move to 70% by 2012 for companies with more than 100 employees.

We're not [saying] that SaaS is a midmarket phenomenon. But it is in that midmarket where we see the most aggressive SaaS adoption.
Bruce Guptill
managing directorSaugatuck Technology Inc.
Of course, vendors hoping to cash in on this trend are selling SaaS applications covering everything from timecard management to full-blown ERP programs, with varying degrees of success.

Guptill said the survey found IT managers primarily taking to customer relationship management and workplace collaboration software SaaS programs.

His guess for the reason behind the success: "That's pretty much where most of the SaaS activity is on the vendor side, isn't it?"

Not faring so well in the SaaS arena right now are ERP, supply chain management, compliance and risk management programs, results Guptill called "puzzling."

"That's an area outside of what you want to do as a company, but you have to get it done," he said. "Why not outsource?"

Guptill said Saugatuck will conduct a new survey to determine why CIOs are spurning SaaS programs in those sectors.

Let us know what you think about the story; email: Zach Church, News Writer

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