Documens Boss

CRM lead by www.salesforce.com started the momentum of cloud, as did many of the Web conferencing companies, all of which have been textbook examples of a SaaS application - “Software on demand”.

As with many new developments, SaaS has been viewed with some suspicion. I am sure it was the same when electricity was first introduced; the idea of piping an invisible force in to your home that could kill you if you came in contact with it, would surely have caused some unease.  Elec-trickery was probably how many of our parents viewed electricity, making sure that all plugs were removed from their sockets before they could sleep at night.  How many of us do that today?

The SaaS model caused uneasiness with users due to data being outside of their control and the potential security issues that raised. Although this concern has not completely disappeared, the proliferation in people's private lives of websites such as Flickr, where digital images are presented and stored - and even, to some extent, Facebook, where personal data is uploaded, along with online banking and trading, has facilitated and accelerated acceptance of cloud computing. This, and the more fashionable must have “electronic jewellery” such as the iPhone and iPad (bought by the iSmugs  ) and Google Docs for collaboration and sharing of documents, plus the further acceptance of the "thin client" has all eased the resistance to the idea of software and data not held within your own domain.

In just a few short years, we have moved into the social interactive and networking world and have a new breed of dynamic young executives who are highly internet savvy and very comfortable with cloud. It is not simply a cultural and behavioural change, SaaS does have some strong economic arguments in its favour, as follows:

• Reduction of customer's IT requirements
• Consequential lower operating costs
• Speed and ease of deployment
• Departmental flexibility where management can circumnavigate their own IT “gatekeeper”

The end user is now primed for a SaaS revolution and the real barrier is no longer the customer (not to the same degree, anyway) but the supplier.  The traditional software vendors who sell their software using a traditional license model, realise their revenue up-front, which creates a large injection of cash and good commissions for their sales force.  This up-front cash injection also provides more attractive management compensation models and another important front end driver. The front end interface to the buyer i.e. the sales force and their management will have an affect upon the direction of future sales. 

From a technical perspective, and here we see another possible driver, SaaS has some limitations.  ECM solutions, by their very nature, require integration into content rich back-end legacy systems and this may require quite a lot of ongoing development as other parts of the jigsaw change and requirements, possibly driven by legislation and behaviour, evolve. SaaS can show quick deployment but is not ideal if customers want a long term, flexible development platform that can reach deeply in to their legacy systems, seeking and using data and documents from a wide range of back-end systems.

When we look further forward to the sale of SaaS companies, the long term revenue subscription model can add significant value to the company, since it has the magic “recurring revenue”, thus, providing a good return to the shareholders, who are prepared to invest and play the long game of building long term subscriber loyalty and a not insignificant level of dependence from their customer base. Many software vendors are talking SaaS but, in reality, they are simply only selling their software on a subscription model and “Hosting” the software on the customer's site. As the end user becomes more educated, the true SaaS providers, who are able to deliver high levels of customer service and satisfaction and a proven record of renewable subscription contracts, will be able to realise more value for their companies as acquirers go for the “sure bet” of recurring contracts. In addition, the ongoing, predictable revenue of SaaS will be very attractive to VC’s, investors and companies looking to grow via acquisition. 

The SaaS migration has begun, but is by no means in full swing just yet, as it is a long way from handling high, mission critical applications.  Where a client requires a development platform with a high degree of integration into backend legacy systems, SaaS may prove to be a runner-up.

So, SaaS is not a panacea for the ECM industry, but an important development which is gaining increasing momentum and, I am sure, will be a significant feature in many of the acquisition negotiations I will be conducting over the next few years. 

For further opinions and insight, read the Boss News article "Business Leader Perspectives on SaaS" here http://www.documentboss.com/blog/business-leader-perspectives-saas

Definition: Software as a service: SaaS, typically pronounced “SaSS” is software that is deployed over the internet. A SaaS, a provider licenses an application to customers as a “pay-as-you-go” model. SaaS is also called “software on demand”. SaaS vendors develop, host and operate software for customer use. Rather than install software on site, customers access the application over the Internet. The SaaS vendor may run all or part of the application on their hardware or may download executable code to client machines as required - disabling it when the customer contract expires.