My friend Josh Greenbaum writes Implementing SaaS: If it’s easy, it’s because you’re not trying
He makes the case SaaS is an complex as on-premise, may be even more so. He cites
The other way you can tell that complexity and SaaS are now synonymous is the growing quantity of deals gone bad. SuccessFactors has spent a tidy seven-figure sum of late remediating troubled implementations, and to be fair, the offending SIs have run the gamut from boutiques to the global SIs.
I share his concern. I have had conversations with several SaaS vendors that the hordes of on-premise consultants are headed their way and they need to be more vigilant.
But Josh is focusing on the implementation project, not the life cycle. The major difference between SaaS and on-premise is SaaS takes over hosting, apps management and upgrades which multiple service providers did in the on-premise world. That’s huge.
In my book, SAP Nation, Chapter 4 described the many implementation project overruns in the 90s. But Chapter 5 describes the highly inefficient data centers the hosting providers ran, the armies and lack of continuous improvement at the application management outsourcers (many offshore) and the multi-month, multi-million $ upgrades.
The TCO exploded post-implementation. As I wrote
“The problem is back in 1996 we did not anticipate that the systems integration cost, bad as it already was, was just the tip of the iceberg. As SAP customers went into production, they outsourced their hosting. They had massive upgrades every few years. As they consolidated and put shared services around SAP their network needs grew significantly. They outsourced their application management to the Deloittes, and then to offshore vendors like TCS. The ecosystem around SAP grew and grew and grew and every Sapphire we would dance around the topic and SAP would keep talking about certification of SIs – which only focused on the implementation cost, and not much on the other layers I describe above.”
Guess what? SaaS has dramatically collapsed the hosting, apps management and upgrade cost. DRAMATICALLY. And with Amazon aggressively tackling connectivity costs many SaaS implementations are already starting to see network costs decline nicely.
Josh also makes the point SaaS being functionally siloed leads to more integration costs. He cites
“So imagine, like one relatively small company I know, having a cloud backoffice consisting of 80 cloud apps. Each one upgrades on its own schedule, with little or no awareness of what the other 79 are up to. The company in question was actually considering getting a DNA graft and moving a ton of functionality to a single on-premise ERP system.”
I would love to see the 80 apps he is talking about. They sound like features, not modules. And I would like to see which ERP package replaces those 80 items, and I bet I could find him a more complete SaaS package or two which would deliver the entire wish list.
Josh is perpetuating the myth that on-premise was more functionally complete. If it was the case why have SAP and Oracle spent tens of billions beefing up their footprint in the last decade. And btw where is their integration? As a customer asks in my book
“SAP used to publish A0-sized wall posters with the R/3 data model (entity relationship diagrams). How about similar for the existing SAP portfolio? Integrating even among 100 percent SAP assets must increasingly be a
Frankly, most reasonable IT execs have the view Shobie Ramakrishnan, CTO at AstraZeneca expressed in my book
“IT has always had to deal with integration issues; it’s just that the flavors have become more much hybrid and nuanced. So, in my view, the acronym CIO is becoming more Chief Integration Officer.”
And if the on-premise vendors were so complete, why are so many customers “ring fencing” around them with Salesforce, e2Open, Workday, Plex and other functionality?
Finally, Josh pays no attention to advantages SaaS has brought which on-premise vendors cannot even understand because it has never been possible in their world. Instead he says
So if you’re doing enterprise SaaS because you want your IT life to be more simple, think again. The game is rigged against simplicity, and always has been, for the simple reason that business is complex, and always has been.
Let me respond with two examples on how SaaS actually reduces complexity
Example A from Workday Rising
An executive from Equifax gushed about the bi-annual upgrade process – how painless it is and just as importantly the comfort he got from the fact that his peers were testing the same release at the same time, and how he could benefit from the wisdom of that crowd.
Example B from Jason Prater at Plex in my book
“…if we see that there are pieces of functionality that no longer serve a purpose to our customers, we can easily prevent code bloat by removing those lines of code from the entire solution. In the last year alone, Plex’s developers have removed what amounts to approximately one-third of the code within The Manufacturing Cloud.”
(Cross-posted @ Deal Architect)