Originally posted on on the e-Sourcing Forum [WayBackMachine] on Tuesday, 24 July 2007
CRMBuyer recently ran an article entitled “Where Should Your E-Commerce Platform Reside” which highlighted the success that many small and medium sized retailers have enjoyed with their adoption of hosted Software-as-a-Service offerings. Although this result should not be surprising, considering the rampant success of SalesForce.com and its smaller competitor, SalesBoom.com, it’s nice to see the media recognizing that the model works.
It’s no secret that I’m a big fan of on-demand, as should be obvious from last summer’s “On-Demand” weekend series “The Good”, “The Not-So-Bad”, “And the Coming Pretty …” and the follow-up wiki “On-Demand / SaaS Application Platforms”, but articles like these serve to demonstrate that it is not a fervently held irrational belief.
The article points out that “SaaS is another step beyond subscription and that not only does the software innovation flow continuously from the vendor to the buyer, and not only does the buyer pay evenly throughout the life of the relationship, but the software ‘lives’ at the vendor location” which is “a small difference with big implications”. Furthermore, since SaaS is designed to radically minimize the kind of customization that becomes a boat anchor with traditional build or buy mentality, it ends up addressing two of the biggest problem retailers often have with software – the cost conundrum and the innovation gap.
In the cost conundrum, large retailers that have legacy systems in place are continually grappling with the “pay me now or pay me later” problem where they either have to pay considerable incremental costs to maintain a legacy product that is almost crippling them in its inadequacy or pay a very large amount to update the system to the new version.
The innovation gap refers to the fact that the average large retailer has only made two to three investments over the past ten years to try and keep its direct and e-commerce businesses near the innovation curve while Web 2.0 technologies are innovating on what seems to be a daily basis. This has resulted in a technology gap that often can’t be bridged even with a spend of US $20M or more
SaaS overcomes both of these because you pay a manageable fee on a monthly basis and your software is updated regularly and automatically as part of your subscription. As the article says, it all comes down to what kind of business you’re in. If you’re not in software, then you really shouldn’t be trying to maintain a full IT department – you’ll never be able to match the staffs and expertise of the large providers, and considering that doing so provides no value add to your business offering, you should not even be trying.
Furthermore, as the article points out “SaaS can provide a clean, contemporary starting point for a cross-channel strategy that front-ends the warehouse, inventory and logistics facilities with the newest technology, designed to evolve with full backward compatibility, instead of forced upgrades and installations”.
The article concludes with seven key characteristics that you should use in assessing SaaS offerings in the marketplace that are not a bad start:
- Solution Strategy
How does the vendor bridge the almost inevitable gap between the “out of the box” software and what (you think) you need? - Integration Strategy
How does the vendor’s solution integrate into your back-end systems? - End-User Empowerment
Make sure the system is intuitive and usable by all affected parties. - Cross-Channel Strategy
Evaluate how cross-channel features are implemented. - Cost-Reduction Strategy
Make sure that the SaaS solution allows you to unplug the costly systems that you are currently running. - Retailer Differentiation Strategy
Make sure the solution gives you the tools you need to maintain and extend your differentiation and brand identity. - Design Strategy
Make sure to choose a SaaS vendor that designed its platform to be scaleable from the outset for the business that you play in.