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Businesses Get Serious About Software As A Service

By Mary Hayes Weier, April 14, 2007

InformationWeek Research finds companies using the delivery model for a wider variety of applications.
No Big Rush
Customer service and sales force automation are the leading application areas for subscription software, but more are coming into play. Among those surveyed who are subscribing or planning to subscribe to online software, more than one-third are using it for human resources or desktop applications. Nearly 30% are using it for e-mail, and more than 20% are using it for payroll and application development.

Yet some businesses are moving slowly and keeping SaaS limited to noncritical applications. MiPro Enterprises spent two years using Salesforce.com's sales force automation service before going further with SaaS. Two months ago, the 260-employee IT consulting, medical staffing, real estate management, and business brokering company subscribed to an HR software service from Workday, a startup founded by PeopleSoft co-founder David Duffield.

Why Are You Adopting SaaS?


view all the charts
By limiting its first try to Salesforce, there was little risk, says Jeff Micallef, a managing partner at the company's IT arm. "It wasn't going to shoot the company down if that model didn't work," he says. Similarly, should Workday's HR app go down, it wouldn't stop the business from running, Micallef says. MiPro plans to implement Workday's billing and general ledger applications when they become available later this year. The company estimates it saved $50,000 on hardware it didn't have to buy by using SaaS for HR and $100,000 on IT personnel who would have been needed to deploy and support software on-site. SaaS savings are letting the company invest elsewhere in the business, Micallef says. "Flexibility is important, too, as the business needs will change over time as well," he says.

Ease of deployment continues to be the leading reason businesses subscribe to online software, cited by 69% of respondents using SaaS. Just over half of respondents think on-demand software is more flexible and lets them keep up with changing business needs.

The Scary Side
Nearly a third of respondents say they're skeptical about SaaS. Security is cited most often as a concern--by 48% of respondents who don't have plans to use SaaS--while 40% question the reliability and uptime of hosted software. About a third are concerned about functionality, interoperability with legacy and other software, and even the cost of what's frequently described as a less expensive approach to software deployment.

SaaS users have some of the same doubts. Among those using or planning to use subscription apps, 87% cite security as a major concern. Just over 60% cite integrating their SaaS software with existing applications as a top problem, while 56% cite data security and 36% cite data control as challenges. A quarter say they're concerned about proving a return on investment for these apps.



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