I am increasingly convinced that a number of big changes are happening that are likely to reshape the way businesses use technology, including cloud computing, SaaS, and the increasing ability to really compose solutions from services (think SOA that works across technologies). I believe dollars and hours are going to be the drivers of these changes, rather than pure technical considerations, and want to do a few posts to share some of the reasons. I’ll start with a key SaaS virtue, which I actually believe if more a factor of the "service model" than SaaS — rapid implementation.
Phil Wainewright’s recent post over at ZDNet talks about how a SaaS provider of project management and collaboration (Daptiv),
has recently released numbers on starting subscription to live usage –
and the average is less than 30 days, even for a rollout larger than
1000 users! Beyond the positive metric, I found two details about this
interesting:
- SaaS and service providers tend to measure the cycle
from start to usage, as opposed to the somewhat misleading "production
deployment" in the software world. - The metrics around cycle are automatically collected by the SaaS system
I contend that "production deployment" is misleading because in a
traditional software model that is not necessarily the point where
returns begin — in fact, it is the usually the point of maximum
expense! At the moment of production deployment, you typically have
multiple dev and test environments licensed, lots of gear tied up, and
– most signifigantly — lots of people consumed (developers,
integrators, deployment and operations, trainers, etc). As soon as the
deployment is successfully completed (assuming it is…), you then
begin ramping users — and that is where value shows up.
In an (much) earlier post,
I shared GXS’s own experience of doing a service based (SaaS) project
in parallel to our CRM project, and how different it was — so we have
experienced this first hand.
But the fact that Daptiv has collected the metrics for its project
interested me, because I think it showcases a certain mindset found in
service providers — the drive to get clients using the system. As one
of the largest and most experienced B2B E-Commerce service providers,
we can understand this motivation! It actually stems from the business
model of "SaaS’y services" (as opposed to Professional Services…).
In a traditional software model, the vendor of the software makes
the bulk of their revenue from a license — which is usually purchased
before any usage occurs. While software vendors are certainly eager to
see customers succeed in the use of the software (GXS has several
wonderful software partners), most large deals — known as EAs, or
Enterprise Agreements — actually make the vendor "economically
indifferent" to usage (meaning they don’t get more money because it is
a "site license").
Professional services often has an even stranger model — in that
the flow of money actually decreases or stops when the project is over!
This is kind of like a recent driving vacation I took, where during the
long drives to Boston and then Maine my boys were allowed to play as
many video games (in the car) as they liked. It put them in the strange
position of being sad that a 10-hour drive had to end! This is not
meant to suggest PS firms don’t work diligently to complete work in a
fast manner — most do. We also offer PS, and we like to see projects
finish quickly, as it helps win future business (and taking too long
has the opposite effect). But in the services world it is different…
When you sell SaaS-like services (and most of GXS’s ECommerce
services meet this description), you make your money as clients use
your system. We have the ultimate incentive to get clients up and
running quickly, that is when we get paid. Even better, unlike a model
where the bulk of the expense occurs before any return, using services
allows you to align expense and return so that large projects are more
"even", rather than front-loaded. If you plan to have a community of
100 business partners, for instance, you pay for 100 only when the
100th partner joins and starts participating — rather than the
traditional "build it and they will come" approach.
This fact is obviously not lost on the service provider, which is
why I believe we will always drive for shorter implementations and
faster go-lives. When it comes to vacations, service providers are
driving the car, and cannot wait to get there!
2 Responses to “Advantage SaaS: Faster Go-live!”
thanks a lot
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