The joy of SaaS and the pain of the traditional software model

The joy of SaaS and the pain of the traditional software model

Posted by Pete Loughlin in SaaS 18 Jul 2013

Earlier in the week we wrote about the brave transition that Basware made from old school to new school thinking on software sales. To many if not most who take an interest in enterprise software, whether that’s from an end user or buyer point of view or from a software supplier point of view, the case for SaaS ranges from attractive to compelling. But there seems to be a significant community that remains wedded to the old school way of thinking.

I sit on the end user/buyer side of the fence and, for the benefit of those old schoolers on the other side of the fence, I’d like to describe from personal experience, the contrast between the two models, not from a functional perspective but from from a commercial relationship perspective.

Purchasing Insight logoSaaS model

The first and most obvious feature of the SaaS model is the pricing structure. While over time, the costs may well be comparable to the traditional model, it’s a much easier internal sale. Getting agreement to small or no upfront costs followed by regular costs proportional to the benefit delivered is much easier than a big license fee with no guarantee of an ROI.

Support is free and on tap. As users, we enjoy seemingly limitless face time with the SaaS provider during implementation because it as much in their interests to see an successful deployment as it is in ours. Their implementation team is proactive and their methodology is professional and polished. It’s a pleasure to deal with them

Traditional model

The initial license cost and support costs may be justified by an assumed ROI but factor in the cost of unpredicted customizations and upgrades when your current version goes out of support and the business case can look dubious.

Third line support is there – albeit slow at times and there can be a debate about whether an issue is due to a fault in the software or in our IT infrastructure and they are quick to point the finger and blame. When we do require a customization, the professional service costs are expensive. They charge a lot because they can.

But the worst part of the traditional model is the behaviour it drives at year-end.

The financial success of any software provider is linked directly to revenue – that’s a fairly obvious point. For the SaaS provider revenue is linked directly to successful deployment. Come year-end, that drives an enthusiasm to see software deployed and used successfully -to see happy customers. For the traditional provider there is no connection between revenue and successful deployment – that’s the users problem – so come year end, it’s all hands to the pump to get contracts signed and invoices paid – and I mean all hands to the pump.

There is nothing more frustrating when you’re deploying, customizing or supporting enterprise software than to see implementation teams change their focus from delighting customers to delighting their CEO and shareholders – at the expense of their customers.

Just as it’s not easy for a software provider to change course from old school thinking to new school thinking, neither it is easy for a business to change it’s enterprise software provider. But the ongoing costs and pain of dealing with some traditional providers is simply not sustainable and many business will take the long term view and exchange the long term pain of the traditional software model for the short term pain of change.

Pete Loughlin can be found on twitter @peteloughlin

  • eSourcing July 22, 2013 at 10:47 am /

    All very true. Another common element with SaaS is that with true SaaS products (single instance, multi-tenanted), there typically isn’t any implementation. For example, I’ve not heard a squeak from anyone ‘real’ (i.e. ignoring the automated marketing emails) from Mailchimp, nor LinkedIn, nor Facebook, nor Google Apps, nor Zoho (apart from the times I contact support), and so on.

    It can be the same with procurement software and I would argue that supposed SaaS software that still requires an army of implementation personnel for 6 weeks is still only a minor step-change improvement from the traditional software model. It’s time now for a major step-change where organisations can do all of this themselves for even greater results, much like some of the excellent apps I mentioned above.

  • Patrick Chabannes September 19, 2014 at 9:18 am /

    Unfortunately, dear Peter, if the real economic SaaS model implies to pay as the effective service level produced, today the SaaS contract of ALL the S2P and P2P software companies including Basware do not allow to increase or decrease the cost drivers.
    So today the risk, as the licence model is and was, on the customers shoulders.

    I hope that tomorrow the real SaaS economic model will rise and, for sure, Software companies will need to develop a better user experience to get more users onboard.

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