On-Premises vs. SaaS; Manual vs. Automatic

Recently, a local software company in a non-competitive industry approached me to get my opinion about SaaS, and the strategic importance of developing a SaaS product plan.

It was the first time in a long time that I even thought about that question. In fact, last week, I celebrated six years of running the SaaS offering for Hyland Software. Since then, while I have defended and evangelized the SaaS approach, I had not really thought about the go/no-go decision.

If you read the analysts and journalists, more and more, SaaS is growing. There are lots of technical reasons for that, and a number of business reasons, too. But most of all, I think it comes down to meeting the needs of the prospective customer.

Customers want choice; the debate as to which is best is based on each customer’s specific and very unique need(s). With hosting/SaaS/The Cloud, technology is allowing software vendors to meet the needs of more prospective customers. In the coming years, I sincerely believe that those that do not offer a SaaS/Hosted solution will not survive.

An interesting parallel could be made between auto manufacturers offering standard and automatic transmission. No matter which you personally feel is better, each customer will make the decision based on their own needs and desires (and some are passionate about their preference). For an auto manufacturer to not offer a choice limits their ability to serve prospective customers.

Interestingly, automatic transmission was NOT the popular option when it first came out.  There was limited manufacturing in 1904, but it was not readily adopted by consumers (similar to the failed Applicatio Service Providers (ASP) from the last millennium). Drivers liked their manual transmission because that is what they were used to.  Even after technology advances and the cost efficiencies of mass-production in the 1940s and 1950s, automatic transmission was included in a minority of cars sold to the public.   It was not until a new generation of drivers hit the road from the 1960s to the 1980s that automatic transmissions really took off.  Fast forward to today, and 80%+ of all cars are automatic transmission.

As is often the case with something that is “new” or “different” (like automatic transmissions), SaaS adoption has not exploded overnight…though we have seen solid, steady growth over the past six years.  However, I expect SaaS will become eventually the IT equivalent of automatic transmissions. As the technology evolves, as  more people see the advantages and as a new generation of IT leadership hits the workforce, more customers will want to utilize SaaS/Hosting/The Cloud.  The once new, unfamiliar territory of SaaS, in my mind, will eventually be the choice of the majority.

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