E-Sourcing Forum » SaaS Rules in the Middle Market – Turn That AS/400 Box into an Ashtray

SaaS Rules in the Middle Market – Turn That AS/400 Box into an Ashtray

May 18th, 2006 at 07:45am Jason Busch

Recently, I’ve been thinking quite a bit about the whole SaaS/On-Demand vs. installed argument in the middle market. And with Oracle / JD Edwards coming out with an e-sourcing offering, the question is now one that middle market procurement organizations should really think hard about as well.

Personally, I’m becoming more and more sold on SaaS as the optimal delivery model for e-sourcing when it comes to the middle market. Here’s three reasons why:

1) E-Sourcing is not just about software. The support (e.g., supplier training, event monitoring, bid strategy, etc.) is often just as valuable as the software itself, especially for organizations which are just getting started. By working with a single provider who hosts the software and provides these services on top, it simplifies the work required on the customer side, and should, in theory, accelerate and maximize savings. This is critical in the middle market where resources, staff and budgets are in short supply and organizations need to generate initial results rapidly to prove the value of their investment.

2) E-Sourcing software improves everyday. Well, not quite everyday, but with vendors offering new SaaS releases coming at least a few times per year (often more than that), customers often gain new functionality at a small or no incremental cost (such as bid optimization). If you license a product, you’re stuck with the current capabilities unless you upgrade. The fact that middle market companies now have the same — or similar — advanced e-sourcing optimization capability on their desktop that Fortune 500 companies have paid millions for is due entirely to the SaaS free-upgrade approach.

3) Avoiding the IT hassle and heartache. In middle market companies, IT organizations (if you can call them that) are stretched incredibly thin. The last thing they want or need is to support another business application. And what matters more to them when the sh*t really hits the fan? Getting the accounting system back up and running so the CFO / controller can close the books, or helping out the procurement organizations. Go figure. Purchasing is not the one who signs the paychecks.

I’m willing to be convinced that SaaS is not the answer in the middle market, but the more I think about it, the more I feel that with very few exceptions, hosted e-sourcing is the way to go. Still, the recent Oracle / JD Edwards announcement has at least raised the question – and option – of a non-SaaS approach. And options are good things. At the least, they provide fodder to negotiate better deals with SaaS providers!

Jason Busch

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Entry Filed under: General, Technology / SaaS, e-Sourcing Marketplace

2 Comments Add your own

1. Eric Strovink | May 18th, 2006 at 2:25 pm

There hasn’t been as much benefit from SaaS as there should have been. The pain associated with creating solid web-based distributed applications has delayed progress on software functionality and reliability. From the trenches, I have seen progress grinding to a halt, even reversing for a while, as we grappled with new technologies and rapidly-evolving standards. I do agree that potential benefit is there, though.

Also, I think it’s important to define what we mean by “Software as a Service.” Is SaaS an installation/update methodology, or has the term become a generalized mandate for running every client application inside the browser? This is an important question, because browsers simply aren’t up to running complex apps. Even Ajax technology is raw and bad — just try to do something GUI-ish, and see how ugly it gets. Building a large app with Ajax is not feasible at all.

So, for fill-in-the-form RFx and simple database apps like contract management, browser-based thin clients work OK, and I’m fine with slapping the sloppy “they ought to be SaaS” label on them.

But for heavy-duty analysis, or heavily interactive applications, browser-based clients don’t work well at all (when’s the last time you built a spreadsheet model over the Web?). One solution to this is the so-called “stateless thick client.” For an interesting discussion, see Tolia, Andersen and Satyanarayanan, “Quantifying Interactive User Experience on Thin Clients”, IEEE Computer March 2006.

The good news is that thick clients can be SaaS, too; in the precise meaning of SaaS, that is — i.e. automatic update and invisible temporary installation. But there’s absolutely no reason to mandate that everything run in the browser. That would be a terribly limiting outcome, given the poor state of current browser technology.
2. David Bush - Iasta | May 20th, 2006 at 9:03 pm

Wow, Eric. I could not have said it better myself and could not agree more. Thank you for taking the time to write a well crafted explanation, as I also believe it is a topic overrun with marketing and “thin” on understanding. SaaS can be very limited by browser technology in terms of functionality, speed and security. It is amazing that IT departments occassionally cannot grasp this concept.

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