The real differences between SaaS and on-premise

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I often get asked the question by clients “why should SaaS be any different to on-premise applications”?

They ask it in relation to a variety of topics - ease of configuration, usability, customer feedback, business/IT collaboration. It sounds like a basic question but there are actually several answers.

One example is for ‘ease of configuration’; in a direct comparison that we did between a SaaS solution and an equivalent on-premise application for the same business requirements, the SaaS solution was hands down less effort to implement for build and test (the design effort was comparable).

The functionality provided was broadly the same and in this case, we concluded that there was actually nothing special about SaaS in itself that meant that it was easier to configure – the SaaS solution was simply just newer, better architected software.

In another example for ‘usability’, the implications are actually quite profound. For on-premise applications, usability feedback to the application vendor is typically subjective – through user forums, sample usability tests, etc.

However, for SaaS applications (e.g. Salesforce.com, Workday, etc.), usability feedback is real-time and based on actual key-strokes – these vendors know exactly which functions are intuitive and which ones users are struggling with. This unique ability with SaaS becomes relevant and important with a critical mass of users.

Phil Wainewright included similar examples with Google Maps and Ariba’s recent conversion to SaaS in his blog “Network Effects and the Cloud Business Model”. It struck a chord with me because it highlighted the entirely new possibilities across a network of users across organisations utilising the same SaaS application. I’m seeing the same shift in thinking across some of my clients seeking to exploit SaaS models across their indirect channels to create what Wainewright called new SaaS ecosystems.

In my discussions with clients, Partner Relationship Management (PRM) within a SaaS model takes on new meaning. It goes beyond basic collaboration with channel partners for key contacts, opportunities, service requests, etc. Now vendors sharing channel partners can share enablement capabilities and the associated costs. Multiple partners working on the same opportunity can conceivably collaborate in ways that just weren’t possible before.

Within an organisation, the possibilities are no less profound. The best examples here are the new operating models that clients are adopting as they include SaaS as part of their overall architecture – it covers fundamental questions on how Business and IT groups work differently with each other, new and obsolete roles and responsibilities, updated release management processes incorporating SaaS roadmaps and revised governance approaches.

In each of these cases, the ‘network effects’ of SaaS need to be considered. As we work with clients in this area, they are realising that the results can be transformational.

Where is this all going? In the not too distant future, I expect that these SaaS ecosystems can overcome some non-trivial issues around data privacy and standardisation across key meta-data. Once that happens, the speculation around new analytic services offered by SaaS vendors and partners will become a reality.

Imagine a scenario where you sign up a SaaS subscription for Sales Force Automation. The data that your sales force is entering is compared to the wider aggregate network of similar organisations like yours and correlated to what drives higher sales performance.

You then get an additional service that presents you with insight-driven recommendations on how to create incremental sales. As the correlation accuracy improves, more options will open up for subscription models e.g. additional premiums or value-based/gain-sharing deals.

In summary, there are real and significant differences between SaaS and on-premises—and I think these differences will only become more prominent as SaaS technology advances.

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