CIOIN

New research from Gartner attempts to throw some cold water on the hot software-as-a-service (SaaS) market.In Gartner Fact Checks the Five Most-Common SaaS Assumptions, VP and distinguished analyst Robert DeSisto writes about the assumptions the IT industry has made about SaaS apps. He is concerned that if companies are deploying SaaS based on false assumptions, and they'll be seriously disappointed.

I've been bullish on SaaS apps. I'm excited because it SaaS offers companies more choice and greater flexibility in satisfying business users' needs. I'm well aware that SaaS isn't perfect. But it's improving.

Perhaps I've made some assumptions about the SaaS market. And as my father always says: never assume anything, because you can make an "ass" out of "u" and "me."

Assumption 1: SaaS is less expensive than on-premise software.

DeSisto says that SaaS is only less expensive than on-premise software during its first two years in operation. "SaaS apps will have lower TCO for the first two years because SaaS apps do not require large capital investment for licenses or support infrastructure," he says.

But after three years, he continues, an on-premise deployment can actually be less expensive from an accounting perspective, because companies can write down hardware depreciation costs associated with the deployment on their balance sheets.

My take: I wonder how much companies care about five-year TCO right now. Companies may be willing to take the two-year TCO savings and worry about the five-year TCO later.

Assumption 2: SaaS is faster to implement than on-premise software.

Simple SaaS implementations will be faster, says DeSisto, but SaaS deployments are becoming increasingly complex as companies require greater customization and greater integration with existing systems. That complexity slows down deployment. "Vendors neglect to say that SaaS deployments can take seven months or longer," says DeSisto.

My take: With ERP and CRM on-premise installs still being measured in 12- to 18-month standards, I don't see a seven-month long SaaS deployment being too problematic.

Assumption 3: It is priced like a utility.

Many SaaS providers say customers are only charged on a pay-per-use basis - similar to electric companies - but for most SaaS deployments, the pay-as-you-go model isn't the case, says DeSisto. "In the vast majority of cases, a company must commit to a pre-determined contract independent of actual use," says DeSisto. "In some cases, the app lends itself to metered use but for the most part, utility examples are in the minority."

My take: DeSisto makes a great point here, and it is one that companies need to check out before signing any SaaS contract.

Assumption 4: SaaS does not integrate with on-premise app and/or data sources.

This is false. DeSisto says there are two primary ways to integrate SaaS offerings with on-premise applications and/or data sources. "The first method is batch synchronization, which initially involves loading the SaaS app with data. Once this initial data load has been made, data can be incrementally synchronized on a scheduled basis," he says.

"The second method is real-time integration using Web services. Another way to combine the two methods is by having a Web service trigger based on an event occurring in the SaaS service," DeSisto adds. "Yet another method is emerging that involves integrating SaaS apps at the user-interface level through mashups."

My take: If business users and CIOs are assuming that this is the case, then they need to talk to a SaaS vendor ASAP. Integration technologies have a come a long way.

Assumption 5: SaaS is only for simple, basic needs.

In general this assumption is false, but there are still limits to what companies can do with SaaS, says DeSisto. "There are industry examples in which complete custom apps have been built using SaaS APaas (application platform as a service)," he notes. "However, some gaps remain for complex, end-to-end processes that require complex workflow or business process management capabilities."

My take: As DeSisto correctly notes, SaaS vendors have been dogged by a reputation that their products were simply for limited CRM applications. And that has definitely changed.