SaaS - One Size Does Not Fit All

While getting my MBA from Kellogg, I co-founded a supply-chain and logistics software company (Celarix) that delivered the "software" as a web-based service. We launch the company in 1998, and we were one of the first in our space to offer a solution as a hosted application. When setting the strategy and defining the delivery model, I didn't realize the buzz around SaaS that would come a decade later. At the time, the unique approach made strategic sense, provided a compelling model to customers and resulted in the company being acquired around four years later.
For Celarix, SaaS was the best and only viable delivery model. In a nutshell, the service provided visibility to global supply-chain activities by integrating with hundreds of the world's leading logistics providers. Given the effort required for each integration, it would have been very difficult for any customer to replicate the network that we could develop. By offering the solution via SaaS, we were able to provide software + valuable logistics data.

Today, I see a lot of hype around SaaS but not a lot of business models that provide value beyond just the backend IT blocking and tackling. While there are benefits to SaaS, there are also issues and it is not as a one-size-fits-all option however.
SaaS Benefits
1. Somebody else takes care of the technical "plumbing"
2. Barriers to switching are low
3. Costs can be spread over a longer period of time
4. Time to value can be accelerated



Saas Issues

1. Everybody is up or everybody is down
2. Everybody must run the same software version
3. All change management is on the vendor's schedule
4. SLA's are still scarce - (even Salesforce.com, the poster child for SaaS doesn't offer them)
5. More expensive over the long-term
6. Corporate governance takes a back-seat [i.e. backup, disaster recovery, archiving, SOX compliance, etc.] are mostly outside your control
7. Capabilities for integration into legacy systems is still not widespread
8. Vendor "sustainability" and access to the application is not guaranteed (i.e. with installed SW, if the vendor goes out of business, you still have the SW to run. With SaaS, you have limited recourse)

For some, SaaS is a great options, while for others, on-site deployment is a better alternative. The dogmatic industry drum-beat that SaaS is the best solution for everybody is downright wrong.