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 Channel Futures

MSP 501


Gartner: The Great SaaS Debate

  • Written by Joe Panettieri 1
  • July 9, 2009
Generally speaking, I respect Gartner's research. I've quoted Gartner's analysts since about 1992. But a recent Gartner report suggests businesses are only "somewhat satisfied" with software as a service (SaaS). I know SaaS has its flaws and challenges. But are businesses only "somewhat" satisfied with SaaS? Really?

saas-satisfactionGenerally speaking, I respect Gartner’s research. I’ve quoted Gartner’s analysts since about 1992. But a recent Gartner report suggests businesses are only “somewhat satisfied” with software as a service (SaaS). I know SaaS has its flaws and challenges. But are businesses only “somewhat” satisfied with SaaS? Really?

I understand there’s continued value for many on-premise software options. But every day, I hear from more and more readers and managed service providers who moved to Salesforce.com, NetSuite, Constant Contact, Hosted Exchange, Hosted SharePoint, Hosted Security, and a range of other SaaS services.

If all of those SaaS adopters are “somewhat satisfied,” does that mean they were “very dissatisfied” with their previous on-premise approach?

SaaS Data Points

I believe customers are generally happy with SaaS. But it looks like Gartner’s “somewhat satisfied” SaaS statement is backed by in-depth data. Some highlights, according to ZDnet UK:

  • 333 organizations in the UK and US were surveyed
  • On average, respondents ranked their experience with SaaS at 4.74 on a seven-point scale
  • Respondents who had considered using SaaS, but decided not to, said they made this choice due to high cost of service (42 percent), difficulty with integration (38 percent) and technical shortcomings (33 percent), Gartner said
  • 58% of organizations said they would maintain current levels of SaaS over the next two years, while 32 percent said they would expand, five percent would discontinue and five percent would decrease levels

Anybody hearing customer praise — or push back — on SaaS?

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7 comments

  1. Avatar Aaron Houghton July 9, 2009 @ 12:49 pm
    Reply

    At Preation (http://www.preation.com) we have gone through the transition from selling installed single-tenant software to a multi-tenant SaaS solution over the last 12 months. We rewrote our primary application from the ground up starting in January of 2008 and began the process of selling our existing and new clients on the new model after launch in October of 2008. Existing clients are very attracted by the new offering mostly because SaaS provides them with ongoing bug fixes and new feature upgrades at a lower cost. At this time very few existing clients have actually moved to the SaaS solution because either 1) their existing installed software is still under a 12 month warranty that we provided at the original sale or 2) the upfront cost of the installed software required a 2-3 year period for ROI.

    The existing clients that have moved to our SaaS solution from our installed solution really enjoy the new cost structure and service model. New clients have absolutely no hesitation to begin using the SaaS solution as it has a lower barrier to entry (lower upfront costs) than our previous installed software solution.

    The single largest indicator of the success we’ve had in the transition from installed software to SaaS is shown in the increase in our Net Promoter Score as a company. As an installed software company we consistently had a NPS between 0% and 20% (low) and with all other things held constant (employees, customer service, target market, business problem addressed, etc) our NPS as a SaaS provider was just measured at 80% (industry leading). I’m a firm believer that the SaaS model will continue to bring increased satisfaction and efficiency to people who buy technology and will create new opportunities where barriers used to exist. This is particularly true and powerful within the SMB (small and medium size business) market.

    Preation’s Eden Platform product is a website optimization system for small businesses. More information can be found at http://www.preation.com.

  2. Avatar Joe Panettieri July 9, 2009 @ 1:19 pm
    Reply

    Aaron: Thanks for walking us through your transition and key considerations. I will check out Preation.

  3. Avatar Brendan Cosgrove July 9, 2009 @ 2:34 pm
    Reply

    Doesn’t seem like a 4.74 out of 5 is merely “Somewhat satisfied.” Of course there are times when customers would LIKE to move to SaaS but can’t because of app vendors, legacy premise equipment integration, or just plain availability of their kind of app in a SaaS model. I guess those situations could leave a business “Somewhat satisfied” but that’s not because they’ve moved to SaaS and not had a good experience, it would be because they couldn’t move to SaaS.

  4. Avatar Joe Panettieri July 9, 2009 @ 3:20 pm
    Reply

    Brendan: 4.74 out of 5 would be awesome. But it was actually 4.74 out of 7. I apologize if I didn’t make that clear. I misread the Gartner data the first time as well.

  5. Avatar Brendan Cosgrove July 9, 2009 @ 3:36 pm
    Reply

    ahh…well that does change things. Sorry for the mis-read.

  6. Avatar Scott Bils July 20, 2009 @ 1:17 pm
    Reply

    Some of the decrease in SaaS satisfaction may be reflective of the fact that IT is now playing a much greater role in the selection, deployment and management of SaaS applications than it has in the past. In a recent survey here at Conformity we found that IT is now involved in management and administration of SaaS applications in 72% of multi-SaaS organizations. At the same time, most SaaS applications today don’t easily integrate into the processes and tools that IT uses to manage their environments (directory services for example), which may be part of the ‘technical considerations’ factors that are picked up by the Gartner survey. It’s probably not surprising that IT satisfaction may be lower, but at the end of the day it reflects ‘growing pains’ as SaaS becomes more mature. Much of the IT concern that we’re hearing is driven by integration and manageability issues that should be addressable by the SaaS industry as it becomes more familiar with enterprise IT requirements.

  7. Avatar Joe Panettieri July 20, 2009 @ 2:22 pm
    Reply

    Scott: Your points reveal some deeper considerations. Thanks for offering them up. Even as SaaS experiences growing pains, I think the SaaS trend as a whole will continue to thrive and expand. Though that doesn’t guarantee individual SaaS projects and SaaS providers will succeed.

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