Software-as-a-Service (SaaS) is a revolution that’s coming your way, so how are you as a CIO planning to meet its challenges – and its opportunities? That was the underlying question behind the latest CIO Executive Forum event which looked at whether SaaS is an opportunity or a threat to CIOs, based on the expert views of users and vendors.

“It depends on what sort of an organisation you are the CIO of,” reckoned Steve Willock, managing director of Info Technology International Limited. “We definitely saw it as an opportunity. We are a relatively small firm and we wanted to get competitive advantage. SaaS got us into the game much quicker than using traditional on-premises applications would have done.

“I had a clean sheet of paper. Nor did I have a legacy of IT staff to take care of. We had our own piece of retail technology that we had built and we wanted that to work within a single environment. I didn’t want to have to make it work with a CRM system and an ERP system and so on. The SaaS model was deemed to be relatively new at the time, but it ticked a lot of boxes for us and so far, two years on, it’s been a good decision.”

At Celerant Consulting, SaaS entered the firm via the IT department. “We had been acquired a couple of times by other firms,” said CIO Howard Lamb. “We had picked up software solutions as we’d been acquired and they’d been imposed on us. We had also been outsourcing our datacentres for a good few years and we were about to outsource our PC support services so SaaS seemed to be a natural evolution. The benefits are that you can configure and get up and running so quickly. I think for the first time IT is moving faster than the business. And this was an ITdriven decision.”

Unorthodox access

At Experian, SaaS entered the company in a less-controlled manner. “We have doubled in size over the past four years,” said Nigel Hodges, manager of global CRM strategy and programmes. “Every firm that we acquired had some form of solution already Users and vendors on specialist panels give a resounding thumbs-up to Software-as-a-Service at the latest CIO magazine hosted Executive Forum in place. One of our key imperatives is to get value out of our key acquisitions. We needed to get a solution off the ground quickly that would put everyone on the same page.

“We had a number of locally sourced SaaS solutions where the businesses had bought a number of trial licences and maybe got up to 10 or 20 seats. We needed to pull together disparate sales groups to add significant value,” he said, adding that people became attached to their own SaaS solutions very quickly.

“When we suggested to one of our operating businesses that they might want to migrate away from a SaaS solution, they told us that the salesforce would leave if we did!”

Advantages of rebellion

Being a rebel was also the case at Gloucestershire County Council, admitted contact centre manager Glynis Morris. But the rebels have rapidly become examples of good practice within the local authority. “We were the rebel department, but now we have lots of other departments coming to us and asking what we are using,” she said.

“People wanted to know what it was that we were doing that enabled us to keep operating during the flooding that hit Gloucester earlier this year. Our IT department had nothing to do with the introduction of SaaS in the beginning, but they are coming to us and asking if they can use it in other projects that are coming up. It’s great when the IT department is coming to us and asking those questions.”

The council now plans to roll out SaaS as a delivery mechanism in other areas.

“Scalability and flexibilty are important to us,” said Morris. “We want to roll SaaS out to other areas like social services because people saw how well it worked during the floods. Scalabilty is vital. We have 17,000 staff and we want to roll SaaS out to at least 6,500 of them. I would always go with SaaS now. I have control over the systems within my department. Everything else goes through the IT department and then it takes ages. This way, I’m in control.”

All the panelists concurred that cost is a factor in the decision, but not the only one. And the claims made by the SaaS vendor community don’t always stack up. “The alternative we had was to buy two or three separate applications,” said Willock.

“The collective cost of that would run into many, many thousands of pounds and then you’d have integration costs on top of that. “We looked at what SaaS would cost us based on the number of seats that we expected we’d need at the time and it was an attractive option.

“Two years on, the cost is still better than it would have been if we had gone the on-premises route, but it is more expensive than we expected it to be. There are hidden costs and these are often in traditional areas. Your own IT people are going to end up configuring other people’s systems rather than your own system. You are configuring a unique instance of someone else’s systems so you can end up being more of an expert on other people’s products than they are! But overall, it’s still better value.”

Financial savings

Celerant’s Lamb also sees cost benefits. “The thing that surprised us was that we could save money in two or three areas. We were able to get things up and running faster than in a conventional on premises deployment.

“We had already outsourced our footprint to an outsourcing firm so we were able to go back to them and say that because we were doing SaaS, it would have implications for them. They were flexible about trading off applications and PC support and bundling with our other services which gave us an advantage.

“The licensing model does make it easier to budget. We have a three-tier licensing arrangement with Salesforce.com. You have to be clear on what level of licensing you want people to have. We’ve found that you can be flexible about the level of the licensing. If we don’t get the tiers right, then we can go back and get more or some and less of others.”

Experian’s Hodge argued the cost value of SaaS is useful in overcoming executive resistance and scepticism. “We had a number of CRM on premises systems that are only now coming off depreciation,” he said. “Our executive team saw the amount of money that they had spent on on premises CRM in its heyday and they were not willing to do the same again. SaaS was an acceptable way of moving forward.”

All the panelists agreed that SaaS should be seen by the CIO as an opportunity, not a threat and should be on the agenda of most organisations. “SaaS has changed the shape of our IT organisation,” concluded Lamb. “It’s made us less concerned with keeping the lights on and more interested in being able to partner with the business people. It is absolutely an opportunity to raise the value of IT investments. Never say never, but we would primarily look at SaaS in future deployments. Only if we couldn’t find a suitable offering would we consider going on premises.”

Vendor view: Security a major issue

As the CIOs sat down to discuss SaaS, news was breaking of a phishing scam in the US, allegedly centring on a breach of a Salesforce.com deployment at payroll firm ADP.

But, as our vendor panel noted, security is an ever present topic anyway. “Security is always raised, it’s always discussed,” noted Craig Sullivan, international vice president of product management at NetSuite. “But SaaS vendors have been at this for the best part of a decade and we have all learned a lot. We have a strong track record of delivering services well above the levels of availabilty that most companies can do for themselves, especially among the small and medium enterprises.”

“Security is very, very important,” added Steve Garnet, EMEA president at Salesforce. com. “We are holding the most sensitive data of around 35,000 companies. It’s highly volatile and sensitive information. We do that for the likes of Barclays Bank and ABN Amro. As you can imagine they have armies of security experts who come out to visit and inspect us. They go back to their companies and say that our levels of security are higher than their own. The great thing is that every customer gets the same level of security. If you’re a five user company, you get the same level of security as Barclays and ABN Ambro.”

But is SaaS really ready for the enterprise mainstream?

“If you go back 10 years, CIOs were not used to SaaS and so they went on premises,” noted Joe Brown, EMEA president at RightNow Technologies. “Ten years ago, 20 per cent of our business was on demand, and 80 per cent was on premises. This year we’ve had one inquiry about on premises. The world is changing quickly. The key value for companies now is speed and time to market. SaaS helps take advantage of that.”

“It is all about flexibility and customer choice,” added Jason Nash, CRM product manager at Microsoft Dynamics. “SaaS is already here. Many people have Hotmail accounts. That’s a SaaS implementation. If we take our CRM products, customers can deploy them in-house or they can have them delivered as a service through our partners. It’s about what the best and most appropriate model is.”

It will also be the customers who eventually determine which of the multiple defintions of SaaS and on demand comes to be accepted. “They will decide,” said Anthony Learer, technology director for Oracle (Siebel CRM On Demand).

“Customers are looking for improvements in usabilty. The challenge for salespeople is to find a product that they can pick up and use. It’s less about whether it is delivered as on demand. But for CIOs, SaaS is an opportunity, not a threat. It enables them to deliver a new level of value to their organisations and reduce the time to market opportunities for the business."