Blogger: Guy Creese
Part of the sales pitch of a Software as a Service (SaaS) solution is that updates and upgrades are included in the pay-as-you-go price. There's no separate support fee to pay (for software, the annual support fee is typically around 20% of the license fee) and you don't need to pay for major upgrades (e.g., from version 3 to version 4). You pay your monthly or annual fee and the solution just runs. This is in contrast to software, where every couple of years there's often a forklift upgrade--there's a new major release, it's usually expensive, and you need to buy new hardware or go through a painful migration process to get on the "new and improved" version. Compared to software, what's not to like?
Actually, the fact that there isn't a forklift upgrade. Think about it. The pain and cost affiliated with a forklift upgrade is usually what causes an enterprise to reevaluate the value of the solution. "They want $2 million to upgrade, and it's going to take us a year to do it? Geez, that's a lot of money. Is it worth it? I mean, are we really going to get our money's worth? Maybe we should look at competing solutions."
To take a real world example, some enterprises move from Lotus Notes to Microsoft SharePoint when confronted
with the cost and complexity of moving from Lotus Notes 6 to Lotus
Notes 8. The upgrade was going to be painful anyway; those companies
seized the opportunity to move to a competing solution.
In other words, the forklift upgrade is what causes an enterprise to step back from the daily grind and decide whether to continue with a solution. It's a discontinuous function that grabs the business's attention. There's no corresponding attention-grabbing blip on the SaaS side--and that's a problem. Many businesses will continue with a suboptimal SaaS solution because they pay a relatively small fee every month and will never ask themselves several years down the line, "Is it still worth it?"
So here's the lesson. Enterprises that are using SaaS need to create their own artificial forklift upgrade moments. Every once and awhile, they need to ask, "Over the next three years, we will spend n millions on this SaaS solution. Is it still worth it?" Otherwise, they may end up going with the flow when they shouldn't.