SaaS: Software or Service?

No, it is not about definitions. I know it might sound like a dull question to ask especially when everyone knows that SaaS is a healthy combination of both software and service. But my question is given the current conditions, where should the business focus more on – the software aspect or the service aspect?

Paraphrasing – again, the question is would you seek the most powerful, feature-rich software or a reliable, available, fast, economic service? What a question! Answer is obvious. You want both. Aha! That’s where the problem is.

Whenever you fuse two things/concepts/ideas, you will find cases where one of the components dominating over the other. The case having a fine balance of all fused components takes time to evolve or might even be a compromise of all components.

Let’s look at Software part of SaaS: Potential problems include:

• There are hundreds of SaaS applications. But many offer basic, common features which are likely to meet the needs of large subscriber base. Some ecosystems such as SalesForce allow customisation. But not all do so.
• Many SaaS applications are available in two modes – as onsite licensed software and as a SaaS version. In many cases latter is not as effective/powerful as the former. For example: Google Apps.
• This leads to a further problem: the SaaS provider continuously enhances his product leading to change management/end user experience concerns.
• Not all types of software are suitable for SaaS. For example: graphic intensive applications, business intelligence software etc. are not ideal candidates for SaaS as they demand resources.
• Not all SaaS applications are well designed for scalability. This leads to service issues such as latency, availability, performance etc.
• Not all SaaS applications are built for inter-operability. As a result, you could be facing data portability issues, duplicating effort, subscribing to multiple applications etc.

Now let’s look at Service part of SaaS: Potential problems include:

• The term “service” is subject to interpretation. Many SaaS vendors meet the minimum expected services including: availability (or uptime), metering, billing, basic security (again in a variety of ways) and scalability in some form for example: number of users.
• This means, you will be depending on other service providers to get other parts of the service such as storage, archiving, customised security and so on. As the number of parties involved increases, responsibilities need to be clarified, support could be limited and normally issues surface at the border where two service providers meet.
• A good “Software” provider is not necessarily a good “Service” provider. This is because of focus on core competencies. Software houses focus on, well, software engineering and development activities. Over the years, it is likely that their corporate culture including sales, marketing and customer service is tuned towards “license buying customers” – who are likely to be few in number – compared to “rent paying subscribers” – who are likely to be large in number.
• Not all software providers will be willing to take on the service provisioning role as it might blur their business focus. They are likely to outsource it to third parties leading to service complexities.

So what should you do? Be aware of issues at both ends of SaaS, get into details, set expectations and negotiate maximising your advantage.

That’s common business sense, isn’t it?