SaaS - Only for small business?

My earlier post ” SaaS, the Holy Grail?” had some interesting responses and made me think about the future of SaaS and the futureof my company as well.

David Terrar, talks about better value solutions for the customers. This I think is an important point, but then David works in the SaaS field himself, with his Twinfield offering. Which by the way I think is most certainly a borderline mid-size company application.

Niel Robertson is very specific about the problems with “Guy’s Stack” and I agree with what he says, up to a point. His whole argument, in my opinion, collapses if you move all these “problem points” into a SaaS model. You will end up with

• companies outsourcing their IT departments,
• nobody cares about, if you use MS-SQL Server or MySQL server,
• Hardware will be shared by application or users,
• applications can easily be customised or tailored by plugins,
• with open APIs even clients could produce tailored code, etc.

At this point Guy is right, deliver the software in a different way and the boxed software value model falls apart. I believe what I sell is certainly a commodity. Open Source software in a SaaS setting must be the ultimate nightmare for proprietary software vendors.

Jeff Nolan, says I am quoting his Bill Gates remark out of context, and then says

… The point was clearly stated in the paragraph that you refer to that if the price of the software is what OSS is competing on then forget it because proprietary vendors have the ability to price their licenses to zero if need be. …

The point is, in my opinion, this remark is completely wrong. OSS is here and has been around for many years, that is proof it works. Linux has been taking business away from Microsoft for a long time, and even Microsoft admits this is a problem. If you tried to out-market Microsoft, that would be a mistake.

We offer our AccountsOffice product for free, why because we could not compete with our competitors and there marketing budged. So I offer one product for free and add unique services and get paid for that.

I would like to see Microsoft charge nothing for their OS, to compete with Linux. The same for the accounting software vendors, with an overhead infrastructure and shareholders, to compete with my FREE product. Their balance sheets would implode!

While I can only talk about SOHO business, I believe others will do the same in the mid-market and large market sector. Twinfield and others do already, but if nobody else will, then give me time, and I will.

Delivery models are important, but I believe the time for artificially accelerated product cycles are over. Big or small vendor, listen to your clients or you will die. Any blogger should know a big marketing budged is not the end to all means.

If I had to take the same decision again about the SAP installation, it would have been different, with half the money and the same amount of work I would have had the same system, 20 % proprietary software, 50 % OSS and the rest PHP scripting and Java. So if I was running SAP/Microsoft/Oracle I would be worried, very worried.

Do I predict the demise of the big boys, no I do not, but they will have to change and it is going to be painful. This is not the first time this is happening either, the telcos had and still have a similar problem with VoIP.

BTW, it was not my intention to upset or even insult anybody, but I think Guy is not “Chicken Little”, for what I believe to be a valid argument. I respect your opinions and share many of them, this is just one we have to disagree about.

Tags: AccMan Pro, AccountsOffice, bad business, Business Development, Business Infrastructure, Business Tool, Client Relations, CPA, Enterprise Irregulars, Entrepreneur, FREE Business Tool, Great Business Idea, Home Business, Homesourcing, IT, Mac OS X, Micro Business, Microsoft, MS Windows, On-demand, OnlineOffice, Open Source Software, Outsourcing, SaaS, Sage Accounting, SAP, SBI, Selfemployed, Small Business, smb, sme, Software as a Service, SOHO, Teleworking, Twinfield, Unix, VAs, Very Small Business, Virtual Assitants, VirtualOffice, VSB, Web Technology, WebOffice, WinWeb

3 Responses to “SaaS - Only for small business?”

1. David Terrar
   http://biztwozero.com
   
   Said on August 8th, 2006 at 7:44 pm

   Hi Stefan,
   I think one of the common themes to the Enterprise Irregulars rebuttal was encapsulated by Guy’s equivalent of your “deliver the software in a different way and the boxed software value model falls apart”. I don’t think it falls apart, but it does have to change significantly. On the rest, just as with Guy, who I have been in dialogue with since our piece was published, we probably have more common ground than your comments suggest. I think you’ve missed Jeff’s point on pricing though, but I’ll leave him to argue that.

   On your examples where industries have had to change, you could have added major airlines attacked by the likes of easyJet or South West Airlines. This kind of competition and innovation are both good for business and good for customers.

2. Dennis Howlett
   http://www.accmanpro.com
   
   Said on August 9th, 2006 at 3:12 am

   One area I find Stefan’s argument weak is as it applies to large enterprise customisations for SaaS. By definition, SaaS is a single common codebase delivered to many 000’s of users. That’s fine in commodity situations but not for apps where there are many points where a process just has to be modified to fit into the IT landscape. That’s why software costs are a relatively low part of the total deal. Typically 10-20%. But you know this anyway.

   As app suites grow or are acquired, the levels of integration expand exponentially in a ratio that conforms to: n(n-1). To date, SaaS vendors have not really had to confront this because the needs of the SMB market are very different to enterprise. As they grow, they’ll find, as Salesfirce.com is already seeing, this is a lot tougher than they thought. Hence the platform, plug-in idea. But it isn’t proven for enterprise - yet.

   There is no doubt that OSS/SaaS is on enterprise vendors’ radar but they believe, and quite rightly, that no customer is simply going to ditch existing investments or take the risks associated with OSS/SaaS when it comes to the commercial stack.

   That’s not to say they can sit tight. As I said in my contribution to the debate, they could do a lot by learning from hwat the SMB SaaS vendors are offering. Whether they choose to do so is another matter.

3. Stefan Töpfer
   http://www.winweb.com
   
   Said on August 9th, 2006 at 8:16 am

   David,

   It is quite possible I missed Jeff’s point, because I can not see it. So if someone can explain it to me, then I’ll be happy to admit I was wrong. Which would not be the first time.

   Dennis, for the same money or less you have to spend on consultants to install and plan your SAP installation, you can get programmers to use XML, PHP, etc to bold tailored code onto OSS or other applications. Plugins are the easy way, APIs are the more demanding way. Once you are looking GBP .5 to 1Mio., which is what my SAP installation was, then you have possibilities.

   At the moment your argument stands, for how long (?) I’m not sure.

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