Blog Entry

Jul 19
2010 

Role Reversal in the Software Industry

For many years I sold a Software as a Service (SaaS) only application. When selling to organizations there was kind of an unwritten rule. Small to medium size businesses would be resourced strapped and culturally more open to the idea of a SaaS application. Larger organizations would have dedicated IT resources and potentially feel threatened by outsourced applications. The conclusion was simple – the SMB market was much more fertile while when selling to larger organizations never forecast above 50% no matter what unless you heard from the CIO him/herself that they would be ok with a SaaS application.

Suddenly though it seems the roles are reversed – at least for the larger organizations. Applications like SF.com, RightNow Technologies and NetSuite have broken down some of the cultural barriers. However, more importantly it seems, larger organizations have really begun to articulate the true cost of internal IT resources.  They’re high cost numbers too. If your organization has effectively nailed the economics of scaling a SaaS based application it will now likely be the preferred option for larger enterprises. Add in time to market and any doubt will be resolved.

It’s a pretty straight forward formula:

Your license fee + their internal cost to manage > Your license fee + your incremental cost to manage.
Once large organizations put accurate IT costs into projects – along with the lengthy approval and scheduling process ;-) – suddenly SaaS options became attractive.

I’m glad to have both in our bag of tricks and understand what it means perhaps to be a switch hitter.