OnStartups

BusinessWeek On SaaS: Article Smells Like That Thing In My Refrigerator

Posted by Dharmesh Shah on July 29, 2008 in saas 11 Comments

Warning:  I'm about to go on a bit of a rant.  I usually only reserve these kinds of articles for when things really irritate me, and this is one of those times.  I'm generally a patient, considerate person, really I am.

Here's the source of the most irritation I've felt from a technology article in a long time (and this from BusinessWeek, a major brand that I respect): 

Beware The Hype For Software As A Service

I actually hesitated to even include a link to the article, because you might be tempted to go read it.  But it has to be done.  It's kind of like when you smell something really awful that's been growing in your refrigerator.  Then, you give it to your spouse and say:  "Hey, check this out -- can you believe how bad it smells?" 

Disclaimer:  I work for a tiny little startup that provides marketing software as a service.  So, I guess I could be biased.  I'm not wrong on this one, but I could be biased.

Back to the article.  Here are some of the issues I had:

1.  SUVs Suck, So SaaS Must Too:  The author does some strange build-up in the opening paragraphs using "SUVs are cool" and "cell phone causes cancer" as examples.  The point?  That both of these are/were surrounded by "hype".  And, we should always beware of hype.  Think of the children!  I'm already irritated.  For the record:  I don't think SUVs are cool.  Oh, and these inane examples are what drove me to the title of this article.  Fight fire with fire and all that.

2.  SaaS Is Cheaper:  The article tries to refute the "myth" that SaaS is cheaper by providing this cogent argument:  "Most service providers charge each user by the month."  There's no discussion of the economics of installed software, drive-by sales in enterprise software, or the cost of capital for small businesses.  Hey, those SaaS vendors charge monthly, so it must be more expensive.  Right?  That must be why Salesforce.com has been so successful -- they just charge more than Siebel.

2.  SaaS Reduces Hardware Investment :  It refutes the "myth" that SaaS requires less hardware investment by arguing that although you don't have to pay for all the servers and stuff, you still have to pay for fast access to the Internet.  Here's the quote:  "Sure, the SaaS providers deal with the servers, and all the Windows headaches and patches and builds and versions and whatever. That's their problem. But you still need fast access to the Internet."  The rest of this particular argument just gets worse from there.  Now, I'm really irritated. 

3.  SaaS Is Quicker To Setup:  Yep, this is a myth that is "busted" too.  The example provided:  "It's kind of like assembling furniture."  The author provides as evidence that SaaS is not easier to setup, the fact that he's got a lopsided bookcase in his den.  This "proves" that little theory about SaaS being quicker to setup, wrong.  Sure, setup costs for SaaS can be high (based on level of customization), but on average, SaaS offerings are simpler and quicker to get going on.

4.  Data Can Be Secure In SaaS:  The article argues that data backup and reliability in SaaS is a myth.  Once again, we have extreme (and in one case totally unrelated) examples offered as proof.  Yes, data security is always a risk, but I'm not convinced that the risk is any higher for SaaS than businesses (especially small businesses) than running the software on your own servers, sitting in your closet somewhere.

If you think I'm being overly harsh, please read the article.  I dare you.  And, if you do go read it, please don't forward it around to your colleagues.  Sometimes, you don't need validation that the thing in your refrigerator really does smell that bad.

End of rant.  Back to our regularly scheduled program next time.