Sold on SaaS

Four companies that swear by software as a service tell why.

Software as a service has so delighted CIO Jonathan Earp at Informa PLC that he's positioning his company, and his IT staff, for the next step. That's a move to the broader concept of cloud computing, which provides other resources in addition to application software as Internet-based services. "Instead of buying another million dollars' worth [of storage], I'm asking my storage engineers to change their strategies to include outsourced storage as a service," says Earp.

He's sold on SaaS and on cloud computing. "I think this is revolutionary," Earp says. "I think the number of servers in our data center will drop significantly over the coming years. If you are a start-up now and you are buying a server, you haven't really done your homework."

Computerworld recently checked in with four companies that have done their homework. We found the typical pros and cons with SaaS, as well as some less obvious issues. But overall, enthusiasm among users was high.

SaaS to the Rescue

  • Company: Nobel Learning Communities Inc.
  • Location: West Chester, Pa.
  • Business: Management of 160 preschools and elementary and middle schools in 13 states

Tom Frank is pretty, well, frank about what he found at Nobel when he got there in 2004. "The company wasn't in very good shape, and one of the things it lacked was any kind of IT infrastructure," says Nobel's chief financial officer.

There were 150 databases, and each school had its own systems and its own financial chart of accounts. "We had a hard time understanding what the heck we were selling," he says.

But there were systems -- if you count the backs of envelopes and DOS-based PCs. "We had to make the information more uniform, and we had to get control of it," Frank says. "We looked at software as a service. It was a way to quickly ramp up without trying to develop our own [software] or pick up a product and modify it."

Developing or buying systems would have required building or leasing a data center, he notes.

Instead, Frank contracted with NetSuite Inc. to provide financial and CRM applications via a Web-based service. He got them running in just 45 days.

Frank says he's thrilled with the results, but he acknowledges that SaaS has drawbacks. "You are pretty much subject to what they determine to be best for a large majority of their customers," he says. For example, NetSuite offered a report comparing actual to budgeted financial data but none that would compare current-year actuals and current-year budget against prior-year results. Nobel ginned that up with Excel spreadsheets, extracting the required data from NetSuite.

Scott Witmoyer, vice president of IT at Nobel, says SaaS users also sacrifice something in the way of flexibility. SaaS vendors tend to offer just one version of an application -- that's where the economies come from -- and when it's time to migrate to a new release, users generally must go along. "That could be a problem if you are midstream in an end-of-quarter close and you want your applications to be incredibly stable during that time," Witmoyer says.

Should users test these new releases? "Absolutely," he says.

Witmoyer adds that SaaS customers must live by the 90/10 rule -- "You'll get 90% of the functionality you need, but for the other 10%, you'll need to figure out another way."

Asked if forgoing that 10% is worth it in return for the other advantages of SaaS, he and Frank answer simultaneously, "Absolutely."

Frank sums up the argument for SaaS this way: "You want to allocate your scarce IT resources to advancing the business, not the IT infrastructure."

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