Cloud computing has been getting a lot of attention in the media lately—and with good reason. Beginning with pioneers like Salesforce.com, we are witnessing a profound shift in the enterprise software market as business applications are moving to the cloud, which is simply computing and storage services moved to the Internet.
Nearly every business application start-up in the past 10 years is principally offered as software-as-a-service, or SaaS, and even many of the large, on-premise software companies are quickly moving to offer hosted versions of their software. There are 13 public SaaS companies with a combined market cap of over $35 billion and the SaaS category is growing at 20 percent compound annual growth rate, or CAGR.
This article will explore some of the reasons why this is happening and apply these reasons specifically to corporate performance management. This is not just a debate about software delivery models. We believe SaaS offers a more compelling value proposition to corporate buyers that can be summarized by the following points:
1. Lower TCO and faster ROI
2. World class environment owned by finance
3. Focus on the business solution
4. Value added services.
Let’s explore each of these in a bit more detail.
Lower TCO / Faster ROI – For a specific suite of applications like planning, consolidations, and reporting, SaaS offers better economics. It provides companies with a predictable cost structure based on price per user fees with all infrastructure, hardware, and data center costs accounted for. There are no hidden costs and the cost of the software and ongoing maintenance is lower by leveraging a true multi-tenant SaaS environment. Implementations tend to be more straightforward due to the consistency of the platform and the modular, iterative nature of the work. In many cases, the implementation can be delivered via fixed priced efforts and/or via a managed service. Finally, application maintenance is significantly less than a traditional on-premise as most of the maintenance effort is done by the SaaS vendor.
Environment Owned by Finance – Another benefit of going with a SaaS vendor is that it provides the organization and the FP&A team with access to an application environment with very little support from IT. Maintaining financial systems is never core to any business so leveraging a platform allows IT to focus on those systems that are core to the business. Also, a combination of rapid product innovation via included upgrades to the environment and SAS 70 Type II compliance provide the organization with a platform that keeps getting better and is also very secure.
Focus on the Business Solution – Perhaps one of the biggest benefits to going with a SaaS vendor is that it allows FP&A to focus on the business solution, not the technology infrastructure to support it. Many times, corporate performance management projects are consumed with discussions about how IT is going to install and ultimately maintain a pretty complicated on-premise software application. By going with a SaaS vendor, your organization is able to take advantage of a flexible, scalable platform that will grow as you grow. It is also easy to learn and easy to use so you can focus on how to improve your business, not your knowledge of the software.
Value-Added Services – A final benefit that does not receive much focus is the value-added services that a SaaS platform can provide over time. What is emerging is a new breed of services. Whether through the vendor or the partner ecosystem we will start to see services such as benchmarking, integration of third party data (econometric, weather, commodity prices, etc.), application modules and templates, etc. that will fundamentally provide a richer experience beyond what single tenant, on-premise solutions can provide.