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Recurring Revenue: Article

The Three Stages of the Enterprise Software-as-a-Service Relationship

And what to do next

The Enlightenment
One of the great barriers to maximizing the full value of SaaS comes from the very reason the enterprise adopted it in the first place. The “silo” effect means that the on-demand application remains effectively disconnected from the other applications that run in the enterprise, with the result that its information remains compartmentalized. In the case of on-demand CRM solutions, SaaS software running solo can be viewed as a set-back to the process-driven enterprise, working in opposition to the goals of architects and business process analysts. As a result, the enterprise, while happy with the fact that their mission-critical tasks are being performed, now begins to grumble.

Add to this the following issues and a re-assessment becomes almost inevitable:

  1. The lack of automation that comes from being disconnected from the enterprise’s in-house applications means more data duplication, manual entry, and human errors. This causes enterprises to spend far too much on IT.
  2. As the on-demand application acquires increasing quantities and quality of information, other departments will want to buy in and enrich their own applications with this data.
  3. With the on-demand application becoming further enriched, your CIO will eventually want to apply some ownership to the system for security’s sake. Whereas in “The Comfort Zone” it was more convenient not to own the system, now the situation becomes reversed.
  4. With the continued growth of subscribers to your on-demand application, eventually the enterprise will want to re-evaluate the license cost structure and subscription fees.

The Re-assessment
Our enterprise now knows both the benefits and drawbacks of SaaS applications. Essentially, the enterprise needs to transform their SaaS application from a department-level tactical system to an enterprise-level solution. This is to eliminate the duplicated work and manual processes and to find a way of milking more value from their application and creating a more favorable cost-structure for the long term.

The enterprise is essentially faced with two choices:

1. Find an alternative solution to their on-demand application. This would normally mean going back to square one, with an on-premises solution or home-grown application and losing all the appealing benefits of SaaS.

or

2. Somehow bring their on-demand application more into the enterprise and integrate it with their existing applications.

The Value of Integration
Integration is really where the greatest value lies. Integration ties your on-demand solutions into your existing business infrastructure and enables both your on-premises and on-demand applications to work together in a way that gives them significantly more power and scope.

With integration, companies can multiply the power and reach of their Salesforce.com, SAP, Oracle JD Edwards, Movex and other applications, allowing the enterprise to efficiently and automatically share and update information company-wide.

Comprehensive information sharing gives both employees and management a better and more accurate picture of their overall business. Such a view allows management to make better business decisions, be more responsive to the customer’s needs, and obtain more efficiency and return out of their business transactions.

Integration Infrastructure vs. Custom Code
The advantages of integration infrastructure over custom-code integration solutions are clear. Custom coding is inherently more risky since it is a one-off that has not been tested in multiple scenarios. It is also man-dependent: if you lose your coder after a year on the job, your project may be lost. While custom coding can seem like an attractive alternative for some integration projects, the process is also time-consuming and inflexible when changes to the original architecture are needed. Few enterprises have the luxury to wait for their custom-code project while the market continues to evolve and move on. When changes are required for your business process or new applications must be added, many of the existing coding threads become redundant and need to be re-written.

Conclusion
The benefits of integration far outweigh the potential fears. In any industry, there will always be vendors out there willing to promise integration at the push of a button and make it appear far simpler than it actually is.

The important thing is to choose a vendor that has the project experience to bring to the table a productive toolset and powerful technology stack that can handle any integration scenario – whether straightforward or more complex. Remember – custom coders and extensive consultancy will push off your ROI and make you wonder why you didn’t stick with the more expensive and time-consuming on-premises solution. Integration proves to be a more cost-effective and practical solution for the enterprise. When undertaken correctly, it will bring your enterprise SaaS relationship to the next level.

Resources

More Stories By Avigdor Luttinger

Avigdor Luttinger leads Magic Software's industry analyst relations program and is one of the founders of the company. He headed software development during Magic Software's initial creation and then launched the company's international distribution.Avigdor holds an MBA from INSEAD in France and an MS in computer science from the University of Lyon.

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