Eye on Oracle

Aug 29 2008   1:18PM GMT

Will ‘on demand’ stay ‘in demand’?

Shayna Garlick Shayna Garlick Profile: Shayna Garlick

What’s the outlook of the Software as a Service (SaaS) business within the next two years?

According to Lawson Software CEO Harry Debes, “the industry will collapse.”

Some may find this statement questionable, especially when many of the major software vendors – – even Larry Ellison, who has publicly denounced SaaS as a profitable business – – have made recent investments in on-demand software. Earlier this week, Oracle released a pre-built integration feature between Siebel and CRM On Demand (its SaaS application). Salesforce.com is on track to become a billion dollar company.

This on-premise and on-demand integration will “synchronize customer data between the two applications, giving sales and executive managers a better view into the sales pipeline,” according to Oracle.

But others don’t see much benefit to these CRM hybrid deployments. Gartner analyst Rob Desisto says, “It’s very difficult to keep SaaS and on-premise in sync.”

Hybrid deployments aside, the future of SaaS remains the overarching question. In this interview with ZDNet Asia, Debes says: “This ‘on demand,’ SaaS phenomenon is something I’ve lived through three times in my career now.” And he’s quick to point out that this time won’t be any different than the others – – SaaS will go nowhere.  

Here are some other highlights from the interview:

  • For the question, “Won’t people avoid the mistakes of “previous” SaaS incarnations?” Debes has a simple answer: “People are stupid.”
  • Lawson Software uses Salesforce.com, a company who, in Debes’ opinion, is successful because their product is good, not because it’s SaaS.
  • Debes gives two main reasons the SaaS business model doesn’t work: Up-front costs lead to a loss in revenue (when revenue is over a five-year period), and compared to traditional software, there’s a much lower chance SaaS will help you retain customers.

What about SAP, who last year created Business ByDesign to support its SaaS efforts? The development has not met with success, but SAP hasn’t given up hope on its on-demand offering. The company just announced that later this year, they will release a new CRM suite of products as part of Busines ByDesign.

According to the article, “The new version of the suite will incorporate an innovative approach to CRM and incorporate business intelligence technology from Business Objects.”

What do you think? Do you agree with Debes? Or, do you think these vendors’ efforts will pay off in the long run?

3  Comments on this Post

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  • Andrew Kerber
    This is the most intelligent and accurate comment about SAAS I have seen in some time. SAAS as a concept has no benefits, and in implementation, it runs slow, is not secure, and loses data.
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  • Amin Adatia
    Do I want my data and data modifications to be under some other jurisdiction, both country and organization? With the way the Security forces have been making changes to the privacy and access to data, I would not want to trust anyone else being able to "protect" my company data. I fear the SaaS operators will gladly release my data. Regards
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  • Dan Clamage
    I suppose the answer I give to your question is "It depends." If SAP and Oracle's offerings are over-simplified and overpriced versions of their unhosted products, then they will meet with a lukewarm reception by the market. What sort of companies are most likely to consider SaaS? Those that (a) don't want or can't afford to make the huge outlay in infrastructure (people and equipment) to bring these products in house; and (b) are perfectly happy with a simplified, non-customizable version. SaaS allows smaller companies to focus on what they do best, and not be distracted by managing what should be a Turnkey system anyway.
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