BlogERP: Jim Holincheck's HCM Software Blog

SaaS: Will It Survive? Is It Even In Danger?

Harry Debes, CEO of Lawson, created quite a stir in an interview where he pronounced that SaaS would "collapse" in two years.  Many others have weighed in on this including Vinnie Mirchandani, Jason Corsello, and Sarah Lacy.  They make the case for why SaaS will last and is good for customers.  One of Harry's arguments is that there has only been one really successful SaaS vendor, Salesforce.com.  He says:

"An industry has to have more than just one poster child to overhaul the system. One day Salesforce.com will not deliver its growth projections, and its stock price will tumble in a big hurry. Then, the rest of the [SaaS] industry will collapse."

There are arguably other successful SaaS vendors (especially in HCM as Jason notes).  However, Salesforce.com has been the poster child.  Joshua Greenbaum, who has previously predicted that demise of Salesforce.com, had an interesting post where he discussed Harry's comments.  He made an important point.  There are other factors at play in the success or demise of Salesforce.com beyond just the SaaS model.  However, he is not a big long-term believer in pure-play SaaS.  Joshua believes the future is a hybrid model (vendors offering the customer a choice of delivery models).

As I have said previously, I believe there is no such thing as a SaaS industry or market.  SaaS is a delivery model that is used in many different software markets.  So, I disagree with Harry on that point.  There is no industry to collapse.  Joshua (as well as Harry) is right though that SaaS is not necessarily the best answer for all software markets.  However, I believe Joshua comes to the wrong conclusion.  I do not think the industry will move to the hybrid model.  I think the industry will continue to have multiple models.  Different markets have different requirements.  Pure SaaS solutions may be appropriate for some and not for others.

There is nothing particularly wrong with multiple models from a customer perspective.  In the HCM software market, I find that that most customers choose the best-fit application first, then they evaluate the delivery model choices.  If SaaS is the only option from the best-fit vendor, then that is usually not an issue for customers.  If the best-fit vendor offers multiple options, then customers choose the best one based on their needs.  Harry's own experience with Salesforce.com is typical.

"We use Salesforce.com, and I like it. But I would've bought the product even if it wasn't SaaS. The success of Salesforce.com, in my opinion, has to do with their product being good, not because it's SaaS."

So, are you with Harry?  Is SaaS over-hyped?  Are you with Joshua?  Is the pure-play SaaS model untenable in the long-term?  I am on the record here and here (Gartner subscription required) as believing that SaaS usage will continue to grow.  What do you think?

Update

I received the following clarification today from Kathy Nottingham at Lawson providing additional color on its position on SaaS:

"While in APAC a couple weeks ago, Harry Debes was interviewed by ZDNet Asia.  He made some bold, broad statements predicting the demise of SaaS which created quite a stir in the analyst/blog world.  Harry stands by the general statement, but here are some points of clarification:

While Harry has strong opinions about the long term viability of SaaS, he and the rest of the Lawson organization are not trying to dictate application delivery options to the market, but rather respond to market demand.  Travis White posted an "opinionizer" article on lawson.com clarifying Lawson's perspective on SaaS.

http://www.lawson.com/wcw.nsf/pub/Opinionizer

While we have not seen significant market demand for SaaS delivery/deployment options for our general ERP solutions, we have seen interest in SaaS solutions in the HCM space.  Lawson is delivering SaaS HCM solutions to our clients and providing other deployment options as well.  Larry Dunivan provides more Lawson perspective on SaaS in the HCM space in his latest blog posting:

http://perceptivehrtech.com/

Hopefully, these articles provide a more complete perspective on Lawson's SaaS position.  If you have any questions about Lawson and pricing/delivery options that we offer to our clients, please contact me.

Collecting Data on Talent Management Applications

Now that Google Docs supports offline editing of documents, I thought I would try it as a blog authoring tool.  I like it as a word processor so it may make an ideal offline blogging platform (especially on my Asus EEE).  Anyway, I digress.  I just put the finishing touches on the customer reference survey we will be doing for the Magic Quadrant for Employee Performance Management Software.  I am pretty excited about the data we will be collecting about usage and purchasing plans for talent management applications. I sent the survey questions to the vendors today so they could communicate to their customers what will be on involved in completing the survey. Of course, we will be gathering data about more than usage and purchasing plans (like satisfaction with the vendor and its products), but we have great plans for additional research based on the results.  If you are a Gartner client (subscription required), you can see how we leveraged this kind of data in the Magic Quadrant for E-Recruitment Software.  What are your most pressing questions about talent management application usage?

Reflections on Talent Management

Thomas and I just finished the first round of vendor briefings for the upcoming Magic Quadrant for Employee Performance Management (EPM) Software.  As Thomas bicycles his way through the Alps for the next two weeks (you can keep track of what he is up to here), I had a chance today to take a breath and reflect on the last few weeks.

We have seen a maturing of products as vendors continue to add functional depth to their EPM solutions.  We have also seen an increased focus on usability.  Not surprisingly, we have also seen many touting new social networking capabilities. 

At the same time we have been doing these briefings, I have been getting the usual steady stream of client inquiries.  I looked at the list of clients this month and it struck me that there were at least three of the very large variety (greater than 65,000 employees) plus another of that size tomorrow.  All four of them wanted to discuss integrated talent management.  All of them have some solutions in place in some talent management areas already but want to know more about the market for the broader suite. 

In "Unlocking the Strategic Value of Talent Management Application Investments" (Gartner subscription required), we discuss the adoption patterns of customers.  In terms of buying behavior, the research conclusions still hold true.  However, just because the really large companies have not bought talent management application suites does not mean that they would not like to do so.  Now, the vendors just need to be able to deliver the depth and breadth required by these customers.  What do you think?  Are vendors ahead of customer demand or do customers want more than the vendors can deliver?

links for 2008-08-13 [delicious.com]

• The Human Capitalist » Using LinkedIn to Assess The Profile of Your Organization
  Jason points out a compelling use case for social software -- one most organization have yet to take advantage of.
  (tags: socialnetworking)
• Social Networking's Potential and Peril - Human Resource Executive Online - Story
  It is good to remember as the hype builds around social software in the HCM world that there are potential pitfalls too.
  (tags: socialnetworking)
• systematicHR - Human Resources Strategy and Technology » The Realities of Integrated UI
  This pretty much says it all about user interface design in traditional business applications.
  (tags: ERP HCM)

links for 2008-08-12 [delicious.com]

• The U.S. Swimming Relay Win and the Industry Move to Customer Advocacy - Rob Enderle
  Good thinking on the difference between customer satisfaction and customer loyalty. I see a lot of vendors that promote high customer satisfaction scores, but when you talk directly to their customers, it is a different story.
• Help Thomas Support Zimbabwe | Venture Chronicles
  Something I should have done sooner, but I will remedy now. Please support my colleague Thomas Otter in his efforts.

Some Recent Gartner HCM Research For Your Consideration

I wanted to make you aware of some of my more recent HCM research (Gartner subscription required).  For those wanting to know about Service-Oriented Architecture (SOA) and its impact on HCM software, the two notes below will be a good starting point.  In addition, the note on the leveraging business application suites should also be thought-provoking.  Enjoy.

The Impact of SOA on HCM Applications
29 July 2008
James Holincheck

Service-oriented architecture-based solutions promise to address some of the key challenges of developing, implementing and maintaining traditional human capital management applications.

New SOA-Based HCM Applications Emerge
29 July 2008
James Holincheck

New applications from Lawson, SAP and Workday give human capital management customers a glimpse into the potential of service-oriented-architecture-based solutions.

ERP, SCM and CRM: Suites Define the Packaged Application Market
25 July 2008
Yvonne Genovese   Jeff Woods   James Holincheck   Nigel Rayner   Michael Maoz

Users searching for ERP are often looking for the level of integration provided by ERP, but for functionality that extends well beyond ERP. Understanding suites and leveraging their value is important to a successful application strategy.