General Consultant Discussion

This could also be titled ""the end of the loophole for customers who don't want to pay maintenance on software"".

And as I say, the minute a bigger player goes belly up leaving subscribers with a very limited time to switch systems is the PR disaster that causes a reboot in saas thinking.

I suspect that you're right and we'll see some of this - hard to say the best way to protect against it. What company wants to come in to see that their accounting software provider is out of business and nobody can access their info. And then what happens to that data. May limit growth of the very small players.

I would imagine this is being scrutinized very closely during the audit and financial footnotes....

Interesting thought @JeffSchwenk Wonder if I could use that seed of worry to a prospect looking at Netsuite etc.

If you aren't you should be! Think about what would happen if you lost access to this data. It is the equivalent to your building burning to the ground and you have no backup. It is a very REAL possibility! Business continuity is a high level risk assessment.

That argument used to carry so much more water a few years back, but today more and more companies are looking for the cloud. We just closed a deal with a division of a fortune 500 company that did not want small business software on their servers. We thought using the ability to migrate in house would be a selling point, but it carried absolutely zero water with them. SaaS is at the far side of a swing in the ever swinging pendulum. Centralization vs. Decentralization. Big Government vs. Small Government... Software companies are going to force the subscription model to increase their long term revenue. Hosted or not. Cloud is an option for companies that can't or don't want to manage the complexity... subscription or perpetual license.

@GaryFeldman - you are correct that more and more companies are looking for the cloud but I still can't figure out why except that it's the NEXT! NEW! THING! Unlike the shift from DOS to Windows where businesses were given better infrastructures to allow for integration, automation and, therefore, lesser data entry, what benefits does the cloud bring except lower up-front costs (can already be acheived with leasing options) and no infrastructure costs internally (offset by higher costs long-term in cloud)? I strongly believe we need to have cloud options in our portfolios but I feel like it's a giant shell game being perpetruated on businesses today.

I doubt SAAS would have any impact on financial statement disclosures other than normal risk assessments such as product liability, self-insurance and the like. Watch for the pendulum to swing back away from SAAS in about 3 to 4 years as CFOs react to their perpetual fees and are out looking for cost reductions in the organization.

@Peter Wolf - Some is semantics and some is true business change. Cloud is deployment, SaaS is licensing. Put the two together and you have a total subscription model. Most people I speak to understand that they are paying a premium over the long term for a time value of money when comparing to perpetual licenses on owned servers. That is the semantics part. NetSuite is cloud only. ERP 100 Online is cloud, and if you buy licenses, or subscribe to them, you can still take them in-house. If you subscribe from Sage??? The business change is where a company starts to take advantage of the cloud to improve the efficiency of the operations. We are working with a company to provide custom connected services which we plan to plug into multiple ERP systems hosted in our cloud. Just like you can plug Avalara into the cloud or on-premise, the key is that we can provide these as pre-configured services in the cloud because we control the infrastructure This is much harder to do if we have to worry about different equipment, firewalls, etc. In terms of overall costs, one of our customers has over 175 users and no IT staff. I would tend to think that we were less expensive overall for them. For others, we have pre-confgured databases in server templates that has cut our implementation time by 1/3 to 1/2 or more depending upon the application. How much of that savings we pass on to our customers is totally up to us today, but one day will be more market driven. NetSuite can discount their software as much as they want to a new subscriber because the incremental cost of the software and the infrastructure is very low. As long as Sage and SAP keep their perpetual prices at their current levels or keep their payback periods reasonably short, the market will continue to accept SaaS subscriptions at nice rates. Eventually the technology and the richness of the applications will rival Sage's traditional feature function advantage. Bury your head, or confront the brutal facts.

I think the answer here is much simpler on some levels (not all) - customers don't want to toy with workstation configurations and operating system fine tuning.

Then you get to have the joys of trying to make multiple Saas products using different tech at different data centers talk together in some kind of cohesive way. I guess I'll be old fashioned, but for the majority, I don't see Saas as a great option for normal ERP. CRM maybe, Service/time/billing.. maybe but not core erp

None of the major new age SaaS players is making GAAP money - so you may be onto something. At some point these companies will need to earn a profit and I suspect that will be price increases to users who ultimate find that they're locked in. Where do you go if Netsuite raises fees 10% every year ? Then again the same could be said of our on-premises buddies.