SaaS Is Over-Promising and Under-Delivering, Survey Says

Written by Steven Walling / July 9, 2009 6:30 PM / 13 Comments

According to a new survey of more than 300 enterprises by Gartner Research, software as a service has failed to impress business users across the board. Both U.S. and U.K. users polled were far from enthusiastic about their experiences with SaaS.

Most telling was that customers gave the most dismal reviews to areas where vendors are making the biggest promises: namely, low costs and high performance. Despite changing attitudes towards its security and reliability, these results suggest that providers are creating some of their own ills by overselling and under-delivering when it comes to key benefits of SaaS.

Where SaaS Has Failed

Respondents replied with surprising unanimity on how lukewarm they felt about the performance of SaaS: on 16 factors, all received less than 5 on a 7 point scale. But those areas where they expressed greatest dissatisfaction were those in which SaaS companies have continually made rather grandiose claims.

Cost: Few enterprises anticipated annual costs to be so high. Hardly surprising, since rock-bottom cost is the number one promise of vendors of all stripes. After signing up, however, 42% said that there were high and often unexpected costs to SaaS, making it the number one reason they rejected it.

Ease of Integration: Painless interoperability with their legacy applications is a key consideration of businesses before diving into SaaS, and it's also the number two disappointment that causes them to leave it behind. For our bet, this is one realm where providers are already on the ball with improvements; countless development teams are working hard to make their applications play nice with SharePoint and other enterprise standbys.

Speed of Implementation: Fast deployment, even just days or hours in extreme cases, is a feature that the majority of outfits promote. But lack of speed in implementation garnered the third lowest rate of satisfaction.

What Vendors Can Do To Fix This

Enterprise vendors, this is your challenge: capitalize on the growing acceptance of SaaS without being overzealous. Continuing declines in IT budgets will give you a seat at the table, regardless of other concerns. But an easy pitch on being efficient and cost-effective doesn't give you leeway to brand SaaS as a magic bullet. To do that is to shoot yourself in the foot.

Comments

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Me thinks SaaS is the next biggest boom in IT. Cost-cutting factor in IT budgets is the key for it.

Posted by: Sandeep Swaminathan | July 9, 2009 8:24 PM

This is sour grapes. Gartner is one of the biggest offenders in the interminable SOA hoax. Of course Gartner would love to put down SaaS. What's remarkable is that Gartner acknowledges SaaS at all. SaaS is not on the traditional ISV menu so what in the world would Gartner want so say something contrary to the interest of the ISV client base they've had for years.

Posted by: Bruno Fashonista | July 9, 2009 8:28 PM

I would love to see the list of customers surveyed by Gartner. Must all be SAP and Oracle shops. No wonder they're unimpressed with SaaS. The only one they know is ADP !

Posted by: JoJo Bitbucket | July 9, 2009 8:35 PM

Although I doubt the general message of that report, there is some truth in it. SaaS is a one-size-fits-all solution: integration with existing IT services or legacy data is cumbersome and sometimes even impossible with SaaS; same for new features to adapt to a customer's workflow or security requirements.
One solution to this could be a model where a service provider offers customized SaaS/PaaS ("myPaaS") together with professional services for integration and customziation. That is, each customer accesses his own individual platform that may be hosted at infrastructure providers like Amazon EC2 (some more information about this model here).

Posted by: Matthias | July 10, 2009 1:48 AM

Looks to me like they were interviewing IT managers rather than line of business.

The #1 reason to pick a SaaS solution is fit to business requirements. If you don't have that, none of the other factors are relevant. Placing technology requirements at the fore suggests a rationalization of status quo.

The study also fails to recognize the reality that more and more backoffice processes are moving to SaaS, without IT involvement. Think of all the CRM tools, travel planning, expense management, etc that are increasingly moving off homegrown solutions onto hosted platforms. These may be beyond the periphery of the IT department representatives interviewed in this study, but once factored in they paint a different picture of adoption.

Posted by: Ross | July 10, 2009 5:07 AM

I think these issues depend on vendor. As a cloud computing vendor we have not had these issues with our clients. In fact, they've been happy with all aspects of our PaaS solution. www.workxpress.com

Posted by: Jake Burns | July 10, 2009 5:48 AM

All enterprises will eventually will be in the cloud and on Saas. This is inevitable. However, moving to the cloud and SaaS just changes where the stuff resides. There are still the same problems of conceptualizing correctly the solutions to enterprise problems. This move will leave many with obsolete business models and these guys will moan deluxe.
So, SaaS no SaaS etc, the big issue whether the stuff is good - and there will still be many good apps that beat saas, but that has got nothing to do with delivery method.

Pawel Lubczonok
ThoughtExpress

Posted by: PAWEL LUBCZONOK | July 11, 2009 4:10 AM

This is utter non-sense.
Did Gartner also survey non SAAS enterprises who are dishing billions a year in upgrades, license, seat fees etc?

Posted by: Jason Tryfon | July 11, 2009 4:27 PM

It makes sense that people would see SaaS as under delivering. After all its still a developing technology. If people are expecting it to be the silver bullet of IT systems they will be very disappointed.

As Pawel said its not about the delivery method its about quality of the applications. Just because its hosted somewhere else and costs less doesn't mean your business is going to run any better.

I think SaaS is misunderstood. To me its more about the delivery method (web based services) rather than hosted applications.

I think most software will shift to being web based but I don't think companies will outsource all there apps to vendors in the cloud. Software is becoming part of the business process so why are companies going to outsource they very thing that makes them competitive?

Posted by: Nelson de Witt | July 14, 2009 7:36 AM

Of course enterprises are not in love with SaaS... yet. For the time being, SaaS is best suited for small and medium sized businesses. The functionality and pricing make SaaS the way to go for smaller companies that don't need the huge platforms or can't afford them. Some companies, like HyperOffice.com, have come to realize this and are smart enough to go after that market. Others are still unsure about where to position themselves, and are left spreading themselves too thin.

Eventually, down the road, SaaS will overcome traditional software as the software of choice for enterprises and SMBs alike. There is no denying that. One needs only to look at the advancements of the past 10-12 years and apply the level of those transformations to the coming decade. Possibly in half that time, as things are happening bigger and faster.

Posted by: James Carter | August 4, 2009 6:37 AM

There is no doubt that SaaS is next ear technology but we need to insure that how we can rip the benefit from this. Thanks for such indepth details in SaaS.

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Posted by: nusret | December 26, 2009 11:12 AM

I would love to see the list of customers surveyed by Gartner. Must all be SAP and Oracle shops. No wonder they're unimpressed with SaaS. The only one they know is ADP !

Posted by: aofarashizaa | February 3, 2010 11:41 PM