The Real Deal: Jeff Kaplan on SaaS in Back Office

This continues a new set of posts. Guest columns from practitioners and bloggers I respect. The category - The Real Deal describes them well.

Jeff Kaplan, ex IDC and Meta, is the managing director of THINKstrategies, a strategic consulting company based in Wellesley,MA, and the SaaS Showplace.  He recently wrote a nice piece in BusinessWeek on SaaS myths.

"One of the most widely-held misconceptions about software-as-a-service (SaaS) is that it is only suited for front-office functions, such as customer relationship management (CRM) and salesforce automation (SFA), rather than ‘mission critical’ applications like enterprise resource management (ERP) or supply chain management. The reality is that SaaS has already made significant inroads into important back-office areas and the rate of adoption of these applications is accelerating.

The primary reason SaaS is generally associated with front-office applications is the tremendous success of Salesforce.com. Yet, even Salesforce.com is trying to bust out of the tightly-defined box that it created for itself as the CRM company. Its most aggressive efforts center on its AppExchange partnering platform and ‘ecosystem’ of third-party applications, including many back-office solutions.

Another barometer of the growing market for back-office SaaS solutions is the growing number of back-office application providers adding their names to THINKstrategies’ SaaS Showplace online directory. There are currently twenty SaaS providers offering Accounting and Financial applications; sixteen e-commerce providers; another sixteen ERP providers; a dozen offering supply-chain solutions; a half dozen in procurement; and three more offering manufacturing SaaS applications.

Among the most recent additions to the back-office SaaS landscape is Kinaxis with its new web-based, on-demand RapidResponse™ service that enables brand owners and contract manufacturers to share online decision support tools to respond to changes in product demand and supply. Another indicator that SaaS supply-chain solutions are becoming ‘industrial-strength’ is the recent announcement by Secure Computing Corporation that it selected the Click Commerce demand chain management solution. When a security solution company selects a SaaS solution, it represents a pretty strong endorsement that it can be trusted to manage a back-office function.

In a recent supply-chain spending survey, AMR Research found 26% of companies are considering on-demand service offerings. These findings confirm the market trends which THINKstrategies sees and expects to accelerate over the coming months."

He can be reached at jkaplan@thinkstrategies.com

Comments

[Jason Wood]

Jeff,

I think part of the disconnect is the notion that being a software provider is, in and of itself, vetting of the business model.

We have to segment the market. Clearly, you could make the argument that backoffice functionality for SMBs is a natural extension of the SaaS model, but is that really surprising?

NetSuite, for example, is really going after Goldmine and Act and Intuit and Excel; try as they might to portray themselves as an SAP Killer.

The bottom line is many of these companies need to decide, very quickly, whether they are going to be content to carve out a niche where the prey is weakened (i.e., the SMB-third tier on premise software vendors hanging on for dear life) or if they've really got the technological sophistication to make SAP, Oracle and others sweat.

Being a public investor, I'm clearly from Missouri. I'm not necessarily buying it until they "SHOW ME."

[Jeff Kaplan]

Jason,

You're right that SaaS is commonly seen as a solution primarily geared toward SMBs. But, as I stated in my BusinessWeek Online column, Myth #4 of this market is that SaaS is restricted to SMBs alone. A surprising number of large-scale enterprises have been using SaaS solutions for a number of years to satisfy not only their CRM and SFA requirements but also their Human Resource Management (HRM), payroll (think ADP) and other important corporate needs. Supply-chain management (SCM) is also gaining acceptance and generating traction at the 'high-end' of the market. A great barometer of this trend can be found at http://saas-showplace.com/pages/2/index.htm, where you can look at the Quick Summary Profiles of SaaS providers in the Supply Chain category and see many brand-name companies listed among the SaaS providers' sample customers.