SaaS Vendors Grow in Uncertain Times

Like many, I have stopped tuning in to the evening news.

"If it bleeds, it leads" -- the saying that has driven the news media world for way too long -- has finally annoyed me enough to start ignoring the news. Yes, the economy is hemorrhaging, but geez-louise, isn't anyone watching and reporting on the bright spots?

Apparently not, so I will step up and point you to a good news item in the SaaS and hosted world.

Savvis, Inc. contracted with Vanson Bourne to conduct an independent survey across the UK, Singapore, and the US to measure the relationship between IT spend on outsourcing and SaaS, and company strength in the down global economy. The survey, with 314 participants, was conducted in January and February of this year. And the results validate the business value proposition of using external IT resources.

Some interesting statistics from the report (PDF) include:

  • 52% of IT executives noted that the greatest cost savings will emanate from reducing infrastructure costs, reducing staff levels (49%) and a virtualization strategy (44%).
  • The study affirmed strong interest in cloud computing among IT executives, with 72% in the US stating that cloud computing will play an important future role in helping companies gain efficiencies and reduce costs.

My favorite quote from the entire report is:

"The survey confirms that organizations who outsource more IT infrastructure services are doing better than their counterparts (emphasis is mine) by focusing IT resource on developing and managing business critical applications," said Bryan Doerr, Chief Technology Officer at Savvis. "Many IT leaders are being forced to do more with less budget in 2009. Cloud computing can help businesses achieve cost savings and efficiencies, and gain cost, control and end-user experience metrics, often in combination with traditional managed services." added Doerr.

I have been a strong proponent of virtual business processes since 2001 (my book, The Case for Virtual Business Processes, was released in March 2003). At that time the technology emphasis was on managed and hosted services. We were also beginning to see the rise of offshore outsourcing. It was clear, even back then, that technology infrastructure complexity, security issues, regulatory compliance requirements, and normal business cycles were making firms question the value of doing everything IT on their own.

As the report shows, Using a hosting company, managed services firm, and now SaaS provider makes good business sense. It isn't about randomly reducing headcount to add dollars to the bottom line. Using a firm whose sole purpose is all things IT brings a level of expertise a company could not afford to have in house.

As we witness the spectacular collapse of the Industrial Era business model, built on doing everything in-house and collecting companies up and down the supply chain to form a conglomeration, it becomes clear that something has to change. Take the old idea of using specialists to do the work, but instead of acquiring them, use them on a contracted basis. The concept behind the emerging model is to remain light and nimble. This is what SaaS can offer.

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