October 20, 2010, 11:39 AM — ORLANDOD -- Software-as-a-service (SaaS) may offer the advantage of application-based computing you can pay for as needed, but there are pitfalls, too, that are becoming increasingly evident, according to Gartner analyst Robert DeSisto.
SaaS is a "service-delivery model," said DeSisto at Gartner's ITxpo Conference. "Something is shared on the back end, and that, hopefully, gets you economies of scale." However, he immediately added that if you're "getting into this game solely to save money, you have come to the wrong place."
"Quite frankly, it's not to save money," said DeSisto, whose division at Gartner has spent several years looking at market offerings and the experiences of Gartner clientele in various SaaS contractual situations.
The basic advantages of SaaS — and there are now hundreds of applications available — is the ability to quickly scale to thousands of users and gaining technical value without capital outlay. Other advantages are that there are incremental releases that deliver more functionality immediately for users, with the SaaS provider doing that work. SaaS vendors are showing they can deliver "more rapid response to enhancement requests," DeSisto says. Patch management may be easier, too, under SaaS.But it's also clear there's a downside related to the way pricing and service-level agreements are often constructed.
Examples of SaaS vendors include Salesforce, Taleo, Workday, NetSuite, Oracle, SuccessFactors, and Microsoft Dynamics.
DeSisto points out that the irony, though, is that enterprise customers can end up with "shelfware as a service" because in some circumstances, customers get locked into multi-year contracts for a schedule over time and start paying for users that don't get deployed quickly enough. Under inflexible contracts, customers have actually paid hundreds of thousands for SaaS shelfware never used.
SaaS customers should be pushing for contracts that accommodate changing user requirements at least once a year, and "capacity-based alternatives," DeSisto said.
Another pitfall is that the service-level agreements are "all over the map" and sometimes don't even exist, DeSisto noted. "SLAs have to be at 99.7% to 99.9%," advises DeSisto, with a clear specification for "tangible remedies" if that doesn't happen. Finding out about SaaS data center operations is imperative and it may come as a shock to find out that many have no disaster recovery, he adds.