Nay-sayers have leveled plenty of criticism at applications delivered over the Web. The rap has been that customization limitations and integration challenges make software-as-a-service unsuitable for companies with complex application environments.
Mark Bloomquist is not hearing it.
Bloomquist is senior director of customer care at Postini in San Carlos, Calif., which uses Salesforce.com’s sales-automation and customer-service applications. When Salesforce.com’s applications weren’t exactly what Postini needed, Bloomquist tapped into Salesforce.com’s AppExchange developer environment to add new functionality, including a portal for self-service case management, a tool for tracking product enhancement requests and a system for capturing training registrations.
Salesforce.com has been the poster child for software-as-a-service, increasing its user base to more than 550,000 subscribers since its founding in 1999. Today the CRM vendor is pioneering efforts to reduce the cost and complexity of integrating its hosted applications with other systems by making resources, such as its AppExchange network and Apex programming language and development platform, available to customers.
With many of today’s software-as-a-service providers building their systems on a service-oriented architecture , integration of software-as-a-service resources with on-site systems is manageable — particularly compared with some of the integration challenges of legacy client/server applications, says Michael Mankowski, a senior vice president at Tier1 Research. “It’s not a no-brainer, but it’s easier than calling in Accenture to do an SAP implementation.”
As efforts such as Salesforce.com’s AppExchange platform are refined, more large enterprises with complex application environments are buying into the idea of software-as-a-service. The hosted model continues to grow in scope and acceptance, according to Gartner. The research firm predicts 25 percent of new business software will be delivered as software-as-a-service by 2011, an increase from 5 percent in 2005.
Although more large enterprises are getting on board with software-as-a-service, adoption typically still starts at a department level, analysts say. A user signs up for a subscription using a department’s operating funds and spreads the word to co-workers, Mankowski says. “All of a sudden it gets viral. That’s how [software-as-a-service] sells in an enterprise,” he says. What is changing is that IT departments, which sometimes were a barrier to software-as-a-service adoption, increasingly are sanctioning the model, won over by its lower upfront costs compared with applications deployed on-premises, faster deployments and more predictable ongoing costs.
Security concerns, which used to be a bigger issue three or four years ago when enterprises weren’t as comfortable with Internet-delivered applications as they are today, are subsiding, Mankowski says. “The security issue has not melted away, but it’s certainly less of an issue now than it was a few years ago.”
As IT executives have become more accepting of software-as-a-service, they are looking to deploy the model beyond CRM — a typical software-as-a-service entry point. Human-capital management is one hot area. Payroll giant ADP, for example, has been building out its hosted software portfolio via such acquisitions as on-demand talent management vendor VirtualEdge and employee services vendor Employease. Meanwhile, PeopleSoft co-founder Dave Duffield in late 2006 unveiled Workday, a software-as-a-service start-up that is focused initially on human-capital management and plans to expand deeper into ERP .
Software-as-a-service providers also have made headway in such markets as finance and accounting, supply chain, procurement, document management, e-commerce and regulatory compliance . NetSuite, for example, offers a broad suite of hosted ERP, CRM and e-commerce applications. The regulatory arena includes such software-as-a-service players as Axentis and Enviance.
San Diego Gas & Electric (SDG&E) uses the Enviance’s software-as-a-service platform to streamline the capture and analysis of environmental and safety compliance data. When the public utility reentered the electric-generation business, it needed a way to manage the associated regulatory requirements. Kelly Hunt, generation compliance manager at SDG&E, quickly realized she needed a more robust system than spreadsheets to tackle the challenge.
Enviance’s software is tied to the plant’s core operational system, OSIsoft PI System. By integrating the two, SDG&E automatically schedules, executes and documents such tasks as preventive maintenance — reducing the company’s dependency on manual processes. “There’s less opportunity for error,” Hunt says. With infractions costing as much as US$25,000 per day, per violation, that’s a critical concern.
Hunt didn’t set out to buy a software-as-a-service solution for regulatory compliance, but Enviance’s hosted model turned out to be a strong selling point as SDG&E evaluated vendors , she says. “We don’t have to manage the servers, any upgrades. Enviance takes care of all of it,” she says.
Likewise for Postini’s Bloomquist, the main appeal of the software-as-a-service model is that someone else is responsible for taking care of the application.