Tuesday, May 8, 2007

McKinsey says buy SaaS

Phil Wainewright's blog on Software-as-a-Service (SaaS) on ZDNet has a post on McKinsey Consulting's endorsement of SaaS, and I'm partial to their opinion as a McKinsey alum myself (well, that, and the fact that OpenTeams is SaaS). They make some good arguments:
Several of their most compelling arguments come down to simple economics: they say that SaaS has less financial risk for buyers, is cheaper to use and yet just as profitable for vendors.
"… many customers are eager for the shift because they're frustrated by the traditional cycle of buying a software license, paying for a service contract and then having to buy upgrades. Many customers believe they would have more control over the relationship if they simply paid monthly fees that could be switched to another vendor if the first failed to perform."
"Ownership costs are typically less — as much as 30% lower for a typical CRM installation, according to McKinsey & Co analysis."
"Even more important to enterprise customers is that they can expect better service, since developers can’t sell a license and lose interest, but must continue to improve and upgrade the service in order to prevent customers on a monthly subscription from migrating to a competitor."
The biggest remaining concern is security and getting comfortable with corporate data residing outside the firewall. OpenTeams has a pretty straightforward response to this: where do you keep that other precious corporate asset, cash? In a giant safe in your offices? I doubt it. More likely a bank, eh? You trust the bank to know what it's doing when it comes to protecting your money - certainly more than you know (or want to know) about protecting office vaults.

More and more companies are realizing IT data access and security are not their core competencies, as the steady stream of stolen data stories in the media makes all too clear. It's also gotten much more complicated with distributed workforces and partners outside the firewall. Better to leave it to SaaS companies who focus on security as an integral part of everything they do. Just think of us as banks for your data.

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