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Getting your software on the Web has limits

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In the bad old days of corporate software -- that is, before "software as a service" arrived on the scene to save the day -- getting a big piece of new software running inside a company had numerous pitfalls and pain points. Consultants rang up big bills, and programs from different vendors didn't always work well together. In the end, the implementation often cost more and delivered less than anyone expected.

Now, though, that "SAAS" is here, what are we starting to see?

Alas, many of the same things.

"Software as a service" is one of those trends that rolls through the technology world every few years, promising an end to everything that people don't like about business as usual in the multibillion-dollar world of corporate technology. Typically, these new approaches deliver on some, but not all, of the promises, often while creating new problems of their own.

The difference between traditional and SAAS-style software is roughly the difference between cooking in and ordering out. In traditional software -- the sort sold by big companies like SAP or Oracle -- if you want to run, for instance, an accounting package, you have to first license the software, then buy the necessary hardware, then have your IT department get everything up and running. The process can take months and cost millions of dollars; delays are common.

With SAAS, though, you use a Web browser and the Internet to connect to the software, which the providers maintain for you on their computers. (Services like Hotmail and Gmail are, in effect, an SAAS approach to the relatively simple application of email.) The cost of SAAS can be 10 percent to 20 percent what the traditional approach costs, at least initially.

The poster child for SAAS is Salesforce.com, the San Francisco company that went public in June 2004 and now has a stock market valuation of nearly $4 billion on a lofty P/E ratio of 160. The company markets its approach with "No Software" buttons and emphasizes ease of use: Open a browser, and right away you can start tracking your sales staff and customers, the particular SAAS application that Salesforce.com offers.

In part because of the company's huge success, traditional software companies are now on the marketing defensive. Customers, journalists and investors inevitably want to know about their plans to, in effect, SAAS-ify their products. And just about every new software company now describes itself in SAAS terms.

But there are indications that the bloom may be off the rose, especially as use of the SAAS approach moves away from its home turf -- small groups of 20 or so users without easy access to a big IT department -- and into big corporate departments with thousands of users. For instance, AMR Research surveyed 100 users of SAAS-style customer software from different suppliers. It found that for 36 percent of users, the experience fell below expectations -- usually because the products took longer or cost more than expected.

AMR analyst Bob Bois blames what he calls an "expectation gap" between the just-add-water marketing of SAAS suppliers and the hard realities faced by companies -- especially big ones, with complex needs -- when they try to actually implement a program.

One indication of the growing complexity of SAAS software comes from the Web page of Salesforce.com itself, which lists scores of consultants, integrators and add-on pieces of software that work with the core Salesforce.com offering.

Looked at one way, it's evidence of a thriving "ecosystem" of products and services. But it also suggests that as SAAS companies grow to serve more users, they increasingly take on some of the complexity of the software approaches they are trying to replace. And for Salesforce.com specifically, a series of embarrassing outages on its servers that left some customers unable to work, including one last Thursday, haven't helped.

"At first, they were trying to differentiate themselves from others and said you didn't need an IT department," says Christian Aaselund, of Acetta, a Seattle-based consultancy. "But now that the platform is becoming more robust, you are starting to need those things again."

Hiring the necessary consultants for a medium-to-large SAAS implementation can easily double the cost of the project, at least in the first year, say many people. Indeed, Accenture, the consulting heavyweight associated with the world of traditional software, is now a "Featured Partner" of Salesforce.com.

Salesforce.com marketing director George Hu says the product is every bit as easy to use as the company says it is, and if consultants are needed, it's to make the inevitable social changes that are needed at a company so that it can make the best use of the new software.

"When you deploy any enterprise application, regardless of its size, there are issues you are going to have to work through," he says. "You have to manage that process."

No one suggests that SAAS isn't an enormously important development in software or that it can't be especially useful for smaller outfits. But while it may be a welcome kick in the pants for traditional software vendors, forcing them to rethink and simplify their products, it's not a silver bullet. In fact, nothing ever is.