I read a piece about 2 weeks ago that gave me one of those moments: you know, when a whole lot of pieces fall into place and your mind races. It was titled You Become what you disrupt

Since that moment I’ve become increasingly aware of this trend in the SaaS world. (It’s like when you buy a new car, suddenly all you see is the same car). It’s my contention that SaaS has itself fallen foul of some of the very (bad) traits it set out to remove. All for sound economic reasons, but the proof is there.

Lock in – Force.com, Amazon.com, Google.com (plus a whole bunch more ). Here’s a list of the glittering stars of SaaS, internet and PaaS. All going after lock in. Tim O’Reilly comments on the Google App Engine.

Keeping the internet as an open platform is a choice. We didn’t understand what was happening to the PC ecosystem, but we’ve seen this movie before, so we should recognize and fight this plot line when we see it happen on the internet. We need to keep our cloud services vendors honest, and tell them we want an open, interoperable platform, not one based on lock-in.

Bob on Smoothspan suggests that Amazon should more aggressively move toward lock in to further its financial success. Hmm, I thought lock-in was so last decade? Isn’t one of the tenets of SaaS the way you can change vendors easily?
Interoperability. Hey software vendors, get this. We want our applications to work together! Have a quick think about why Microsoft desktop applications are so wildly successful. They did two things

  1. they made it simple to use. The leap from DOS to GUI was massive in making PC’s mainstream.
  2. they made all the programmes you commonly use work together on the same platform. Its my understanding that way back when they brought the various services like word and excel together one at a time (the argument about how successful this was done is irrelevant for most people), they made it easy to do.

Fast-forward to Monday, SaaS commentator Phil Wainewright went into overdrive about the SFDC / Google Apps integration. Saying a bunch of stuff including;

This is a showcase for on-demand integration. Salesforce for Google Apps is a close integration of two distinct on-demand application stacks, in which both applications can continue to follow their separate upgrade and evolution paths without breaking the integration.

(In the interests of honesty & integrity, so did I about Salesboom.)
But think about that. So basically you’re saying wow, you can integrate two apps together. Ummm so like integrating your SAP GL with CRM from Seibel. Or how about Payroll with Accounts. Ok, I’m assuming it happened a bit quicker, but the mere fact that Phil is trumpeting this as a major event is…well sad. This isn’t new, way back it used to be called EDI, then that became unfashionable so it became integration, then webservices and the latest mashup. Sorry, but I would have thought in a 2.0 world this was EXPECTED.

Identity, look at what is going on here. The fact that OpenID exists is to address the same issue users have been fighting since application silos were in nappies. The nirvana here is single sign-on. IMHO Google’s suite of products is so useful because I’ve got identity federation across them. This still isn’t addressed. Take the iPayroll/Xero example above. They’ve got database integration, but no identity bit. To the best of my knowledge none of the vendors allow for single sign-on (does Force.com? Does anyone?)

Proprietary systems – ok here (with one large noticeable exception) SaaS providers seem to be doing quite well. The ability to create customisations (widgets or whatever) seems to be quite universally applied. My question is (and the point of this post) is for how long? Using history as an indicator, this free for all can’t last. For a couple of reasons;

  1. Vendor share, someone will dominant and change this. You’ll be able to write customisations, but for one company not many. Then you’ll see a bunch of small companies writing auxillary apps for the core…force.com anyone?
  2. Commercial pressures, freeware just doesn’t cut it. Ad funded apps, well for the time being ok. But the relevance of Adwords is declining, surely that makes that model questionable? Sooner or later the market is going to come under pressure. That means a couple of things, consolidation and pressures to retain (lock in) customers…

So has SaaS failed by becoming like the old established players? Who has it failed? Was it all inevitable? Am i way off base?

5 Comments
  • Falafulu Fisi |

    Yeah, I read about the decline of Adwords about a week ago. To me, it seems that internet advertisement is over-hyped.

  • I understand your sentiment. You could add to this my recent laments about Amazon charging essentially maintenance with their new Silver and Gold Support programs:

    http://smoothspan.wordpress.com/2008/04/18/amazon-rolls-out-better-service-the-cloud-wars-continue/

    At some level, that feels so Old Enterprise Software Company.

    OTOH, and pursuant to your points above, SaaS still offers all the benefits it ever did relative to the old model. It simply never claimed to fix all the ills.

    When I think of the SaaS advantage in its purest form I think of SaaS vendors as having to earn back their customer’s loyalty each and every month by delivering a service, not bits and bytes. That’s powerful, valuable, and a significant step forward.

    I’m not sure SaaS vendors ever signed up to make it easy for you to leave them, they just view that since you invest so much less in it up front, the risk is all on their side and not the customer’s. You don’t get the old problem of spending tens of millions and still not having a working solution.

    But we can still hope for even more and we can try to avoid backsliding.

    Cheers,

    BW

  • Ben,

    Great post! It definitely forces one to think about the current state of affairs in SaaS. I don’t think SaaS has become entirely like the old industry, but it does have some basic genetic material that originated in the on-premise world.

    Too many people are discussing SaaS 2.0, etc. What they fail to realize is that in the software business, v1.0 really means beta. What I mean by this is that in our first iteration of SaaS, we didn’t tackle everything we wanted to, but it’s a hell of a start. Most of the negative items you highlighted in this post are part of what I’ll categorize as “growing pains” and missteps driven by hypothesis of what business strategy should look like in the SaaS world.

    I think reflecting on SaaS as you’ve done is the first step to correcting things that we feel are inadequate, as well as laying the foundation for what SaaS 2.0 (which is the first non-beta SaaS iteration!) looks like.

    -Sinclair

  • Sinclair/Bob

    Thanks for the comments – the post was by the unreasonablemen – one of the diversity blogs contributors

    Appreciate you input to this discussion

    Ben

  • Hi there, Thanks for the comments!

    First up a clarification. Google’s ad revenue’s are still increasing ( 20% YoY)) http://moneycentral.msn.com/investor/sec/filing.asp?Symbol=GOOG

    The more i think about this topic generally, the more i wonder if SaaS companies are having to make these types of compromises because its what VC’s & or the market wants. Ie business models that they are comfortable with. (Either that or there aren’t any new business models). Until SaaS becomes a majority stake in the software market this may continue to be the case.

    I agree there are (significant) differences in the real world lives of SaaS providers (the putting it on the line every day is a brilliant one), maybe these differences will create change?

    Looking forward to seeing some others views on this and seeing how this pans out.

    Cheers

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