Early next year I’ll be presenting at an outsourcing ICT summit in Auckland. One of the people I have plenty of time and respect for in the SaaS space is Sinclair Schuller of Apprenda. Sinclair posted this excellent discussion comparing SaaS with other ICT process outsourcing.
Sinclair came up with a distinction between horizontal outsourced processes (SaaS or otherwise) and vertical ones. The horizontal ones sit “on top” of the business, providing critical but not “immersed” functionality. The key thing here is that there is a high level of substitutability with these processes. Changing from ISV CRM to SaaS CRM A to SaaS CRM B is an easy and viable proposition.
Where it gets more tricky is where the SaaS product is verticalised within the business, that is it touches many different levels, integrates at many different points and is more “specialised” than a generic product. Clearly in this instance the number of possible solution providers falls rapidly (Sinclair gave the example of dairy farm management software (vertical and specialised) with CRM (horizontal and generic)).
Clearly then a highly vertical SaaS offering (and my contention is that this is where the majority of SaaS plays in the future will be) IS different from other ICT outsourcing and should be entered into more as a partnership model than a low cost arms length one.