Software-as-a-Service (SaaS) is not just about cutting costs anymore, it’s about getting a competitive edge. While slashing capital expenditure on software is still a primary reason for taking the SaaS route, recent research from IBM shows that leading companies are using it to give them an edge over the competition.
SaaS in 2013
While a majority of companies are now aware of the advantages of SaaS as a cost saver, only one in two sees it as a way of achieving the more significant goal of market leadership. Only one in five are actively making the decision to invest in SaaS for business reasons, rather than Total Cost of Ownership (TCO).
The findings, which are contained in a study called Champions of Software as a Service is the result of a survey carried out by IBM in late 2013 on the heels of earlier research conducted to find out how organizations are using cloud computing.
The SaaS research was the result of a survey of 879 decision makers in companies that had SaaS deployments. Of those respondents, 12 percent are C-level line-of-business executives and 10 percent are C-level IT executives. The remainder was comprised of Vice Presidents, directors and managers, and was split evenly between IT and business functions.
While cloud computing is a core element of IBM’s businesses, little research has been done to find out exactly how businesses are using SaaS and what they are hoping to get out of it.
However, what is known is that the use of SaaS has increased dramatically over the past few years, and its growth is unlikely to stop anytime soon. According to the Gartner Forecast: Public Cloud Services, Worldwide 2011-2017, the market will grow from $18.2 billion at the end of 2012 to $45.6 billion at the end of 2017.
On top of this end-user spending on public cloud services is expected to grow 18 percent in 2013 to $132 billion and almost $250 billion by 2017, including cloud advertising.
Reducing costs is still a primary reason companies turn to Software as a Service, but those at the front of the pack, like cloud leaders in general, are discovering how SaaS can help them achieve a much broader and more strategic goal – unlocking competitive advantage.
IBM SaaS Collaboration figures
IBM carried out the research to find what is driving this demand. Generally speaking, while TCO was cited as the top reason, 41 percent have already achieved this to a high degree, with 47 percent now citing competitive advantage as one of the driving forces. A small group invested in SaaS with TCO as the principal goal.
According to IBM, this conforms to earlier research which found that top organizations are outperforming their peers by the strategic use of cloud computing. These companies are also remarkable by the different approach they are taking to cloud computing.
Digging into SaaS
For the sake of the study, IBM broke the respondents into three different groups. They include:
- Pacesetters: Those that have the highest level of SaaS adoption and are gaining competitive advantage through their broad efforts
- Challengers: Those that have adopted SaaS from a narrower, financial perspective, but who are still getting a competitive edge
- Chasers: Those that have been slower to adopt and are still trying to find their way.
The difference between Pacesetters and the rest, IBM found, is the reasons that they turned to SaaS in the first place. While Chasers and Challengers are driven primarily by TCO, Pacesetters have understood the possibilities of SaaS and are using it to improve collaboration, both inside the enterprises and across their wide ecosystem.
Research further suggests that Pacesetters have adopted SaaS for customer-centric reasons, and hope to achieve a competitive advantage through the use of cloud computing. It could be argued, however, that these companies are leading precisely because they have better customer experiences rather than because of a highly developed IT strategy.
One other consideration that needs to be taken into account is the belief current in many enterprises that IT has little involvement with SaaS once the initial deployment has been made.
However, as we have seen in other successful areas of IT, the most successful companies are those that have managed to bridge the business - IT gap to enable both sides of the enterprise to work constructively towards the same goals.
IBM SaaS cloud adopters
IBM SaaS cloud adopters
1. Better IT, Business Relationships
Pacesetters, IBM found, have strong Line-of-Business (LOB) and IT cooperation on everything ranging from the type of SaaS deployments that are used, to the way they are used and how they are installed.
The research pointed to the fact that 71 percent of Pacesetter organizations feature strong business-IT collaboration, as opposed to only 36 percent of organizations in the Chaser category.
Furthermore, 70 percent of Pacesetter organizations said that SaaS is strengthening that relationship, as opposed to 39 percent of Chaser organization. Over 65 percent of Pacesetters actually describe the IT and LOB relationship as a strategic partnership.
2. Improve Efficiency
Pacesetters are streamlining their approach to IT and business, with 66 percent reporting that SaaS improves business application agility and makes it easier to deploy and implement solutions according to business needs.
Three-quarters of Pacesetters also report that they have improved self-service around IT, freeing-up valuable IT time for more pressing projects. More broadly, 70 percent of Pacesetters are optimizing business processes and workflows using SaaS.
Leaving aside these details, Pacesetters are also using SaaS to enable better collaboration within the enterprise and with customers, improving customer experiences in the process.
3. Working Smarter Together
The research also managed to put a figure on the degree to which enterprises use SaaS for collaboration. It found that 61 percent of Pacesetters say that SaaS increases both internal and external collaboration, in contrast to 34 percent of Chasers. Over 70 percent of Pacesetters also credit SaaS with improving business relationships.
Of all the tools that Pacesetters are using to improve relationships, they put social tools at the top of their most favored SaaS application, whereas Chasers placed social tools in the 12th position. IBM says that Pacesetters are using social tools to tap into the right talent to solve problems regardless of where the talent, or problem, lies in the ecosystem.
It is not unlikely that Chasers are Chasers because of their failure to understand the full significance of new technologies, as evidenced by their low placing of Social Tools.
4. Better Decision Making
While there is more and more information being created and entering the enterprise, the difficulties in developing actionable insights are becoming more and more pronounced. However, SaaS has enabled companies of all sizes to deploy analytics applications to suit their needs, including applications that are capable of analyzing big data.
IBM SaaS analytics deployments
The research bears this out, showing that nearly 75 percent of Pacesetters are using big data analytics, while only one third of Chasers are doing the same.
By generating new insights from big data, Pacesetters are able to make faster, more accurate decisions, and ultimately achieve competitive advantage.
5. Market Agility
If Pacesetters have adopted SaaS to develop better customer relations and provide their customers with better experiences, the research also shows that these companies are achieving better market response times and results via SaaS agility response times.
The research shows that 66 percent of Pacesetters are using SaaS to identify needs and to bring products to the market quicker. On top of this, 71 percent are using it to speed up time to market and improving customer experiences in the processes. The research also showed that 71 percent have changed their organizations business model to accommodate SaaS deployments.
Conversely, less than one-third of Chasers use SaaS for the same purposes.
There are other advantages to SaaS, particularly in respect of business needs and the ability to pick and choose applications, or components, according to need rather than because they come with a suite of on-premises tools. There is also speed of deployment and often – but not always - - easy integration with legacy systems.
Neither should the cost savings be written off, although enterprises need to look at this on a five year basis rather than initial costs. That said the report does point to a shift in the way SaaS is being used and, with many businesses now taking this route, the change in the future is likely to become more pronounced.