Everyone who carefully monitors the mass media landscape in regard to cloud computing may observe a certain contradiction among industry analysts and opinion leaders. In some cases, different research teams within the same organization contradict each other.

In the U.S., optimistic scenarios forecasting a very-soon-to-happen mass conversion to SaaS-based business applications dominate. There is a noticeable background of neutral voices cooling down the euphoria. And sometimes you can hit on a conservative judgment challenging the market predictions with well-grounded observations of the real world. The funny thing is that in Europe things are turned inside out.

Confusing Signals

Gartner consistently trumpets SaaS market growth, forecasting revenues to reach US$ 9 bn in 2010, up 15.7% from 2009 and projecting even stronger growth in 2011, with sales totaling US$ 10.7bn, a 16.2% increase from this year. Microsoft’s “SMB IT and Hosted IT Index 2010” echoes the wows, saying 65% of SMBs are using hosted software to some extent, with 73 percent of the remainder considering it.

Forrester questions the SMB market readiness for wide technology adoption, illustrating the point with numbers from the latest “The State of SMB Software and Emerging Trends 2010” survey. It reveals that SaaS is more commonly used by large enterprises, with 57% of SMBs expressing no interest in going to SaaS and only 9% planning to implement it in the next twelve months. IaaS, KaaS, PaaS and the rest of the aaS family inspire even less interest from SMBs. Forrester research of cloud-based storage services confirms “…respondents in all geographies and of all company sizes appear to have little interest in moving their data to the cloud any time soon.”

Pretty contradictory positions, huh?

Real Life Experience

Let me add more incomprehensibility to this discussion. I am working at a developer of WCM and social collaboration solutions both for on-premise and on-demand use. We don’t see any significant interest in SaaS-based services from SMB customers. This data is pretty relevant as the company serves 40K+ websites and 1K+ intranets worldwide and is rated No.3 commercial CMS vendor by W3Techs. Interestingly, in the German press, the terms “cloud” and “SaaS” are commonly associated with “overhyped” and “questionable,” especially as applied to security issues.

Gartner says that CCC (content, communications and collaboration) software leads the SaaS market with US$ 2.9 bn revenue (27.1%) in 2010, followed by customer relationship management revenue of US$ 2.6 bn. No doubt these numbers refer to the enterprise market with just a minor share of SMB. The highly-publicized SMB intentions are still intentions. SaaS-based collaboration is just talk, so far.

Irrationality in Software Strategies

Why is that? The main advantage of cloud computing is significant cost reduction in IT infrastructure implementation and maintenance. Why are SMBs not taking this opportunity to cut IT and especially collaboration costs  -- which is priority #2 in the SMB software strategies according to Forrester? Are SMBs aware of the industry analysts’ market predictions that they should start migrating their collaboration tools to the cloud?

Leaving aside the hot discussions happening around this question, I would like to concentrate on a single aspect of the issue. The psychological aspect.

Different estimations say that 30-40% of SMBs are already running collaboration software, most of which is installed on-premise. Only 5-10% don’t have any collaboration tools and are not interested in deploying any. 50-65% organizations are interested and presumably have some plans for adoption.

The first two groups are unlikely to switch to SaaS as it will require significant investments or changes in strategy. The last group is the piece of the pie that SaaS providers are focusing on as the major potential market driver. What are the main obstacles these organizations envision for going SaaS? You may come across many opinions including security, reliability, customization, integration, governance, regulatory compliance and availability. However, looking deeply into the nature of this resistance, you may notice a certain irrational anxiety that comes very close to being a socially acceptable level of paranoia.

I Like To Own It, Own It

People are accustomed to possessing valuable assets. Generally, possessing means you can establish contact with the object, feel it. The common perception is if you can’t touch it, you don’t own it.

Since the day of opening the first online shop, the software industry has been making efforts to dethrone this habit in regard to software products. Even now, software vendors sometimes experience difficulties explaining that application bought online comes without box. Many enterprise customers still insist that software (regardless of its price) be delivered in a box. They need to feel something they bought although it doesn’t bring any additional value, but rather increases costs.

The same practice extends to the way organizations prefer to use collaboration software. Collaboration is a business-critical tool that directly influences business continuity and efficiency. What? You suggest to move my intranet to some cloud some thousand miles away and have some little-known Moogle-shmoogle manage my apps? What if their service gets DDoSed? What if it gets hacked? Are you nuts? This is probably what will be behind a more conservative “No, thank you” answer when you suggest an SMB going SaaS. Ironically, with collaboration software, “owning” means having a dedicated server standing in the next room. A honking cubical thing with tiny blinking green and red lights. That's really weird, isn’t it?

Irrationality Continues

You would say CRM customers never think this way. True. This is probably because of and thanks to Salesforce.com, which made a great market push, nearly epitomizing the term CRM if not with its brand but with the SaaS model for sure. The collaboration market originated in the pure, on-premise form, and this approach took deep roots in our minds.

SaaS vendors provide a reasonable and well-grounded argument demystifying the common perceptions. These vendors commit to better SLAs than most internal IT departments deliver. The vendors hire highly-qualified engineers, install the best hardware and maintain a distributed network of servers with robust protection against DDoS attacks. They would do anything to protect their reputation. In most cases, they can do the job better than an internal IT team. This is about specialization that drives business efficiency --organizations succeed in a narrow task, doing everything often means doing nothing and delivering no result.

On the other hand, the SaaS model has a crystal clear advantages in reducing IT costs. Deploying collaboration tools in the cloud means organization bears zero capital expenditures anddelivers a lower TCO, superior ROI and reduced AMC. Naturally, here the paranoia meets up with the thrift that whispers to go ahead and get SaaS.


The main obstacle in wide adoption of SaaS-based collaboration is confidence. SaaS providers would need to invest great efforts to break the customers’ comprehension of the verb “to own”. In fact, in this case paranoia is a lack of trust. Trust kills paranoia. The collaboration software vendors are obligated, therefore, to educate the market, foster trust and dispel the common misperceptions. It takes time, but I am sure that in the future, organizations will accept SaaS collaboration as they now accept SaaS CRM or CMS.