David Dahlberg: Is SaaS and Cloud Computing Still on the Rise in this Economy?
David is the VP of Marketing for Model Metrics in Chicago. He and I have discussed the TCO argument ad nauseum, to the point where it’s clear that there really isn’t much of an argument because the numbers just aren’t there to support either side.
David makes some interesting observations that challenge the “conventional wisdom” TCO value proposition that seems to permeate from the SaaS / cloud computing community. His hypothesis regarding the apples-to-oranges application of TCO data to the broader market is spot on – cloud computing may not be for everyone at this point, but it does make sense in a number of specific situations. What this tells me is that it’s a futile exercise to try and use one-size-fits-all TCO arguments to justify SaaS and cloud computing purchasing decisions as we have been doing, and focus on integrating the TCO analysis into a more individualized and consultative approach to selling. Does this approach increase the cost of selling and push sales cycles out? Absolutely. But the alternative, which is holding our breath for Gartner or Forrester to release the silver bullet research that crystallizes the TCO argument, is not an effective strategy and will probably never come to fruition.
Reardless of the TCO, SaaS will continue to benefit in a downturn. Not least because of the lack of financial commitment needed. It’s easy to commit to a low spend on a monthly rolling basis as operational expenditure than it is to commit to spending thousands as capital expenditure.
To add to that, the interesting part about SaaS being an operational expense is that while many organizations have slashed capital spending to zero, there is an opportunity to leverage operational budgets to procure new services by reducing costs in other areas. An example of this is when I was an IT manager for a large CRM software company during the post-9/11 downturn, I was able to continue to fund projects by renegotiating maintenance contracts and other operational items that were already approved from a budget standpoint, and redirecting those dollars to other areas…even though SaaS wasn’t widely available in 2001/2002, I was able to work with vendors and creatively structure software purchases as “rentals,” which is effectively the same concept as SaaS subscriptions. So for organizations that are able to identify areas for operational cost cutting within areas that are already funded, they can funnel those dollars into new SaaS initiatives without having to request new funds.