Lindsey Armstrong, Salesforce.com: Why enterprise on-demand is in demand

The suggestion that software as a service (SaaS) is for small businesses has been pervasive. But, as Lindsey Armstrong suggests, small businesses and large organisations alike can enjoy the benefits of SaaS.

By Lindsey Armstrong, Salesforce.com

It surprises me when I hear anybody suggest software as a service (SaaS) is right only for small businesses. The argument is that it appeals because it removes the management overheads of IT as well as the cost of infrastructure and allows a business to focus on what it does best.

That’s all true but do those benefits resonate only with small companies? If pushed, I’d expect a casual observer to think it more likely large enterprises would benefit most from the undoubted economies of scale achieved through SaaS, not to mention the mobility, flexibility and cost reduction.

But at Salesforce.com, our customer base is actually split in three pretty equal chunks – small, medium and large business users. And that is the crux of the matter. In isolation, size tells us nothing about a company. It is certainly no barometer of what technology is going to be right, or wrong for a company to use. It’s just as likely that a company’s IT use be determined by its industry sector, its ambition or its attitude towards innovation.

Smaller businesses no more like to be thought of as ‘small’ as larger enterprises like to be thought of as lumbering, sluggish or slow to adapt. That’s certainly the reason why Salesforce.com is used by small, ambitious companies looking for enterprise-quality technology without the headache of installing and managing on-premise software and support infrastructure.

But it is also the reason why large companies are increasingly moving over to SaaS and cloud-computing. Currently we work with the likes of Avis Budget Group, Cisco, Japan Post, Merrill Lynch, Symantec, Time Warner and Toyota, to name but a few. And the number of large enterprise users is growing all the time.

One reason is because scalability is critical to any business of any size. And while that’s true at any time, it’s particularly the case when there are ongoing concerns over the state of the economy. The ability to scale both up and down without incurring huge additional management costs, dealing in ticketing and delays or accumulating ‘shelf-ware’ as software goes unused is critical. On-premise software and the traditional licensing model simply do not allow this.

If that sounds unduly pessimistic – rather than pragmatic - then far more positive is the need for companies to react to opportunity. Opening branch offices or mobilising field staff to meet demand in new territories is far easier when all the infrastructure required is a web connection, laptop and browser. Conversely, for staff to visit the office, or for IT teams to get out in the field to install and support software immediately, makes a company less reactive. And neither of these benefits only kicks in above or below a certain size of company. They are universal.

Industry dinosaurs

Where large companies start to see clearer differentiation over smaller companies is with cost savings. Large SAP and Siebel CRM implementations have traditionally been at the high end of enterprise IT expenditure. Much of that investment is being written off now after years of trying to rescue ROI. Other, more fortunate companies caught wind of the SaaS revolution in good time to pull out of large on-premise investments.

For those companies using a SaaS solution there is no paid-for software gathering dust on the shelf. There is no costly over-licensing or compliance risk of under-licensing, no additional infrastructure requirement, no need for IT teams to spend years rolling it out and whole weeks each year managing it. At this end of the company-size scale the savings start looking pretty dramatic.

When a company only pays on a per-user basis and the management and infrastructure is looked after on a multi-tenant basis by a trusted third party there are huge economies of scale to benefit from. There is also greater transparency. No company maintaining on-premise software can ever know with any degree of accuracy what it will pay one year to the next in related costs. With SaaS it becomes a more manageable utility model without the hidden costs.

We recently conducted research among CIOs and found those in large enterprises are twice as likely as their peers at SMEs to be looking to cut costs in the current climate. For that reason, more and more enterprise CIOs are going to be embracing the greater cost-efficiencies of SaaS as they look to deliver more for less.

But Salesforce.com, the market leader in SaaS and platform as a service would say that, right? Of course we would, but don’t just take our word for it. Analyst house Gartner has shown growing support of the SaaS model for enterprise users. And you only have to look at the attempts by the likes of SAP and Microsoft to reinvent themselves in the face of competition from Salesforce.com and Google for further evidence that enterprise IT is changing.

These industry dinosaurs know they aren’t guaranteed a future place at the IT top table if they don’t shake the mindset that kept them and the industry in a one-speed, on-premise world for far too long. Small companies and large companies alike have seen the tangible benefits of SaaS and now there’s no going back.

Lindsey Armstrong is EMEA president at Salesforce.com.

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