Excellent article on SaaS segment growth and challenges.

SaaS is not merely a mid-market phenomenon. In fact, there are a wealth of examples where large enterprises have standardized on SaaS-based solutions to automate and support key business processes -- from customer relationship management to strategic sourcing to supplier management.

Indeed, McKinsey, the top strategic consulting firm, reports that its annual survey found that the percent of CIOs that planned to use SaaS solutions within the next 12 months doubled to 61%. And globally respected Credit Suisse Software Analyst Jason Maynard states: “The conventional wisdom is that On-Demand software is appropriate only for small businesses. Nothing could be further from the truth.”

Just some real-world examples of SaaS success stories at large, global enterprises include:

*Pepsi uses a SaaS solution to manage corporate contracts.
http://supplyexcellence.com/blog/2006/05/03/and-the-on-demand-challenge-pays-off/

*Barclay's uses a suite of SaaS solutions to manage its supply and contract management activities.
http://supplyexcellence.com/blog/2007/04/30/barclays-transforming-supply-in-an-ever-changing-world/

Your article makes good drama. But it doesn't reveal the whole story. SaaS is indeed another option in the business application portfolio for companies of all sizes, geographies, and industries.

For large enterprises particularly in financial services the elephant in the room is data security. Salesforce.com fell to a phishing scam comprising SunTrust Banks customer’s. This is an unacceptable risk and will slow enterprise adoption.

Excellent article! I think this does a great job of highlighting the issues CIO's must consider when evaluating SaaS offerings. As a SaaS vendor (Intuit's QuickBase), we are involved in these discussions on a daily basis. The issues highlighted here are the ones that SaaS vendors need to solve to achieve broader adoption.

I especially appreciated the quote "don't expect something unique." I believe that the ability to make SaaS implementations conform to unique business processes - without all of the messy custom code of the on-premise model - is the next frontier for SaaS. I talk more about it on the QuickBase Blog.

While the SaaS model has improved dramatically on security and reliability not enough attention has been paid to flexibility. "Best practices" are the average of everyone's practices and end up being right for no one.

Again, great article and one that I'm recommending to others at Intuit.

SaaS targets the long tail of the small and medium companies. It will take some time for the large companies to adopt SaaS. At WinSaaS we have a done a survey and more than 90% of companies that look, in the Internet, for SaaS solutions have less than 25 computers.

SaaS isn't going to take over the world - each app will be considered in isolation and is really an finance and accounting issue to start with. SaaS vendors will sell the benefits but there are as many challenges with it at the moment.

What’s this Software as a Service (SaaS) all about? A layman’s view and implications for Technical Professionals

Simply put SAAS is like a modern form of outsourcing with one main difference - YOU STILL MAINTAIN FULL CONTROL. Its just a case of utilizing your SAAS providers expertise, resources, support, but u retain full administration rights, changes can be made instantly (you should be provided with a the same console your provider has) “what they can do, you can do” – this ultimately empowers a CIO to focus on more pressing projects that he is engaged in- without having to be burdened with tasks that previously was managed in-house.

Benefits to an Organization:
Lower Overheads
Better utilize resources, by applying it to current & future projects.
Gain a trusted partner providing you with a service that is their core focus as they have the resources, capable people, support & experience.
Enables organization to better Focus on their core function or fundamental value they provide their clients, especially if IT is not their core business.

Byron Graham
bgraham@groveis.com
Postini & SAAS Wholesaler

I agree that security is a key element for Saas acceptation.
Typically Salesforce.com now supports 2FA (using Vasco products that are the reference in banking) and can now ensure a much better security.
Next step for this kind of service is to ensure a private virtualization, but operational may not like the idea...
best rgds,