"Tear down this wall" was the famous challenge from United States President Ronald Reagan to Soviet leader Mikhail Gorbachev to destroy the Berlin Wall. (Source: Wikipedia)
The best thing to do when you have only one strategy for your company is to say there is only one strategy in the world. It makes you right automatically which is a great boost for anyone's ego. When Marc Benioff came with the famous no-software tagline, he was trying to make a point. As the only SaaS game in town, in a market dominated by Siebel, playing the no-software card helped Salesforce.com differentiate itself and win, leaving all its competitors far behind. I understand the marketing wisdom behind "no software" but I don't agree with this claim. It will be as reasonable for Toyota to declare the death of a non-hybrid cars.
But why do I even bring "no software" up? It is all because Lawson CEO predicted the death of SaaS and carefully explained that he has only one strategy too: YES software. I don't even want to get to the argument who is right: Benioff or Debes. Debes is entitled to have his own opinion even if I think he is terribly wrong. Nonetheless, most of the reasons he provided to support his point of view are either wrong, or bluntly anti-customer.
When I wrote the post titled Is SaaS for me? I realized that SaaS' strength stems from the fact it is a model where the vendor and the customer are fully aligned. The vendors need to work hard to earn their customers' business time and again. Just think about it: a SaaS company with as little as 1,000 customers will get 5 reminders per business day to keep working for its customers. Apparently, some of the on premise players do not subscribe to this idea. Judge for yourself:
Debes on the SaaS market:
SaaS is not God's gift to the software industry or customer community. The hype is based on one company in the software industry having modest success. Salesforce.com just has average to below-average profitability.
Look at Salesforce.com vs. Lawson performance in the last year. I think one chart is better than 1000 words... Lawson is in business for 33 long years and its net profit is lower than the 9 years old Salesforce.com. Debes also conveniently forgot WebEx that was sold to Cisco for $3B last year, and ignores the 100s of fantastic SaaS companies that generate billions in aggregated revenue, and can beat many on premise companies when it comes to customer satisfaction hands down.
Larry Ellison has the same perspective as I do. He accidentally funded the CRM product and NetSuite. He didn't really mean to. They've had small successes but, overall, they've been spectacularly unsuccessful.
Translation: The CRM product (AKA Salesforce.com) and Netsuite worth together almost $8B: 5.5 times more than Lawson. I am sure Larry Ellison wants to go back in time and put his money on Lawson instead of SF and Netsuite. After all, Lawson share price was cut in half between 2001 and today.
Debes on customers' wisdom:
People are stupid. History has shown it repeats itself, and people make the same mistakes.
Should I add anything?
Getting signed up as a SaaS customer is fast, but getting out is just as fast, whereas traditional software is like cocaine — you're hooked. It's too difficult and expensive to switch providers once you've invested in one.
I am sure even Lawson customers didn't expect this kind of honesty: Lawson adopted the East Germany cold war strategy: it was a horrible place to live in, but high walls and blood thirsty guards kept you in. No customer (and no German) wants high walls — they like flexibility. And it is not only about moving off a product — it is about adjusting the payment to the need. Case in point: you bought 1,000 seats of Lawson 2 years ago and now your company needs only 300 due to major downsizing: would anybody buy back those 700 extra seats you paid for only 2 years ago? A customer using SaaS will just pay for 300 the next time he is up for renewal, so cost can be adjusted to revenue. Think about that for a low wall.
As long as it's working, people are happy to stick with one product.
Where was innovation in the world if everyone thought that all you need is a product that works?
Debes on hype (and right for once):
People will realize the hype about SaaS companies has been overblown within the next two years.
To end with a positive note, I will give him that. SaaS is not a religion, nor a strategy. It is a delivery mechanism that in some cases is better, in others not. There are good SaaS companies and there are bad ones, but the bad ones don't last, since their customers don't let them to. This is the only reason why SaaS is not going anywhere.
I am sure we will all have lots of fun discussing this article during our 100% SaaS session next Friday.
The problem with SaaS from a software industry perspective is it exposes the tradition that software does not normally provide the full-value the purchaser expected; customers have long bought more software than they actually use or get value for. What salesman would give that up without a fight? In contrast this makes growing a SaaS based company more difficult (forced to make software that delivers overt value) and perceived to be less profitable (lower ticket price) than they are accustomed to.
There is a lot of "smoke and mirrors" on the front-end of software implementations that lead customers to believe it's their fault that the system they purchased months earlier and finally deployed doesn’t work exactly as they expected, or is used as often as they hoped. “Doubling-down” is the reaction so they won't be embarrassed (or accountable) for the large sum of money they invested; the spend continues.
With SaaS the system must deliver the expected benefits immediately — there is no place to bury customer expectations. It has taken a few years for SaaS providers to develop remarkable and useful services that address the fundamental industry-wide challenge of value to customers. To quote Marc Benioff "People are always over-estimating what you can do in one year in our industry and under-estimating what you can do in one decade."