Research firm Gartner predicts that the worldwide public services cloud market will grow18% in 2017, with software-as-a-service (SaaS) cloud offerings projected to grow 20.1% for a global revenue worth 46.3 billion dollars. The same report cites SaaS as one the more mature cloud technologies, because it has been so widely offered by vendors and adopted by companies. So what has made SaaS so popular?

  • SaaS is a budget seller for enterprises
    CIOs still remember all the groundwork they had to lay to sell management on an in-house system that required expensive software licensing and millions of dollars of hardware. With SaaS, all of this is eliminated. You simply subscribe to a service from a vendor.
  • Vendors like SaaS
    Vendors can stay away from highly customized versions of their product at different customer sites. Instead, they can run all their clients as multi-tenants on one system platform. This allows them to leverage their staff and data center resources, since they can support all their clients in a single effort.

In this environment, the standard SaaS implementation process for companies has been to sign an agreement with a vendor to implement the system and to call the vendor whenever there's a system issue.

Meanwhile, IT (uptime, system throughput, etc.) gets the emphasis--and there is a tendency for companies to forget that they enlisted with the SaaS vendor in the first place because it had specific expertise in a company function (HR, sales, supply chain, etc.) or in a specific industry vertical like healthcare.

When this happens, companies start risking a decline in the returns on their SaaS investments.

Here's how.

True to its promises, the SaaS vendor continues to improve its software with enhancements that are issued continuously, monthly, quarterly, and so on. Since the vendor installs these new software versions, you don't have to worry about that in IT, which is exactly what you want and what you are paying for. However--are your end users getting the benefits of the new enhancements?

When it comes to historical software usage in the end business, the 80-20 rule has consistently applied to in-house software. In other words, 20% of the software gets actively used by the end business every day, while the rest of the software, which requires training and changes to business processes, sits unused.

The story with SaaS isn't necessarily any different. And if most of the breakthrough software enhancements are not being used, you begin to lose business value on your SaaS investment.

How can you fix this?

Begin by refocusing your annual, semi-annual, or quarterly SLA and performance review meetings with your SaaS vendor.

Meetings in the past might have focused on report cards of system uptime and performance--but these report cards can easily be expanded so they begin to look at areas like software utilization. In short, how much of the vendor's software (or software enhancements) are being actively used by and incorporated into the end business?

For the SaaS vendor and your company to get good grades, the two of you will have to work together to ensure that software enhancements are steadily infused into your organization so the business can take advantage of the function or business vertical expertise your SaaS vendor is offering.


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SaaS Research 2017: Adoption rates, business benefits, and preferred providers

This report looks at what cloud services businesses are using, as well as why companies choose to go the SaaS route, how satisfied they are after making the switch, and what matters to them when choosing vendors. Free for Tech Pro Research subscribers.


Second, you should take a hard look at how you are using the services of your SaaS vendor.

Many companies only call vendors when there are IT issues--but how many times do companies chat, email, or pick up the phone to ask the vendor about the "best use" of a particular new system feature or function for the end business?

The answer is, not often.

Finally, companies should keep an eye out for free seminars, online training, and documentation for software upgrades that the SaaS vendor should be producing. It is not enough just to see an enhancement that the vendor installs on the system. Rather, your end users should be getting concurrently educated on what the enhancement is, how they can start using it, and whether it will affect any existing business processes.

If these steps are not taken, companies risk losing the value of their SaaS investments.

A good way to improve both business and system performance is to organize a joint team of IT and end business users which meets with the vendor and works to ensure that the company gets the most business and IT benefit out of its SaaS software.

Companies that are using this approach see improvements in their SaaS software utilization, and feel much better about the ongoing investments that they are making.