Is Your Vendor Really Operating "In the Cloud"? The 3 Most Important Questions to Understand About SaaS

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image I have written a lot about the advantages and disadvantages of the SaaS model over the past years.  As many of you know, I am a huge advocate for SaaS done right and by all indications (including some forthcoming research) the use of SaaS is continuing to increase at significant rates.

The branding of “SaaS” or “in the cloud” has quickly become table stakes for all vendors.  Right now, though, we are seeing lots of  wolves in sheep’s clothing.  Every vendor under the sun, including the big ERP vendors, are now branded some or all of their applications as Software-as-a-Service (SaaS).   This proliferation of “…look at me, I am SaaS” is creating more buyer confusion than ever.

As a result, I offer three questions every buyer of HCM software should ask any vendor walking in their door to determine if they are truly a SaaS vendor:

  • Do they offer utility-based pricing? – Is the vendors pricing model based on how the application is being used?  Most vendors today offer subscription-based (per employee, per month) as the standard for utility pricing.  Utility-based pricing is important because allows customers to easily and cost-effectively ramp up or ramp down usage of the application.
  • Do they have a multi-tenant infrastructure? – Is the entire infrastructure completely share (including a shared data model)?  While many would argue multi-tenancy has less relevance for large, global companies, a shared or multi-tenant infrastructure model is important for a vendors’ cost efficiency but even more important as it enables the vendor to maintain its architectural integrity and easily deliver new product releases to many customers at once.
  • Are their product updates seamless? – Meaning are the product updates automatically pushed to customers and requiring those customers to accept the new version? (Note: the functionality of new updates are typically turned off and configurable by the customer).  Seamless updates ensure all customers are operating off of the exact same code base.  If a vendor says they do not force updates, they are not SaaS, because this means they are running multiple versions of the product code for different customers.  I think this is the kiss of death, and even worse than an on-premise delivery model, because the vendors is forced to support and maintain each customer uniquely.

Right now, I think only a few HCM vendors (less than 5) would qualify under my views to be true SaaS.  Sure…I’m a purist but too many vendors sales reps are misrepresenting how they are doing SaaS and most buyers today are overwhelmingly unknowledgeable about the long-term repercussions of the impacts of their SaaS deployment.

Thoughts?

  • http://www.1234cast.com 1234Cast

    As has been said – the details of SaaS to a customer are largely irrelevant. This is like making a big deal of the fact that your traditional software is delivered on CD/DVD.

    However from the vendors stand point, true SaaS is critical to success. Anyone pretending to do SaaS without multi-tenant and a single code base will not survive.

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  • Addison

    I think the details of SaaS should matter to a customer interested in innovation, growth, scale and getting the most from the product they are paying for. If a customer just chooses a vendor because they can do this function X right now and the price is right, that might be all they want and who cares about cost or the future…seems short sided. If I want a software to manage my recruiting, onboarding, or performance measurement processes for right now and for the changing future, I need to assume my organization is going to change to some extent, or you should hope so…I want a software package focused on innovation, technology and growing with new trends in these areas and can deliver these to me with little cost that gives me options.

    I agree the kiss of death is multiple versions for multiple customers and I would throw into the mix those SaaS providers that make changes to the software that change the way users use it the morning after the release happened. These upgrades need to be as transparent as possible to the install base with the OPTION to use them or not.

    Great topic….defining true SaaS to customers is difficult because there are a lot of vendors claiming such but are not truly SaaS and it makes the scene confusing.

  • Bill Kutik

    While the advantages of a vendor maintaining one consistent code base for all customers has always seemed irrefutable to me, I am less sold on multi-tenancy bigotry! Sure it saves the vendor a ton of money on servers and application support, but if those savings are not passed onto the customers, who cares if they’re running separate (but identical) instances of the code on separate servers for every customer?

  • Bill Kutik

    I also think we should not confused Cloud Computing with SaaS. A vendor can be truly SaaS while running its own data center and not be in the Cloud of servers provided by Amazon, Google or whomever.

  • Jason Corsello

    Bill-

    “Who cares if they’re running separate instances of the code on separate servers for every customer?” I do. As someone who works daily with a hosted solution deployed at a third-party data center, every time a new release comes out incurs cost and resources. I need to download the updates from the provider and subsequently install that update uniquely on the servers at the data center. On a few occasions, the updates have been shipped with bugs that can require a number of man hours to identify and resolve. In addition, any update requires functional/regression testing to ensure any existing configurations are not compromised.

    If the product is single tenant, the vendor must conduct a similar process for every customer. Those cost and resources should matter for every customer!

  • Addison

    Jason – good point on quality. When running a single code line, as a product owner, we love the fact that we just focus on a single version. This leads to better QA practices, and faster turn around times on issues being found and resolved.

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  • Matt

    Can you name the true SaaS vendors, according to your standards?

  • http://peoplebase.com Edward Brown

    Jason, absolutely agree that having to install updates yourself provides great anecdotal support for multi-tenant. But as vendors come out with hybrid models that, for example, do updates automatically but don’t necessarily do them in unison for all customers on a single version, it will be gut check time for us purists.

    Whether it will be worth the extra cost to customers or the lost profitability to vendors is for them to decide, but quasi-saas will not match the software quality and the support quality at the same low cost, other factors equal (which they never are).

    As for the default disabling of newly launched features, Jason and Addison, I think it depends on the feature, and I understand being sensitive to users who by nature hate change, but we need to be careful not to end up supporting, in a sense, many versions because we’ve tied absolutely everything to a configuration setting.

  • Kris

    same q as @Matt, who are the (

  • http://blog.hirestrategies.co.uk Peter Gold

    Jason

    I agree with you from a technical standpoint but the real issue is the business need.

    If I have a true SaaS product does this help me attract and hire the best people? No it does not. Too many people buy and then blame the technology for their failure.

    Great technology does not equal great results whereas great recruiters can still get great results without the best technology.

    Peter

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