Avoiding Failure with SaaS

CIO Update describes the growing trend toward software as a service (SaaS) products. The artcle argues that SaaS implementations are less expensive and failure-prone than traditional enterprise software deployments:

Before Salesforce.com rolled out its first services in 2001, companies that wanted to keep track of sales leads and pipelines installed customer relationship management (CRM) packages such as Siebel’s Sales Force Automation. These products were notoriously difficult to implement, with some estimates putting the percentage of CRM licenses relegated to shelfware as 50-to-75 percent. Why? CRM packages are expensive to buy, they are more expensive to deploy, and can be unwieldy to use.

Industry experts estimate that between 65-and-85 percent of CRM project implementation attempts end in failure. The reasons are numerous and varied but when the costs are totaled, a failed CRM implementation is an expensive proposition. Licensing costs start at six figures, and the total deployment costs can hit seven and eight figures with everything factored in.

With a track record like this, it’s not surprising companies are seeking alternatives. These deployments are considered to be both high-cost and high-risk, with a history of failures and cost overruns. It’s only natural that a paradigm that promises to mitigate both cost and risk has proven attractive, and that is exactly what is happening with SaaS.

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The track record for ERP implementations approaches that of CRM. Because of the complexity of implementation, many ERP companies actually took a hands-off approach and relegated deployment to IT consulting firms. Although this is certainly one way to get rid of a headache of your own making, thousands of “Big Four” consultants put their kids through college on earnings from ERP implementations; some of which were successful and some of which were not.

[Thanks to Carlos Somohano for bringing this article to my attention.]