SaaS best-of-breed vs. SaaS suites: Who's likely to win?

Bigger software suites are emerging in the SaaS world, much like they did in the on-premise (and office automation) world. Best of breed SaaS applications may soon be operating at a cost disadvantage. Will suites prevail again?

My money is on the Suites

About two months ago, I contacted a number of CIOs from large firms about their recent SaaS (Software as a Service) implementations. One of the things I heard from several of these executives was that they would implement more SaaS products only when SaaS vendors develop more applications. Why? These software buyers want an integrated suite of products and not have a bunch of best of breed SaaS applications that the customer must integrate. Integration in the SaaS world is different than what one finds in the on-premise world.

Technologies from firms like Boomi, Pervasive and others make integration very easy. Just last week, in a conference call I had with Tenrox (a PSA (professional services automation) SaaS provider), I was pleasantly surprised at the number of out-of-the box integrations Tenrox has with leading ERP solutions.

But, customers will do what customers are wont to do. They will buy suites and the larger the suite, the greater the market appeal. So, in the SaaS world, like the on-premise world, we can expect more customers moving to vendors with larger, pre-integrated suites.

Case in point: Workday has released its Workday 10 solution. Now, their SaaS solution includes a number of talent management applications (e.g., recruitment and succession planning) to its core HRMS solution. Interestingly, just weeks before this announcement, one Workday customer expressed this exact functional need (i.e., integrated Talent Management and HRMS) to me. That customer wanted to move more of their application business to Workday and get out of the best of breed business.

Big SaaS suites will benefit at the expense of standalone applications. Why? One of the biggest value drivers behind a customer’s move to SaaS is the reduced internal IT support cost a company has when using SaaS products. In the SaaS world, the vendor maintains the application not the customer. But, in a best of breed SaaS world, the customer is back to maintaining interfaces and integration aspects across a number of (SaaS) applications. Best of breed SaaS applications may have a cost disadvantage to their integrated SaaS suite competitors. How big or small this is will be something that will be deliberated in the sales cycles of SaaS vendors. SaaS vendors need to understand that this is a perception (vs. reality) matter today and best of breed vendors need to figure out how to minimize or destroy this perception. If they don’t, SaaS suite vendors will rule the market.