SaaS in tough times: Don't just survive, thrive

Commentary - Much has been made of how the Software-as-a-Service (SaaS) marketplace, and companies using SaaS, will benefit from the recession - for good reason. By all accounts, SaaS companies managed to thrive during the 2000-2002 downturn and have continued to be “recession proof”.

With an economy struggling to recover, CIOs are under tremendous pressure to determine where costs can be cut from the bottom line, and what can be outsourced. Some CIOs have turned to cloud computing and SaaS as a financial “quick fix” in some cases, but there’s a growing realization that SaaS offerings have met a level of functional maturity to compete head-on with many traditional offerings at an enterprise level. Regardless of which survey or report you read – and there have been many in recent months – on average SaaS can also reduce the cost of implementing and supporting an application by 60 percent.

So what are some other advantages the SaaS model brings? And if you are a SaaS customer, how do you not only survive the downturn, but prepare for a return to business growth, regardless of when that growth actually occurs? Because as bad as things look right now, the economy is likely to turn around much sooner than we expect it to. History is proof of this.

Prepare for a return to growth before it occurs
The current recession began in December 2007, according to the National Bureau of Economic Research, which charts the peaks and valleys of business cycles. The average recession since World War II lasted 10 months, and the longest postwar slumps (in 1973-75 and 1981-82) lasted 16 months. Although extremely cautious in their forecasts, many economists predict that marginal growth will occur in 2010. Except for the Great Depression, no U.S. recession has lasted more than 24 months since 1885, so there’s a strong possibility that we’ll even start to come out of the recession sometime this year, albeit with a thriftier consumer mindset. Are companies prepared?

Though we're in belts-tightened mode, business and IT can still lay the foundation now for a quick start when conditions improve. New studies support this idea. In a May 2009 report, leading analyst firm Gartner recommended that even while the recession is still underway, now is the perfect time to begin preparing for business growth.1

The SaaS model – Doing more with less
There's a lot of hard work to be done before we can start looking ahead to an economic recovery, and unfortunately fear is driving decisions at many companies, creating a lock on IT budgets. Fear should not slow down or prevent companies from innovating and creating value in order to survive, weather the economic storm or even outperform the competition. If you look to the lessons of past downturns, you’ll find something consistent about the companies that came through strongly. They stuck to their guns and found new markets to take advantage of – SaaS being one of them.

Thinking creatively about how to do more with less is the key to IT innovation during challenging times and allows companies not only to survive but also to seize the opportunities that arise during periods of economic uncertainty. SaaS is providing a faster and more economical way for organizations to deploy, run and utilize software. This flexibility is particularly valuable during the downturn for the following reasons:

• 1. Lower licensing and maintenance costs and reduced overall cost of ownership.
• 2. Reduced in-house IT overheads and increased focus on strategic IT projects. SaaS is helping businesses through the economic downturn by freeing IT staff from deploying and maintaining in-house solutions.
• 3. Reduced upfront costs. SaaS makes it more affordable for budget-conscious organizations to implement the new applications they need to execute their “recession-proofing” plans.
• 4. Continuous quality of service, even when business activity and the demand placed on technology solutions are often increasing.

As we experienced in previous economic downturns, companies that invest smartly during the bad times emerge more agile and better prepared to grow faster after the recession. In tough times, companies strive to shed the extra costs and risks inherent in large, long-term IT implementation projects. As a result, it is becoming clear that, as companies aggressively implement cost-cutting measures, IT organizations that leverage SaaS can realize tremendous cost savings, while continuing to support their business needs and prepare for when the turnaround comes.

biography
Archie Black is CEO of SPS Commerce. You can reach Archie and learn more about SaaS by contacting SPS Commerce.