The Expanding Gap Between On-Premise and SaaS Solutions

SaaS and On-Premise solutions are growing further apart, not closer. The innovation within SaaS vendors is fast, furious and focused. It's also embarassing to on-premise vendors.
Written by Brian Sommer, Contributor

Check out the continuing evolution underway

On-premise vendors that are trying to play in the SaaS world (and I use the word ‘trying’ on purpose) are moving at a glacial pace and falling ever further behind SaaS application software vendors.

Let’s look at the scorecard so far.

On-premise vendors, in general, have either ignored SaaS, been dismissive of SaaS or have been struggling to get SaaS versions of their older products ready for prime time. Specifically, on-premise vendors have been troubled with:

- getting multi-tenancy to work with their products. Products that were designed to be one-off implementations at customers may need a complete re-think to work in the cloud for scores of different customers simultaneously. If multi-tenancy wasn’t designed into the products at the onset, a retro-fit is going to be costly (and possibly ugly).

- getting a Platform as a Service (PaaS) integrated with their SaaS solution. On-premise vendors keep getting confused with their legacy SOA platforms and a PaaS. While both can do many of the same things, on-premise SOA platforms have not turned into commercial software development platforms like PaaS solutions like Force.com and NS-BOS. It’s time on-premise vendors realize that their SOA architectures are fine for on-premise products but insufficient and inappropriate for SaaS products. Just look at the multitude of applications that have already been built on PaaS solutions. Where are the FinancialForce.com and App Exchanges in the on-premise world? I don’t see them and I don’t see them coming either.

- Getting Integration as a Service (IaaS) incorporated into the solution set. The biggest innovations in getting application software implementation costs lowered (at all) in the last few years have come from third parties like Business Process Outsourcers and not from on-premise vendors. Granted, SAP has done some work here with some success, but on-premise vendors haven’t made this a focus area for decades. SaaS vendors have leveraged IaaS technologies from the start and the speed of these implementations is proof-positive of their success.

In the last few weeks, I’ve read a couple of interesting announcements that show the on-premise vendors are losing more ground to faster moving SaaS competitors. Let’s look at three of these announcements:

- NetSuite announced that they are taking their ERP suite to run on the Google Apps Marketplace (and Google’s cloud by inference). This is in addition to it running on the NetSuite cloud. Most on-premise vendors can’t get their products on one cloud let alone multiple clouds.

- Today, FinancialForce.com is announcing out-of-the-box integration to SAP Financials. Think about it, a SaaS vendor is making their software backward compatible with old-school technology.

- Northgate Arinso has created a multi-tenant version of SAP R3 HCM. SAP hasn’t done that yet.

I’d say the gap between the nimble, fast moving SaaS vendors and the on-premise vendors is widening. Any vendor can claim to be innovative, that only takes a press release to state as much. But, speedy innovation or fast-paced innovation is another thing altogether. SaaS vendors are kicking the on-premise vendors but good in this race.

If you’re evaluating new or additional on-premise applications for your firm, look closely before you sign that license. Ask the tough questions to see if:

- the on-premise vendor can get to the cloud anytime soon - the speed of innovation emanating from this vendor matches or exceeds that of SaaS vendors - your on-premise solution can actually catch up to the capabilities in newer SaaS products - your on-premise vendor’s true core competency is ‘spinning’ a story around SaaS instead of actually ‘delivering’ a true, multi-tenant SaaS product complete with a PaaS and IaaS toolset.

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