Urge to transform the business drives SaaS surge

A ZDNet research study and executive interviews with SaaS users uncover the real drivers of SaaS adoption.
Written by Rob O'Neill, Contributor

Software as a service applications are finding favour in user organisations globally. They occupy the high growth segments across a range of enterprise applications types — from customer relationship management (CRM) and sales force automation to human capital management (HCM) and enterprise resource planning (ERP).

In addition, organisations are using a plethora of SaaS tools to answer very specific needs such as social media marketing, managing expenses, and travel.

ZDNet is now at the end of a major quantitative research study probing the drivers and scale of adoption and usage of the different flavours (IaaS, PaaS, and SaaS) of cloud. A key finding of that research, and of a series of user interviews, is that businesses in Australia and New Zealand, countries that are early adopters of SaaS, are flocking to SaaS in search of business transformation.

These organisations want to escape the tyranny of inadequate and disconnected legacy systems once and for all, and create new, agile organisations.

ZDNet's Cloud Priorities report for Australia and New Zealand — the research was also conducted for Asia, Europe and the US — clearly shows organisations are looking for better ways to do business, and see SaaS investment as a strategy to achieve that.

The top business objective of SaaS adopters in ANZ is to build a more agile business model, at 45 percent of current SaaS users. In addition to that, the ability to scale rapidly sits at 28 percent, and a drive for strategic transformation on 24 percent contribute to a picture where SaaS isn't just being deployed for its core functionality, or for costs savings, but for its ability to unite organisations, streamline processes, and deliver visibility and accountability to business activity.

Percentages denote the proportion of businesses that listed the objective as one of their top three objectives for adopting SaaS, so sum to more than 100%. ANZ sample size was 580.
Image: ZDNet

Our executive interview series reveals organisations frustrated with the state of their disjointed operations explicitly using SaaS to deliver unity and visibility where before there was none. Just look at the names of some of these transformation projects: FBUnite by Fletcher Building,  and One Hills from Hills.

Auckland District Health Board was an early adopter of SaaS human capital management in the form of Oracle's Taleo, and the driver was the need for centralisation and control. Indeed, HR and recruitment manager Don Fulford told ZDNet the project was as much about getting internal processes and systems in line as it was about enhanced candidate management.

For Australasian building firm Fletcher Building, a SaaS-based HCM implementation from US provider Workday was part of its FBUnite effort to unite and transform what was described as a "fragmented" conglomerate and to deliver NZ$100 million in savings.

Fletcher wasn't commenting on the project, but in a video inadvertently posted online last year, the company's general manager of human resources systems and procurement, Sharon Spence, said FBUnite aims to deliver four pillars: a winning culture; responsiveness to the market; optimised operational performance; and the lowest possible cost structures.

The aim of the project is to unite and reduce complexity, track and develop talent, and make the company more productive.

That applies across SaaS applications and, in the case of iconic Australian firm Hills, is evident in the deployment of Salesforce.com for sales and marketing.

Hills' group general manager of product, Jeff Arndt

Jeff Arndt, Hills' group general manager of product, said that investment was made to support CEO Ted Pretty's "One Hills" business strategy, to connect and mobilise the different sales and service teams across what was a fragmented business.

Before the project, Hills had many subsidiaries interacting with the same clients and contacts without any visibility of each other's activities. Arndt told ZDNet that a single view of those contacts and interactions couldn't be achieved with the traditional on-premise, client-server system.

And, as Pretty told conference attendees at the Salesforce1 World Tour in Melbourne this year: "when you get visibility, you get accountability."

Arndt said Hills needed a step change, not incremental improvement. SaaS has allowed everyone to interact with the same set of data when serving clients and to see all those touch-points and interactions.

Employees now have one source of information from their cars, tablets, and other devices, through which they can track interactions and the progress of sales campaigns.

It isn't just established organisations that are seeking such unity. Start-ups, too, aim to avoid the pitfalls of traditional on-premises application deployments.  

The South Australian Health & Medical Research Institute (SAHMRI) was born when a state government review recommended the establishment of a flagship health research institute. The drivers for using SaaS were a need to unite the elements being rolled up into the new organisation and to deliver quick, easy, and affordable scalability.

SAHMRI had to think carefully about how to create IT infrastructure from scratch to support its fast-growing operations, and here it was CFO Barry Porter making the running.

Already familiar with NetSuite financials from an earlier start-up, Porter said using it at SAHMRI as well "seemed logical". SAHMRI employed 250 staff and was growing fast: by the end of the year it was expected to employ over 600.

Porter said the great benefit of cloud computing for an organisation in its early stages is the ability to deploy IT systems as a variable rather than a capital cost, conserving capital for the institute's core mission.

The cloud has also helped unite multiple locations and deliver flexibility in commissioning new locations. SAHMRI has three locations now and that could increase to six or seven, Porter said. Access from new locations is simply about plugging in a computer and creating a new user account. There is no need to worry about virtual private networks or other facilities.

A reduction in on-premise IT infrastructure is a natural consequence of SaaS adoption, but this should not be equated with a decline in the influence of IT executive management.

The ANZ Cloud Priorities report says: "Almost one quarter (24 percent) said their adoption of SaaS applications is part of a strategic transformation to reduce on-premises IT. This suggests that businesses are looking for both short-term and long-term benefits from their moves to SaaS."

So which executives are driving this activity?

As you would expect for any strategic transformation, the CEO was the most prominent SaaS proponent overall, initiating 34 percent of deployments of important SaaS applications, followed by the CIO at 30 percent.

Image: ZDNet

But there's a wrinkle in these numbers. CEOs mostly took the lead in smaller organisations. At medium scale and enterprise level, it was still the CIO making the running. In large businesses with more than 500 staff, the CEO initiated SaaS adoption in just 19 percent of cases while CIOs took the lead in 41 percent.

ZDNet's CEO interviews support this. Time and again in larger organisations the executives we spoke to said their CIOs were involved in the selection and vetting of SaaS applications for issues such as network compatibility, integration, security, and performance.

But in smaller organisations, the CEO or equivalent was clearly the dominant project driver.

That was the case both at Australian not-for-profit mining researcher Amira international and at Sydney-based franchise bar and café group Coco Cubano. And, for these smaller organisations, a desire for unity, for one single view of the business, was again at the fore.

Coco Cubano was aiming to grow from nine outlets to 16 or 17 by the end of the year and also planned to target offshore markets. Self-styled 'El Presidente' Tony Melhem told ZDNet the cloud was a growth driver.

Coco Cubano needed a system that would give franchisees access to information from head office in real-time, something that offered layers of access permissions and allowed both the head office and the franchisee's accountants or bookkeepers access as well.

The company settled on Xero, allowing management to work closely, and in real-time, with franchisees. Cloud-based accounting also freed management from their desks, allowing access from anywhere to real-time transactional data.

Melhem said such capabilities, including point of sale integration, were revolutionising the way franchises could operate.

"Technology is important," Melhem said. "What we are looking to do — what we will do — is put our learning and training materials, videos, and ops manual in the cloud to support our expansion overseas."

Amira International, which manages AU$55 million worth of collaborative research projects for around 80 mining industry members, has just 20 staff, but they are spread across four continents.

A shift to the cloud has united those dispersed locations and helped provide access to key information and the ability to share it.

Managing director Joe Cucuzza said the cloud facilitates access to systems and the sharing of information generally, while its chosen NetSuite system has also delivered important management tools for executives to better allocate resources and to manage stakeholders.

Amira shifted from on-premise ERP package Pronto, and after the success of the project is now looking at retiring its legacy customer relationship management system and shifting to a cloud-based CRM service as well.

"Anything that detracts from access is always going to deter people. Now anyone can get into the system and do business," Cucozza said.

Image: ZDNet

The research and interviews found high levels of satisfaction with SaaS investment to date, indicating the SaaS sea-change is not likely to ebb any time soon.

62 percent of ANZ SaaS users said they are either satisfied or very satisfied that their business has achieved the priority business objectives they targeted from deploying SaaS applications. A total of just 8 percent were either dissatisfied or very dissatisfied.

A mere three years ago many businesses felt cloud was unproven and over-hyped.  In early 2014 we're way past the tipping-point of cloud (and SaaS) acceptance as a strategic business capability.

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