Robert DeSisto

Will Software as a Service or Cloud Computing erode prices in business application markets? If sales force automation is an indicator the answer is yes. Just this week Microsoft announced both a price cut and special promotion for its Microsoft CRM Dynamics Online offering. (see Gartner Research Note – Microsoft Reduces Prices to Win CRM SaaS Business published today) I also have routinely have seen discounts in the 40 – 60% range on customer SaaS Sales Force Automation deals this year for all providers.

The main issue is core sales force automation is commodity. Automating the management of opportunities, contacts, and activities has been around for over 20 years. Once functionality hits a level of commodity status, price becomes a key factor. This market dynamic will place heavy emphasis on a SaaS vendor’s ability to scale its operations and lower its per user cost to serve metrics to maintain margin targets. Those providers who have underinvested in operations will not be in position to be competitive in what will continue to be a very price sensitive market.

This past month 20% of my customer inquiries came from CIOs and their supporting staff asking how to fix poorly negotiated SaaS contracts or respond to new business requirements for SaaS services. In many cases, the IT organization’s first exposure to SaaS is when problems occur. Rather than solve each problem as it occurs, I recommend getting in front of the SaaS Curve.

Early generations of SaaS were often implemented on an island, with little integration, configuration and customization requirements. This enabled business executives to drive the deployment of the software without involving the IT organization. SaaS is now being leveraged to handle more-complex business requirements, which requires more configuration and integration outside the domain expertise of the business administration professional. The business organization is not equipped with procurement, vendor management, and software deployment skills to support increasing complexity. Gartner’s SaaS Readiness Assessment Checklist (See Gartner Research Note – Use the SaaS Readiness Assessment Checklist Before Deploying Your SaaS Solution) will ensure that you’re in a position to manage the life cycle of a SaaS contract. The checklist focuses on specific issues such as security, disaster recovery, governance policies and vendor management protocols as they relate to SaaS. Whether you have already implemented a SaaS solution or not, the checklist will provide guidance of where you need to be as an organization to support SaaS initiatives.

At Gartner US Symposium today, I asked an audience of roughly 700 people if they had disaster recovery commitments from their Cloud or SaaS provider. One person raised their hand! Maybe we should focus a little less on exploiting the “phenomenon” and more on inspecting the “nuts and bolts” of a Cloud or Saas provider’s operations such as making sure they provide disaster recovery objectives. External certification in the form of a SAS 70 Type 2 audit is helpful, but by no means sufficient to ensure that customer recovery-time objective (RTO) and recovery-point objective (RPO) service levels can be met. My colleague John Morency authored an important research note (Critical Recovery Questions to Ask SaaS Providers) on this topic and is a must read

Are you annoyed as much as I am when analysts and pundits stop at no end to espouse the benefits of cloud computing or SaaS without providing the downsides or risks? We all have all seen the behavior.  Cloud Huggers are the first to blog when a negative press event comes out about a cloud outage, or security breach. They are also first to create analysis that discuss business drivers but conveniently leave out inhibitors.

 The reality is SaaS and Cloud Computing has value and a place. SaaS and Cloud computing also have issues that should not be swept under the rug. It is imperative that both value and challenges are weighed when considering cloud computing and SaaS. At US Symposium in Orlando, Florida, I will be presenting: “Software as a Service’s Uncertainties Revealed” (October, 20^thTuesday, 5 PM – 6 PM).  Rather than stand on stage and give a “rah, rah” presentation stating SaaS will take over the world (something you can get for free by looking at most cloud computing or SaaS vendor websites), my goal is to make sure everyone in the room walks away with a pragmatic view of the role SaaS will play in their IT future with a focus on the relevant trade-offs of SaaS versus on-premises deployments.  The presentation will open in a court room style drama where I will present the vendor case for SaaS. I will then cross examine the vendor points, and ultimately reach a verdict.  Cheaper, quicker, more innovation are just a few of the SaaS vendor arguments I will examine. The presentation will conclude with a 4 step action plan everyone should take as it relates to SaaS.

I am new to the Gartner Blogsphere. I will be using this space to share real world situations. No theory, just plain real world circumstances.  My first post is my own personal experience on how one company, Discover Card, just doesn’t get it when it comes to CRM. 

My story starts on May 22, 2009 when I mistakenly sent a payment to my landscaper for $x,xxx that was intended to pay my monthly Discover Card bill.  The only way I found out I made this mistake was my wife was declined to make a purchase on our Discover Card on May 27^th. After she informed me, I went online to my bank and found the mistake, a mistake I freely admit I made. I called Discover Card, they tell me I must pay the bill and only then could they eliminate the finance charges on my account. It seemed like a reasonable request, I complied.  Keep in mind, I have never in 10 years carried a monthly balance on my account. However, I have purchased a significant amount of goods for which Discover has received healthy transaction fees from the merchants. So my expectation was they would waive all finance charges and late fees.

On June 2, after my payment was posted, I again called Discover Card. They informed me that they could waive the finance charges but not the late fee. After being a customer for over 10 years and always making payments in full, Discover Card was not going to waive a $40 dollar late fee!  I asked Discover whether they were willing to sacrifice $1,000s in future potential transaction fees for a mere $40. Discover Card’s response was that it was their policy. After asking for a manager and not getting one, I informed them I was no longer a customer. 

Discover Card demonstrated CRM at its worst.