Who will be the next SaaS success?

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This is a great article in Information Week about what it will take for software as a service (SaaS) to gain widespread acceptance in 2009. I agree with all the imperatives in this article, but I think it comes down to one takeaway: we will not consider SaaS accepted until we have at least a couple more successful examples in addition to Salesforce.com. Salesforce may have pioneered a new business model or industry, but an industry cannot be made up of one company. Hence, imperative #5, which emphasizes that Salesforce desperately needs some similarly large and profitable SaaS peers. This got me wondering, what is it with Salesforce anyway and can other SaaS companies replicate their success?

I’d say it is no small coincidence that the most successful SaaS application targets the sales and marketing function, the most notoriously anti-IT function in the enterprise. IT is often frustrated to discover the sale once the Salesforce professional services teams are already walking the halls doing the implementation. With this group as its primary customer, Salesforce has been able to ignore practically every imperative listed in this article. Their sales and marketing customers don’t know to ask many of the tough questions about uptime and disaster recovery. Integration, while nice to have, can be managed by the good-old swivel chair methodology or forced on IT after the fact. Additionally, Salesforce often doesn’t have to prove that they are less expensive than traditional software because they aren’t hampered by IT budgets or frustrating competitive software selection processes.

The other big advantage Salesforce had was its ability to grow a SaaS business model from the ground up. They have had to learn the business of managing as well as developing software. They’ve been focused on revenues and profitability using a SaaS model from the beginning.

Salesforce has laid the groundwork and opened up opportunities, but most SaaS companies will have a tougher customer than the sales and marketing group. When IT is involved, which they typically will be, questions will be asked about integration, reliability, and total cost of ownership. The established software companies will also struggle with reinventing their model. Let’s see where we are in a year, but this trend may take some time to take hold.

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