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Potential Drawbacks
Many midsize businesses are attracted to SaaS because it means they can do away with worrying about a significant investment in technology infrastructure. "When I started looking at NetSuite, I realized I don't need a server anymore, and I don't need to finance another computer," says Gene Waller, CFO and CIO at Bountyland Enterprises inc., a Westminster, S.C., petroleum distributor and convenience store operator. "Now I can go anywhere and get on the Internet and look at inventory, receivables, and payables." With over $50 million in annual sales, Bountyland is using NetSuite Small Business.
Another big user of an array of SaaS applications is Linden Lab, the San Francisco-based creator and provider of Second Life, the virtual world, which is itself a hosted application. "Everything on Second Life is built by the users themselves, and everybody uses common software," explains Linden's John Zdanowski, CFO and CIO. "Internally, we have our meetings in Second Life. We find it's quite productive. Our whole model is basically SaaS."
Linden, a privately held firm with revenues in the $50 million to $100 million range, switched from Quickbooks to NetSuite in 2007. "We use it to manage the financial close process," Zdanowski says. The company maintains a proprietary billing system, which required some integration to work with NetSuite. "When somebody cashes out of Linden dollars, we pay through PayPal or cut a check, and that integration took us a week," Zdanowski says. Other hosted applications the company uses are Google Calendar and Jira, Atlassian's on-demand project management application. "SaaS lets us focus on the things that add value for the company," the CFO/CIO adds.
But make no mistake, SaaS has its drawbacks, most notable the potential for integration difficulties. Another is the likely need for customization, because many SaaS applications tend to be "one size fits all," requiring midsize companies to find ways to adapt the on-demand systems to fit their needs. "Integration is the number one concern," says Nucci of Boomi. "Integration will be a problem with a vast majority of companies when they try to integrate SaaS."
Typically companies incur a problem when trying to connect the SaaS application with a legacy system behind the company firewall. "Many small and midsize companies will have a Quickbooks (Intuit) or Great Plains (Microsoft) running their financial books, and they will need the on-demand system to connect with it," Nucci says. Boomi offers the capability of on-demand integration that can be accessed via a browser. Boomi's integration engine contains the appropriate application programming interfaces (APIs) to make the connections between systems.
Customization was an issue for Premiere Global Services, a NetSuite customer. "For any companies considering SaaS, I would encourage them to check out first whether their business processes fit into this kind of business and workflow," suggests Michael Tasker, Premiere's director of sales process and systems. The publicly-owned Atlanta-based provider of Web collaboration, audio conferencing, and messaging services has annual sales of about $500 million. "We send more messages than any other company in the world," Tasker says.
Premiere used an integrator, Explore Consulting of Bellevue, Wash., to help customize NetSuite's on-demand applications to meet its needs for visibility of all contracts in process, as well as to create a scorecard to measure sales activity in process. Tasker says the cost savings of SaaS was important to Premiere. "It allows us to focus more on the business and on the business processes than on software development," he adds. "We don't want a salesperson walking into a potential sales opportunity and not having full visibility into the customer's history."
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