Community Software SaaS or Inhouse software?

Anshu (who I also met at BarCampBlock talks about SaaS (Software as a Service) solutions.

“So here is my point – either go with a “purist” SaaS definition and
accept SaaS as a relatively small niche market today with limited
adoption or expand your definition to include different SaaS models.
Don’t mix and match.”

I have talked with several vendors (Leverage, Ning) who offer SaaS and others who are pure software plus ASP (Jive Software) and customers doing it either way (Webex, VMWare, Symantec).

Here are the top considerations why for a pure play SaaS:

  1. Multi hosting and multi tenancy: Architecturally this “should” lower your total cost of management. For example if you as a vendor are hosting more than one customer at a server, the total cost of ownership should be lower.
  2. SaaS (technically) will allow you to scale linearly (so will costs). Primarily because you can keep adding into a cloud of computing power, as opposed to scale by the box that ASP services offer.
  3. The only negative I have heard is the perception of lack of privacy/ security. If you are in the same namespace as other customers in the same box, there might be a chance data integrity might be compromised.

Here are the top reasons someone chooses ASP:

  1. They like a particular software offering the best, and believe the option offered by the vendor is functionally superior to other SaaS providers. Given all things same, most customers seem to prefer SaaS solutions though over ASP.
  2. The ASP solution has most likely been around for longer providing a more “stable” platform. E.g. in the community space the software / ASP vendors have been around for 3+ years where as pure play SaaS have been around for less than that.
  3. The functionality of a pure play software solution is percieved to be more comprehensive since most of the engineering effort goes towards developing functionality versus architecting the offering for multi tenancy.

Here is why I have heard customers software and host internally:

  1. They have very high internal security and privacy policies. They believe since customer data and information will be hosted on the community, it is important they be reponsible completely for it
  2. That’s the only way they do business. Due to financial and amortization reasons, they purchase the software outright and then “own” it. After 4+ years (typical amortization schedule),Inte the software ROI goes directly to the bottom line. This is a little old way of thinking in my view, but its the widely held view.
  3. Integration with their CRM and other systems. This is by far the biggest reason I have heard. SaaS and ASP vendors offer little in means of integration to existing systems for customer identity, internal rewards systems and CRM solutions.

For most customers, this is not an either / or option. There are clear reasons why you would choose one versus the other.

What do you think?