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SaaS surprises: Broader appeal, customization and more

Think you know SaaS? There are a few things about the fast-evolving, on-demand software model that might surprise you. For starters, SaaS is becoming more flexible and more customizable than ever before. And while IT is usually stuck ironing out messy integration issues, this time there's help from new tools, strategies and specialists.

Control issues are another surprise — some IT execs are finding that giving up control of upgrades and changes actually frees up time to innovate.

It's a case where perception doesn't match reality. The phenomenal success of NetSuite Inc. and Salesforce.com Inc., two high-profile public companies with Silicon Valley roots that offer CRM suites, has given software-as-a-service technology the image of a one-trick pony — merely a tool for marketers and sales teams. But scratch the surface, and you'll see that SaaS is becoming a strategic tool for users large and small with an array of IT needs.

Take Medco Health Solutions Inc. in Franklin Lakes, N.J. The $45.5 billion prescription benefit management company has more than 20,000 employees, and compliance is a strategic part of its business. Jayme Antonoplos, director of compliance management, says employees must heed and monitor a broad range of regulations, including internal ethics mandates, prescription drug laws and the Health Insurance Portability and Accountability Act.

Until 2006, the company oversaw its compliance efforts with a patchwork of internally written applications. Since then, Medco has begun shifting to on-demand services from Cleveland-based Axentis Inc. One of SaaS's key advantages — speed — has already proved its worth during some recent acquisitions.

Trying to integrate an organization's compliance efforts with Medco's homegrown software would be tough, she says. But with Axentis, the acquired company can immediately adopt Medco's compliance services.

Surprised that such a big company is using SaaS for something other than customer-facing applications? In the early days, SaaS was, by design, confined to cookie-cutter applications. But now subscribers can configure the software to suit end users' needs. Here are a few things about SaaS that might surprise you.

It's Not Just for Small Companies

SaaS advocates often point to the speed at which on-demand applications can be deployed. Keitaro Shigemasa, CIO at Link Theory Holdings Co., which produces the Theory brand of women's apparel, says time was a key factor in its decision to adopt Sky IT Group LLC's SkyPad business intelligence dashboard for point-of-sale analytics. And like Medco, New York-based Link Theory is a large company with multiple stakeholders in the system.

SaaS by the Numbers

$6.8B: 2008 SaaS revenue (Source: Gartner Inc.) 76%: Percentage of U.S. organizations with at least one SaaS subscription (Source: IDC) 30%: Percentage of programmers in North America working on a SaaS project (Source: Evans Data Corp.)

“We could have done it ourselves,” Shigemasa says. “But we lacked the staff and the data warehouse tools. Plus, it would have taken three months or so to get it done.”

It only took four weeks to deploy SkyPad, he says. And Shigemasa praises the service because it requires little effort from his staff to train or support users.

Across the continent, Recreational Equipment Inc. (REI) in Kent, Wash., which reported $1.4 billion in sales for 2008, also had a need for speed. John Strother, director of merchandising operations, recalls that PivotLink Corp.'s eponymous BI service received data from REI on a Thursday and “by Tuesday, people saw it as a vital tool.”

“I never saw anything happen that quickly,” Strother says.

At first, 12 people in his department used PivotLink; now more than 200 employees throughout the company depend on it. REI likely will expand PivotLink into its supply chain group by 2010.

Doug Harr, CIO at Ingres Corp. in Redwood City, Calif., explains that when it comes to software, the traditional choice for IT is “build or buy.” For him, the choice is now “build with open source or rent.”

Harr acknowledges that he's on the bleeding edge when it comes to application deployment. He also notes that he had a greenfield opportunity when Ingres was spun out of CA Inc. in November 2005 with brand-new offices and an empty room for a data center.

Nonetheless, it's radical even these days for a CIO to eschew packaged applications in favor of a full SaaS and open-source environment. But Harr contends that it's not about ideology or parsimoniousness; it's about better software.

“It's not just more cost-effective to go with open source and software as a service; it's more innovative,” he argues.

Ingres has three SaaS anchors — Salesforce.com's CRM offering, financial and accounting tools from Intacct Corp., and Automatic Data Processing Inc.'s human resources software. In addition, SaaS point applications, such as a sales compensation tool from Xactly Corp. and a contract management tool from Aptus, are incorporated into the environment via an integration platform from Boomi Inc., another SaaS vendor.

It's Not Just for CRM

Kenny Gravitt spent 33 years working at IBM and Lexmark International Inc. recovering used hardware assets and reusing the parts in refurbished goods or selling them. After a brief but boring stint in retirement, Gravitt started Global Environmental Services LLC, a 20-employee electronics recycling company in Georgetown, Ky., last summer.

Having been nurtured on IBM's sophisticated ERP systems, Gravitt understood how vital it was to track the growing inventory of gear and the tens of thousands of discrete parts in his 70,000-square-foot warehouse. But his initial Excel- and Access-based inventory system fell well short of meeting his needs.

That's when Gravitt discovered SmartTurn, an online inventory management service from San Francisco-based SmartTurn Inc. He credits SmartTurn with giving his customers sophisticated insight into his supply chain operations without a pricey IT investment.

The SaaS tool, he says, “has won us two contracts” with major computer vendors, who pay the company to recycle hardware in Kentucky but can track progress in real time over the Web with SmartTurn. “It's our advantage over the competition,” Gravitt says.

While Ingres is on the extreme end of the SaaS adoption curve, other companies are certainly moving in that direction. Mark Davenport, IT director at Bosley, a Beverly Hills, Calif.-based men's hair-restoration subsidiary of the $850 million Aderans Holding Co., says the company has had more than a year of success using on-demand software. “We are looking to expand the SaaS model,” he says.

One of Bosley's more notable SaaS tools is the TimeTrade appointment-scheduling service from TimeTrade Systems Inc. in Bedford, Mass. Davenport says the company's previous Siebel system had “gaping holes” that created double bookings, angering customers and forcing the company to revert to a semi-manual process.

With TimeTrade, Bosley's consultants and medical personnel can input their available times at all 19 surgical offices. Customers can then see those available slots and set appointments convenient to their schedules — and no overlap occurs.

Bosley also uses on-demand marketing software from Silverpop Systems Inc. in Atlanta and data-cleansing tools from Stalworth Inc. in San Mateo, Calif. And Davenport says Bosley is evaluating moving from its on-premises CRM software to a SaaS service from Oracle Corp. or Salesforce.com.

Like Harr, Davenport said he has been impressed with how easily SaaS tools can be configured to meet internal needs, noting that TimeTrade's appointment service “does 95% of what we need” because it was customized. But equally important, TimeTrade has been amenable to adding features that Bosley requires in future releases.

“We have to wait until April, but we don't have to make an investment for the new feature,” Davenport says.

Although there are areas where IT shouldn't adopt the SaaS model, on-demand software's limitations are diminishing. And for new operations — whether start-ups, corporate spin-offs or simply nascent business units in existing companies — it's difficult to justify investing in IT infrastructure, given the depth and breadth of SaaS offerings.

As Ingres' Harr says, with only a slight exaggeration, “Just put a wireless router in the corner, and you're done.”

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