Mark Settle is the CIO of Okta, a company born in the cloud; no homegrown applications, no legacy data centers, nothing on-premise. It sounds like CIO nirvana, but in his latest guest blog, Settle offers a practitioner’s perspective on the common myths surrounding the all-SaaS dream.
Every CIO talks about their ‘journey into the cloud’ but few ever expect to truly transition all their applications and data center operations into a cloud environment. These journeys are discussed in highly aspirational terms, implying that the end state – all-cloud operations – will be much easier to manage than the hybrid on-premise/cloud environments they currently maintain.
On-premise operations are perceived to be costly, cumbersome, labor-intensive boat anchors, riddled with technical debt, and difficult to secure and difficult to change. Capital investments in on-premise assets handcuff IT’s ability to leverage emerging technologies or respond to emerging business needs. In sharp contrast, cloud environments are perceived to be almost infinitely fungible and elastic, providing their users with ready access to the latest and greatest business applications and infrastructure capabilities. But is this really true? What is life really like in an all-SaaS world?
For the past two years I’ve had the good fortune to work for a company that was born in the cloud. That’s right – we run completely on SaaS applications and AWS. No homegrown applications. No legacy data centers. Nothing on-premise! While it’s certainly true that all-SaaS operations provide unparalleled business agility, they’re accompanied by some unanticipated challenges as well. Here’s a practitioner’s perspective on the common myths surrounding the all-SaaS dream.
Myth #1: SaaS allows you to build an application stack customized for your business
Organizations that have implemented enterprise-wide ERP systems frequently feel trapped into constructing internal business processes that can be easily supported by such systems. These organizations yearn to break the shackles of their ERP prisons and employ SaaS services to build application stacks that are uniquely customized to their business requirements.
While the freedom of choice afforded by SaaS is certainly true in theory, but it doesn’t always work out that way in practice. Many companies deploying SaaS applications rely on industry leaders in specific functional domains such as Salesforce for CRM, Netsuite for finance, Workday for HRM, Marketo for marketing operations, etc. Paradoxically, the widespread adoption of these industry-leading SaaS tools has led to the implicit creation of a new cloud-based ERP stack consisting of semi-standard SaaS applications that must be integrated by its owners.
Myth #2: 100% reliance on SaaS allows companies to mix and match business applications at will
This myth is also true in principle, but rarely realized in practice. Once a company has built its sales, finance or human resource practices on platforms such as Salesforce, Netsuite and Workday, it’s quite difficult to switch to alternative systems, even if an upstart company operating within one of these fields offers demonstrably superior capabilities. IT leaders know better than most how much people hate change. While it’s true that all-SaaS operations provide tremendous technological freedom to interchange business systems, you’re still stuck with the age-old problem of inflicting change on the users of such systems. Let’s face it – very few IT leaders possess the political capital and intestinal fortitude required to inflict these kinds of changes on their business partners!
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On the other hand, changes to niche applications that address very specific needs are easy to implement precisely because they support narrowly defined processes that are typically prescribed by a single functional group. There is a wide variety of best-of-breed SaaS tools devoted to job applicant tracking, sales lead scoring, travel and expense management, training administration, project management, proposal preparation, financial forecasting, revenue recognition, contract management, etc. Niche tools that address these types of needs can be readily replaced by newer, more innovative solutions. This is the key to achieving true business agility through the use of SaaS – the ability to replace niche systems that complement major functional platforms at will.
Myth #3: SaaS tools are built to ‘plug and play’ – they can be implemented in very short periods of time
This one is true, but with a caveat. SaaS applications can be activated and configured in very short periods of time, typically measured in weeks instead of months or quarters. However, to obtain the maximum business benefit from any given SaaS tool, it’s likely that the tool will need to be integrated with other applications in your SaaS portfolio.
When you really come to terms with the integrations that are required to synchronize data across multiple SaaS applications and update business dashboards in a consistent fashion, you realize that SaaS implementation projects have very long tails. You may still be implementing tool-to-tool integrations a year or more after a specific SaaS application was originally implemented. (Suddenly you become a little wistful about the internal integrations that were an inherent feature of your old clunky ERP system!)
Myth #4: SaaS applications are WYSIWYG solutions that eliminate endless customization debates
Enhancements to internally hosted business applications have historically been laborious and painful. Internal IT teams are usually overwhelmed by requests from their business partners for customized enhancements to on-premise systems. Furthermore, they need to periodically upgrade the version levels of the applications they are hosting, carrying along all the customizations they’ve constructed in the past.
SaaS vendors radically altered this innovation framework. They promised to deliver new business functionality much more frequently, reliably and painlessly than internal IT teams managing on-premise applications. The quid pro quo of this innovation model is that business leaders can no longer request specific enhancements with the assurance that they will be implemented. When using SaaS tools, business leaders are forced to live with the enhancements that the vendor chooses to implement, which quite obviously are designed to address the broadest needs of their customer base. In effect, the business users of SaaS apps are confronted with a WYSIWYG (What You See Is What You Get) value proposition.
Au contraire, mes amis! IT organizations routinely customize SaaS applications. They add custom fields to standard SaaS objects or build custom objects that must be maintained in the future. They may construct API-to-API interfaces among various SaaS applications or build microservices that interact exclusively with a specific SaaS tool. Enterprises have not abandoned their customization compulsions simply because they’re now using SaaS applications instead of internally hosted systems.
Myth #5: SaaS solutions are less costly when viewed on a Total Cost of Ownership basis
The cost effectiveness of SaaS has been hotly debated during the past 15 years, and here’s the simple truth: if you compare the two ends of the spectrum – an all on-premise world versus an all-SaaS world – the all-SaaS world is inevitably cheaper. A world in which there is no data center hardware, no data center operations, smaller application support teams, greater business participation in application configuration and inherent security safeguards baked into individual apps is definitively less complex, less labor-intensive and less costly to manage than an all on-premise world.
Unfortunately, organizations that are in the process of migrating to an all-SaaS or mostly-SaaS world rarely realize significant cost savings until they achieve a critical mass of SaaS tools within their application portfolios. Significant displacements of on-premise systems must occur before companies decommission data centers and materially reduce current staffing levels. The worst situation from a cost perspective is to be stuck somewhere between these two worlds.
The war is over and guess what? SaaS won!
Like it or not, the SaaS subscription model has become the predominant application framework for supporting enterprise business operations. The path to an all-SaaS world is time-consuming and arduous. The end state is not a nirvana-like universe in which all applications are perfectly suited to your business needs, infinitely interchangeable, plug & play upon purchase and free of customization. But in the end an all-SaaS world does enable greater business agility at a lower overall cost – which is the true end state we should all be trying to achieve!