Monday, September 25, 2006

SaaScon 2006: Keynote 1

oday and tomorrow find me at SaaScon: The Business to Business event for Software as a Service.

The morning started off with Paul Gillin introducing Tim Chou (formerly of Oracle). Tim is a polished speaker and he was a wise choice for the opening keynote. He has an easygoing manner, and he delivered his entire talk with no notes and no slides. He just spoke--it was a very compelling delivery...

...and yet, I found myself quite uncompelled by his talk. Interesting, because I agreed with his general point: Software as a Service is succeeding today, will continue to succeed, and will change the software business top-to-bottom.

My first issue with Tim's talk was his take on customization: customization is dead. He gave the example of a dial tone: no one was ever offered a "custom" dial tone, so everyone is happy using the same dial tone. He then gave an anecdote of a customer they analyzed at Oracle: the customer had added 2,000 customizations to their software, but in two years had only actually used 2 of them.

Frankly, I found his examples to be almost condescending to enterprise software vendors. The idea that "because we all use the same dial tone, we can all use identical software" is just silly. Customization is definitely a part of life. If, as an enterprise software vendor, you pretend that you won't need to customize for your customers, you are kidding yourself and doomed to fail. Personal software is a different matter entirely, but this is a "Business to Business event."

I much prefer Gianpaolo Carraro and Fred Chong's take on customization: architect your system so that customization can be handled in a standard way so that you can customize without losing the benefits of shared hosting.

I had another disagreement with Tim's talk: the old "83% of organization's software IT budget goes to supporting existing software" saw. I've heard this before (with different numbers, but all of them large and over 70). The implication seems to be that 17% of a budget on new software isn't enough. But it always makes me think: how much should an IT department be spending on new software every year? Fifty percent? A hundred percent? Can you imagine buying all new software every year, constantly training your users on new software?

Moreover, moving to SaaS may change this number, but it's not as meaningful as you might think: it means that, rather than paying money on managing, you're paying more annual money for license and the cost of managing is built in to that license. And if you are able to get that software cheaper (because your SaaS provider is doing a good job of taking advantage of economies of scale and passing that savings on to you), that doesn't mean that the you now have more budget to spend on new software: it means that you now have a smaller budget. The part of your budget that was paying to maintain that software is now built into your license cost (and, ideally, it's smaller).

There seems to be this myth among companies in SaaS discussions that if we can lower software cost through SaaS, customers will be able to spend more money on software.

Wrong. Customers like SaaS when it saves them money. It doesn't free up huge IT budgets--it helps them decrease their IT budget.

Anyway, I'm glad to be at the conference, and I'm exciting to see the sessions (especially GP and Fred's talk later today)

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