Why Would SaaS Adoption Raise in an Economic Downturn?

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by: Christian Smagg

As experienced in previous economic downturns, companies that invest smartly during the bad times, emerge quicker, and better equipped to grow faster after the recession. Thinking creatively about how to do more with less is the key to IT innovation during challenging times and allow companies not only to survive but also to seize the extraordinary opportunities that arise during periods of vast uncertainty. When you think about it, creative application of new technologies during weak economies actually gave rise to huge waves of productivity like Software-as-a-Service, Web 2.0 or social networking.

But fear is driving decisions at many companies these days, causing this unhealthy lock-up of budgets. Current miasma should not slow down or prevent companies from innovating and creating value so as to survive, weather the economic storm or even outperform competition.

Financial crises are often having a huge impact on IT departments, resulting in significant increases in business activity, placing greater burden on IT resources and forcing them to find new ways to boost productivity while slashing expenses. At times like these, it is highly recommended that companies seriously consider leveraging applications delivered via a software-as-a-service (SaaS) model, harnessing the broader value that these solutions can play in not only moving the business forward but moving it beyond the current economic crisis as well.

Indeed, CIOs should take a much closer look at SaaS solutions as a way to avoid significant up-front investments in new software platforms by simply “renting” on-demand applications that would provide added returns where most needed: the top line. SaaS would empower IT teams to achieve and sustain efficiency and quality, while facilitating the kind of cost-effectiveness that becomes a top priority during a recession.

SaaS is providing a faster and more economical way for organizations to deploy, run and utilize softwares. This flexibility is particularly valuable during economic uncertainty for the following obvious reasons:

  1. Reduced upfront costs. SaaS makes it more affordable for budget-conscious organizations to implement the new applications they need to execute effectively their "recession-proofing" plans.
  2. Reduced in-house IT overheads and increased focus on strategic IT projects. SaaS is helping the business through the economic downturn by freeing IT staff from deploying and maintaining in-house solutions.
  3. Continuous quality of service. Even if business activity and the demand placed on technology solutions are often increasing significantly.
  4. Lower licensing and maintenance costs, reduced overall cost of ownership, also smoothed by the actual SaaS subscription model.
  5. Quicker, easier and less risky deployment and upgrade to new future versions. This reduced implementation risks together with the ability to respond more nimbly to changing business needs while smoothly and incrementally adding new capabilities are making this option significantly more attractive in tougher economic times.

A major advantage of SaaS solutions is the optimum flexibility provided, enabling companies to downsize or reorganize while minimizing waste by instantly reducing or increasing the size and scope of their solution, at any time.

These benefits mean that SaaS is now being increasingly used by companies in a number of areas, not only including Customer Relationship Management (CRM) and Sales Force Automation but also enterprise collaboration, web conferencing and back-office requirements such as expense management, procurement, Supply Chain Management, Enterprise Resource Planning (ERP) and Human Resources functions to name a few.

In tougher economic times, companies want to shed the extra costs and risks inherent in large, long-term IT implementation projects. It is therefore becoming obvious that, as companies aggressively implement cost-cutting measures, IT organizations that leverage SaaS solutions will realize tremendous cost savings, while continuing to support the business’ needs in the most flexible and effective manner.

SaaS is already an important part of mainstream IT in companies both large and small. Its basic value propositions are now widely established and accepted, including low upfront costs, simplified software management (for both maintenance and upgrades), effective security, high reliability, and increasingly, integrative capabilities to bridge data and functional gaps that exist as a result of existing systems and processes. It is therefore expected that SaaS solutions will gain significant share during and immediately following the current economic turmoil, since offering customers the ability to continue to innovate at a substantially lower absolute cost of entry and ongoing TCO, during a period of intense capital spending constraint.

For further insight on this topic, you may want to review a recent Gartner survey analysis  focusing on identifying usage patterns and key trends for SaaS within the enterprise, including SaaS usage per market segments, migration activity between deployment models, projected future usage and investment for both on-premises and on-demand, and the state of governance policies within enterprises currently using or planning to use SaaS.

Original Post: http://www.saastream.com/my_weblog/2009/02/why-would-saas-adoption-raise-in-an-economic-downturn.html