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Riding the Crest of a New Wave: How the Original SaaS Companies Have Gained the Upper Hand (PI Intelligence Bite)

Written by: Jon Hansen

Article Overview: With tier one vendors such as Ariba and SAP moving into the SaaS space, a model upon which organizations such as Source One’s reputation and business have been built, it is in effect an admission that the traditional licensing model does not work. Because of what can only be described as a monumental shift (remember the old analogy about big ships turning slowly), overall awareness and acceptance for SaaS-based or on-demand solutions is on the rise. And with it, the players who are and have already defined this new paradigm.

Riding the Crest of a New Wave: How the Original SaaS Companies Have Gained the Upper Hand (PI Intelligence Bite)

Out In Front of the Paradigm Shift

With tier one vendors such as Ariba and SAP moving into the SaaS space, a model upon which organizations such as Source One’s reputation and business have been built, it is in effect an admission that the traditional licensing model does not work.

Because of what can only be described as a monumental shift (remember the old analogy about big ships turning slowly), overall awareness and acceptance for SaaS-based or on-demand solutions is on the rise. And with it, the players who are and have already defined this new paradigm.

As is the case with the solidly established SaaS vendors, who usually do not receive a single cent for their strategic services until they deliver to their clients’ expectations, is indicative of how the industry is truly evolving.

And unlike the mega-projects of yesteryear, when the lion’s share of the costs were born by the client before the “projected savings” were realized, the “trailblazing” approach by original SaaS vendors has helped to pave the way for a contingency-based pricing model that has been long overdue.

And while “traditional model” vendors like Ariba are now claiming that they are in “the on-demand business” having just reported “a 71 percent leap in subscription software revenues,” does not necessarily mean that they are truly an on-demand company. After all, proficiency in delivering under the SaaS model is not based upon an internalized increase in subscription revenues, but is instead tied to an historic performance record in terms of meeting and exceeding customer expectations.

So rather than heralding a triumphant entry into a new phase of a successful business, Ariba’s historic performance would tend to indicate that the move into the SaaS world was predicated more on admittance that their old model did not work. This latter point is driven home by the fact that between 2001 and 2005, the company lost $3 billion on $1 billion in sales.

This of course would lead me to ask the million, or in the case of Ariba billion, dollar question; “if they could not make it work under the old model, why would they be able to make it work with a new pricing structure?”

The fact remains, that now is the time for the original and true innovators to emerge from the shadows of trailblazing to assume the mantle of broad, mainstream acceptance as the new standard for e-procurement/supply chain solutions and services.

We must delve into the foundational elements of the key differentiators between what I refer to as the original SaaS innovators and the “interlopers” whose ability to deliver results will not likely change despite heralded announcements of a new day.

Use the contact information in the Author's Bio to obtain the complete research material supporting this article's findings.

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Article Tags: admittance, ariba, demand business, demand solutions, exceeding customer expectations, latter point, monumental shift, new paradigm, old model, paradigm shift, performance record, pricing model, software revenues, source one, strategic services, subscription revenues, subscription software, tier one, traditional model, triumphant entry



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