The service side of the equation works, but not the price, when it comes to big-ticket enterprise apps—particularly not when competing with low-cost offerings from nimble, small service providers. When it comes to small and midsize business customers, the
general assumption that gets made in the vendor community is that they would
all line up to use enterprise-class applications if only those apps were
available as a service.
The second part of the equation is pretty much true. A lot of SMB customers
don't have the IT talent on hand to run a lot of application software on-premises.
As a result, the economics surrounding SAAS (software as a service)
applications are pretty compelling.
But what still holds a lot of SMB customers back is the cost of those
applications. Faced with prices that can range anywhere from $50 to $150 a
month per user, a lot of SMB customers balk at the total cost of ownership of
these applications over an extended period of time. To make matters worse, they
also feel that they are paying to make use of a whole lot of features they
don't really need.
That's why there's growing interest in the SAAS category now that Google and
Microsoft are talking it up. Both of them have an emphasis on personal
productivity applications at the moment, as compared with corporate
applications typically offered as a service today by Salesforce.com, Oracle,
NetSuite, Sage Software and SAP.
The issue that SMB customers have is that they typically need something more
robust than productivity applications but less expensive than the business
applications currently on the market.
Into this void have stepped a couple of lesser known companies that are
doing surprisingly well filling a market need. Both InfoStreet and Zoho.com
have created services that offer a wide range of capabilities for SMB customers
and are priced anywhere from 50 to 80 percent less than the services offered by
the big enterprise players.
Of course, the big enterprise players say these applications are only suited
for small business customers. But when you look across the list of customers of
Zoho.com and InfoStreet you quickly discover that there are more than a few
midmarket companies using these services, not to mention a couple of divisions
of large enterprise customers.
Whether InfoStreet and Zoho.com will be around for the long term is
anybody's guess. Speculation is already rampant that falling margins will force
companies such as Salesforce.com to sell out to rivals such as Oracle. And both
Google and Microsoft are expected to increase their portfolio of services
through acquisition. As those events unfold, IT organizations are going to
discover how critical it is to be able to easily export and import data from
one service to another.
In the meantime, the best thing they can do is expand
the number of application services they are willing to consider, because the
diversity of offerings out there that can meet their requirements at acceptable
costs is greater than most people think.
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