The Great SaaS Debate

I had dinner with GovDelivery’s (http://www.govdelivery.com) Scott Burns the evening before his keynote presentation at the SaaS/GOV 2008 Conference (http://www.siia.net/saasgov/2008/overview.asp). We chatted about a wide range of industry issues and trends, yet Scott really got me thinking when he asked, “What do you think the difference is between SaaS and ASP?”

They were basically the same, I said. In fact, no different than the utility computing solutions IBM hypes. Software as a Service (SaaS)…application service provider (ASP)…utility computing…all vendor-invented marketing speak designed to help customers compare different offerings and make a buy decision.

Scott had a different take. He explained that Software as a Service companies subscribe to a multi-tenant approach. They offer the same features and functionality to all users, who then benefit from a better managed, maintained and supported solution.

On the other hand, ASPs are a single-tenant offering. The solution is still hosted by the vendor and paid for by the customer via a monthly fee or on an as-used basis. However, the specific feature set is unique to the user.

OK…I get it. And I recognize the approach taken by a vendor (SaaS versus ASP) dramatically influences their product development strategy, as well as resources they need to invest in customer service and support. It’s why so many software firms introduce a SaaS solution to move away from customer-requested customization.

Do customers understand this difference? Do they even care? My experience tells me “no.”

Several years back Strategic Communications Group (Strategic) promoted American Management System’s Momentum financial management solution in the federal government market. We competed against ERP offerings from SAP, Oracle and Peoplesoft.

Time and time again, government RFPs were issued specifically requesting ERP software. Yet, the project requirements were exclusively financial management. It didn’t matter. ERP had buzz and the perception of delivering greater value. That’s what the customer was going to buy.

It’s important for every technology vendor to clearly define its market positioning and then remain steadfast in how it promotes itself. SaaS…ASP…utility computing provider? Before deciding on what to call your product talk with customers and prospects. What do they want to buy? It’s often easier (and less expensive) to adjust your business approach than to convince a prospect they need a different type of solution.