Software as a Service Has Its Place
As you might have noticed, I am a proponent of anything that gives customers more control over how they spend their money. For example, I think customers should not make huge upfront payments for what amount to software science fair projects.
Nor do I believe most companies need as much tricked-out custom software as vendors tell them they need. They also shouldnt have to pay for software that isnt performing to their expectations. And while marriage is supposed to be a lifetime commitment, enterprise software isnt.
Those are a few of the reasons Ive become a big fan of SaaS (software as a service). I recently came across a company whose business plan is a good example of why SaaS makes sense. This was during the preliminary judging for the www.siia.net Software and Information Industry Associations Codie Awards. Im helping with "business software," a category that includes, well, everything from hosted mainframe apps to FileMaker Pro.
One of the companies Ive interviewed is called LiveCapital. Based in the San Francisco Bay area, LiveCapital has created a SaaS application for business credit management. This is an area ripe for the sort of service LiveCapital provides, which is gathering credit reports on applications and comparing the scoring to criteria established by each client for granting credit.
At most companies this is a labor-intensive paper shuffle by humans who still end up making arbitrary decisions, often because they lack proper policy guidance and sometimes simply because they can. The LiveCapital solution, called DecisionExpress, can totally replace human judgment (or the lack of it) or provide detailed metrics a human credit manager can use to make a decision.
Some of LiveCapitals clients, which include PC Connection, United States Steel, and Siebel Systems, are building Web-based front-ends for capturing the initial credit application online. This allows a credit decision to be made, if not instantly, then in minutes rather than hours or days. Further, because DecisionExpress manages the requests for reports and data flow to and from the credit bureaus, customers are finding the savings in report fees alone can save several times what the software costs each year.
Top fee for Live Capitals service is $36,000 a year, which sounds too cheap to me. Especially when you consider the value of another feature: Constant monitoring of credit worthiness.
Clients can upload their receivables information to Live Capital, which then presents it alongside credit bureau updates. This gives a credit analyst early warning when customers stay the downward slide into slow-pay and, eventually, no-pay. This capability alone can pay for the service in savings from credit write-offs. DecisionExpress can also be used to reduce headcount in the credit department if the customer is bent that way.
Now, Im not in the credit business, but I have taken a cursory glance at a Dun & Bradstreet product that competes with Live Capital as well as at a company called eCredit that has a Web-based app of its own. I dont know enough right now to compare each to the other, so dont buy based on this column. But if your credit department isnt using something to automate credit decisions and keep track of your customers credit standing, you really do need to take a look.
Im writing about DecisionExpress because its a good, easy-to-understand example of why SaaS makes sense. It also demonstrates what makes a good SaaS application:
1. The app provides functionality many businesses need that isnt terribly different from one company to the next.
2. The service allows customization, but the SaaS model prevents clients from doing too much reinvention. This saves money and grief. It also encourages best practices.
3. The service brings together information from several sources and presents it to the user in a friendly, Web-based interface.
4. Hosted services are easier to get running, partially because of the limited customization potential but also because theres no hardware to buy and no software to install.
5. Theres also no software to manage, fix or upgrade. All that is the responsibility of the vendor. Customers get a semi-custom application without having to hire developers and people to keep it running.
6. SaaS costs are predictable and typically usage-based.
7. If the vendor doesnt meet your needs, there usually is no long-term commitment and its easy to switch. This keeps SaaS vendors responsive.
SaaS isnt the solution for every problem, but properly chosen it allows companies to concentrate on their most important value-adds while saving both money and grief. If you havent seriously considered it, you should.
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