A 360 Degree View of Your Business

There are a number of advangtages in Software as a Service, or SaaS. Some of the main ones are:

~ You do not need to buy, own, insure, uprgrade or otherwise maintiain hardware

~ You do not need to employ full time application and database technical staff to maintain/upgrade

    or troubleshoot software
~ Your software implementation is 1/8 the cost of on-premise implementations
~ Using the Internet as your communication access enables you to work from anywhere at anytime
~ And link your NetSuite account to any number of other Internet based services

Software as a Service is a new entrant to the business software market, but it employs an old idea. A third party, in this case NetSuite, maintains the necessary hardware infrastructure and takes responsibility for software code maintenace, upgrade and testing. The customer uses the software as a service. Payroll service bureaus have been using this model since computing's origins in the 1950's. 

More recently, with the advent and now ubiquity of the Internet, a number of companies are offering business software application services beyond payroll. NetSuite offers a full CRM and ERP suite, including Work Orders, Inventory, Full Accounting, Billing, Time and Expenses, Revenue Recognition, Sales Force Automation, Web Presence and E-commerce, and a lot more. Over a 5 or 10 year period your outlay for NetSuite is less than that of a comparable on-premise system. 

On premise software became the norm for many years, starting with mini computers, actually mini mainframes, and traversing the minefield of distributed client server and finally, more recently, the thin client. Regardless of how the pig was dressed, it's appetite never wavered at it continued to grow ever larger. Even small and medium enterprises had to look far and wide for IT help. A whole army of third parties signed contracts to manage desktops, networks, servers and software. Database administrators negotiated mid 6 figure salaries. Business owners felt that to catch up they needed to spend, constantly.

Even with all the spending managers were surprised to find out how difficult it is to restore an on-premise system. Large companies normally run several systems, each a clone of the others. So instead of purchasing one server they buy three: Test, Development and Production. They also set up the software 3 times and then as patched or upgrades are released they apply them 3 times, once to each system. Or course they don't do this without good justification: When, not if, an emergency happens they have multiple systems from which to start over.

What Small or Medium Enterprise can really match this setup with the labor, cash and time constraints that they face? The answer is very few or none. We have yet to talk to an SME who has enough full-time resources and budget to put together a strong team and the hardware and software pieces that will ensure the company's survival in the case of emergency. So SME's move forward with a single system, but a single system does not allow you to practice Backup and Restore procedures and gain confidence that you can survive an unforseen crisis.

Being a small gear in a large machine is never a great option, in our opinion. With a hosted application system your integrator has moved your business critical data to a server blade in a large data center. There you hum along until something urgent happens, at which time you are mostly in the dark. On a weekend or in the evening you will have a hard time finding your integrator, and you have no relationship with the data center. Even if you have their number, it's going to be hard to manage an issue as their only responsibility is the hardware.

Unlike SaaS, you derive no benefit from being in a large user community where issues and problems and noticed early and often and where the weight of application performance falls squarely on the software provider. Instead, your system is a one-off in a sea of one-offs.

Take for example the common occurrence of a system upgrade. NetSuite rolls these out to large swaths of its customer base after first allowing every client to see and test the forthcoming changes in a beta account. Then NetSuite personnel rolls out the newest version and they are responsible for making sure that the system continues to operate properly before, during and after the latest code updates.

Hosted Open Source: The latest flavor of the hosted application is the Open Source business system hosted by a reseller's third party data center. Hosting open sourse serves one important purpose: It highlights the flaws in both hosted applications and open source business software systems. 

In many cases, open source has been a godsend for enterprise software. The LAMP stack for example, Linux-Apache-MySQL-PHP, has been a very positive development in corporate computing. NetSuite itself takes advantage of Linux as the operating system for its application and database servers. But when you try to move up the computing pyramid to business applications the open source model breaks down. At this level it is important to be working from a central code base, identical to that of every other user of the software. Otherwise, you can make changes to the base code which create huge software glitches or security issues which may not come into the open immediately. If you calculate taxes incorrectly, for example, you may not notice until your annual audit completes.

Having open source in a hosted environment also means that you have a custom business software in a custom operating environment. What would happen if you were forced to relocate to a new environment. Could your custom application simply slip into a new blade elsewhere, or would there be issues with application or database server versions? What would happen if your integrator went out of business or changed their model and left you without support? Are you savvy enough to understand the code changes and what is necessary to continue to operate your system.

As the integrator adds other clients to the hosted open source list, how will they keep all of the code bases current while continuing to support a large number of customized code bases. By hosting open source, the integrator tries to offer their own SaaS system, but they have neither the physical nor the intellectual capacity to be a SaaS provider. They are simply exploiting the interest in hosted software and open source to create a market where one should not exist.