___________________________________________________________________________________________________________

In case you haven’t heard (or aren’t obsessively following IT trends like we are), the great trend in software is the evolution from traditional “on-premises” software (e.g. client/server software installed at the office) to Software as a Service (SaaS) (i.e. web-based applications that are managed in the vendors’ data center and accessed “on-demand” through a web browser).

Given what’s at stake for software companies in either camp, debating the merits of each model has led to some fiery discourse. We thought we’d fan the flames by introducing another angle: which model is “greener;” that is, better for the environment. We used electronic medical record software as the comparison example.

We crunched the numbers for each type of software. Here are the quick stats on power consumption of each software delivery method:

On-premises

Total energy consumption by four physicians: 9,408 KW/yr

Individual energy consumption by each physician: 2,352 KW/yr

SaaS

Total energy consumption by four physicians: 611.4 KW/yr

Individual energy consumption by each physician:  152.85 KW/yr

For an even quicker summary, the SaaS software used 93% less energy than on-premise. That is a massive energy savings that if scaled to a large number, has world wide effects on energy consumption.

But, successfully promoting a paperless office and shifting people from the office to the home, requires systems that support these activities. Goal alignment, ensuring that people are working on the right things for the right reasons, is very important. People need to feel like part of the team, even if they aren’t physically present. Traction, not action is the mantra for successful execution. Goal alignment ensures that people are moving in the right direction downfield to score, and not just gaining yardage. In fact, if your players are moving in the wrong direction, they are moving farther away from the goal. Goal alignment helps ensure that this doesn’t happen. It is not a substitute for supervision from a manager, but keeps the team working toward the overall company strategy.

Human Capital Management is a critical to earning green, and going green, enabling people to work from home, in global teams, anywhere, anytime. How green is your organization?

After reading this and engaging in discussions with Charlie, it became apparent that we actually help our customers execute on several of these strategies. We do this in a unique way, enabled by our delivery model and the focus of the product suite in terms of what it actually does for people.

For example, many people think of investing in on-demand solutions as an outsourcing strategy – moving administration away from the core business. But a better way to look at our model is to think of it as an INSOURCING strategy, the customer is INSOURCING a best-in-class and ever improving process. Of course, it is very powerful to let someone else do non-strategic activities faster and cheaper for you. But when you truly INSOURCE, you get the best of two worlds: it is someone else’s core business to figure out the best way to do things, and constantly improve it for you, while also being very cost efficient. That cost efficiency is of course a mutual win for INSOURCE providers and customers.

Effective human capital management processes are critical to INSOURCE. Why? Facilitating teamwork and collaboration is critical for innovation. Finding high potentials, developing their skills, and adapting to the new workplace is critical to closing the talent gap. People are the largest variable cost for most businesses (70%), optimizing their performance is critical to reducing costs. The revolution of on-demand software delivery with the SaaS model enables this phenomenon of being able to INSOURCE strategic processes that support your business’s strategy execution.

If you’re still debating the merits of Software as a Service there’s an article from The Economist you should read. It’s not about SuccessFactors (though it could be) it’s about Google. Why is an article about Google relevant to SuccessFactors? Well, because they provide their offerings as a service, and so do we. Thus, many of the benefits of the approach are the same:

6 lessons about SaaS using quotes from the article:

1. “Most employees already know how to use web-based software, and thus do not need training. “ Any new application takes some time to get familiar with, but when users are used to the web, they have a tremendous head start with SaaS applications.

2. “They can access the services through any web browser, regardless of what kind of computer (or telephone) they use.” Ummm. Yes. No software to install on every PC. Works with any system anywhere in the world.

3. “And in-house IT staff need do absolutely nothing, since the data and software reside on Google’s server computers.” IT’s opinion will always count, but it’s not another system they have to install, update, secure and maintain.

4.  “A bigger reason than money for switching from traditional software to web-based alternatives has to do with the pace and trajectory of technological change…Mr Sannier says it is “absolutely inconceivable” that he and his staff could roll out improvements at this speed in the traditional way–by buying software and installing it on the university’s own computers.” With SaaS, offerings are constantly improved, usually with no additional costs.

5.  “With … software services that are accessed through a web browser, the security issues are more subtle. Since the software and the data reside on the service provider’s machines, the danger is of losing control of sensitive data, which is now in somebody else’s hands. Most IT bosses find this scary. Not so Mr Sannier. He remembers a picture that Google showed him of one of its data centres burning to the ground; it looked awful. The point, however, was that no users of Google services anywhere even noticed, because Google’s systems are built to be so robust that even the loss of an entire data centre does not compromise anybody’s data.”  Because SaaS providers handle security and availability issues for millions of users, they can manage risk in ways most individual companies can only dream of. Though its scary to imagine your data in someone else’s hands, those hands may be far more capable than your own of protecting that data – much like money in a bank instead of under your mattress.

6.  “Big companies will probably keep “mission critical” systems in-house. But as everything else migrates to web-based services, software will increasingly resemble the web technologies of the consumer market”

A post over at Vendorprisey (with a very clever title) got me thinking about Software as a Service (SaaS) again. So often, conversations about SaaS involve an argument about what is and what is not considered SaaS. 

To a certain extent these discussions can be helpful -helping to classify different solutions into categories that imply certain attributes and benefits. But to regular folks, the nomenclature is irrelevant – it’s the benefits that matter.

It made me consider how to uncover the benefits amidst all the technology talk. So here’s a first attempt at some simple questions any layperson can ask to make sure they get the most our of a technology solution. If you have any suggestions – shout ‘em out. 

1. Who manages the technology infrastructure?
If it’s your company, then you’ll be responsible for ensuring the system is available and speedy, functioning correctly, secure, up-to-date, scalable and integrated. If its your vendor, all that becomes their concern – and you can focus purely on results.

2. How do updates and enhancements get made and how often?
Good software is like a living thing. It should grow and get stronger and more capable over time. When your vendor updates the system or enhances it with new capabilities – every customer should get the benefits and have the option to take advantage. The second part is the frequency of updates – in general, more is better. You want your vendor to be constantly improving what they deliver to you and you want to be able to take advantage of it way more often than 1 time per year.

3. Who is making the system work the way it needs to?
This gets at the “customization vs. configurability” issue.  If the answer is a software engineer or programmer it means you are going the customization route. Software code has to be written or edited to get the system to work the right way. This is a big red flag. I’ll explain in a minute. If the answer is a domain expert (in our case, an HR practitioner) – you’re in better shape. It means your solution is being configured to suit your needs from a huge menu of available options.

Why is configured better than customized? The result may be the same – a system that supports your processes the way you want it to – but the devil, as always, is in the details. With a customized solution – you’re on your own. You’ve got a unique bit of software that’ll have its own quirks – so when it comes to supporting, updating and maintaining it – there are unique challenges every time. With a configured solution, everyone is working from the same core – even though every customer’s solution is completely different..

4. Is this about technology or business results? 
If it’s clear that the planning for your roll out is all about the technology – what servers, what installation, what integration, etc – then you’re going to end up solving a technology problem, not a business problem. Finding a partner that can help you focus on the business results of your efforts is the only way to achieve your business goals.

In fact, this has been the holy grail of such systems for years. Today, such data comes from surveys. But if one could get data directly from what companies are doing, as opposed to what they are saying, how much more accurate and powerful would it be? We think a lot. That’s why were already doing it. We think it’s a huge value to our customers – and one of the ways we’re helping to drive customer success.

Erik took a moment to reply to Dubs’ post. Here’s part of what he said: “We are looking at aggregate data from that enormous resource of ours. To look at what works and not we use publicly available financial information and cross reference those two. The findings we make are very interesting and are being used to further push our thinking of leading practice in different areas.”

You can read more about SuccessFactors research here. And if you have questions for Erik, just email him.

A Note: this post was written by a guest writer, and does not necessarily represent my opinion. That said, I think it’s important to host a variety of thoughts and perspectives on the blog and thus, I give you the following article written by Lars Dalgaard, the CEO of SuccessFactors. As always, please feel free to comment.

As an outsider that moved into the software industry five years ago, I’ve been amazed to watch the wild mood swings that take place due to over-hyped and over-marketed technology trends – which every vendor seems to chase loudly in pursuit of “the next big thing.”

Of course, customers in the real world are more focused on “what’s now” rather than “what’s next.” And yet they have to wade through reams of white papers, data sheets and web site content to figure out whose software actually does what – and then hope the promised features actually migrated from the press release commentary into the real product code.

The same type of real-world sanity check can tell you whether a technology trend is here to stay or hyped to decay. A good litmus test is whether it’s vendor-driven or customer-driven.

It’s exactly this test that I believe can sort through the hot topic du jour: software-as-a-service. Admittedly the topic has been heavily hyped by Silicon Valley types looking to drive big multiples. And now that some of those high-profile players have experienced some hiccups, the naysayers are working overtime to call the whole idea into question. Scare tactics and “what if” scenarios abound to push people back into their comfort zones.

Sanity check: Having entered into this business in part due to my frustrations deploying enterprise software for major companies in Europe, I can tell you definitively that the SaaS trend is customer-driven and is here to stay.

It frankly never made any sense to buy bloated software cooked up in an ivory tower; pay 5-10 times more for consultants to tell you how to use it; deploy it for just 5-10% of the people who really need it; suffer through massive upgrade cycles every 2-3 years; and then not even be able to get the data you need to run your business. Now that customers have a choice, there’s no going back – and that’s a good thing.

To help sort through the hype from reality, I’d like to address five lingering myths that just don’t hold true based on our experience with 350 customers worldwide, across all industry sectors and company sizes, that collectively have more than 1.3 million active on-demand users:

*Web-based solutions are unreliable.  All companies experience unanticipated interruptions.  Whether you are a phone company, a power company, an Internet provider, or yes, even an on-demand software application, unforeseen circumstances might arise.  But it is what you do as a company for your customers during these rare occasions ensures that they will remain your customers.  For us, a renewal of 97% speaks volumes about our customers’ faith in SaaS and the unprecedented value it can provide.

*Confidential information is at risk.  Security and data integrity have never been more of a priority. Compromised data – offline or online – can be the death knell of a company. Because SaaS vendors can leverage investments across multiple customers, and have experts in security, encryption and auditing test their systems every day, many of our customers find that we can protect their information better than they can. Multiple layers of protection ensure that customer data is as secure online as it is offline. The latest encryption and security capabilities are quickly integrated. Auditing and compliance are a given, not forgotten. 

*Services will be locked and difficult to change.  It’s true that over-customization was a significant problem in the traditional ERP, CRM and SCM world. However, just because SaaS is better than client-server doesn’t mean we need to throw out the baby with the bathwater. In the real world, business needs and workforce environments are fluid. Customization is vitally important as businesses evolve in real time, and SaaS should make it even easier to adapt the software to meet the needs of the business. And if we’re doing our jobs well, we should be able to learn quickly from thousands of customers and deliver innovation and usability improvements every month rather than every other year.

*SaaS is still too expensive for small and medium sized businesses.  The SMB market is the fastest growing segment of on-demand services.  For the first time ever, SaaS levels the playing field and offers small to mid cap companies the same premium tools and services employed by global corporations to increase customer satisfaction.  The need to leverage efficiencies and streamline business processes is as important for the 15-employee company as the 500,000.

* SaaS can’t scale for global enterprises. This may true with some solutions, but it’s not an inherent truth for the SaaS model itself. We now have 40 customers that are deploying or have deployed SuccessFactors for more than 20,000 employees. Our active implementations range from 5 users to more than 330,000 users. Most importantly, SaaS is the only way we could deliver software like ours that’s designed for use by every employee within the company, not just one department or one class of user.

Of course, there will always be people who fear change, or claim “it was better in the old days.” However, for the millions of real-world SaaS users that now have real-time dashboards, easy-to-use software, fast access to their vendors’ innovation, and instant access to their companies’ information, those old days are happily becoming ancient history.

My favorite SaaS blogger, Phil Wainewright, has a great post from last week about the real benefit of SaaS: It lets everyone focus on results.

He puts it better than I could:

Now, for the first time since that wrong turn the software vendors made all those years ago, on-demand applications are putting business results back into focus. The vendor has already done the implementation before even meeting the customer. The technology is already sorted, and the vendor guarantees to keep it working. What matters is whether the application meets the customer’s business need. The whole conversation revolves around what the customer is trying to achieve, and whether the application can help with that.

Well, isn’t that really what software is meant for in the first place? To get results? It seems quite obvious, but most of our experiences tell us it’s all too rare.

The point he doesn’t make is that we can get to results way faster with SaaS than any traditional software implementation. We don’t need to spend a ton of time or money or effort on the software itself, so we’re free to spend all of our resources pursuing our goals.

It’s kind of like if we had to build a car every time we wanted to go somewhere new. That would clearly be a lot of work. SaaS is like having a car delivered to your door. You still have to drive it to your destination, but don’t have to worry about whether or not (or even how) the car itself works.

How, you might ask? Well as it turns out, David was on the way back from the Gartner Symposium where one analyst recommended (link to another ZdNet article) that it was time for companies to “not own, but rent” applications – among some other visionary proclamations. And so David had SaaS on the brain – but talking to Marty drove the point home.

Perhaps not surprisingly, I agree with David’s conclusion – that SaaS is ultimately a no brainer. Here’s an excerpt:

Think about it.  How many businesses need the headaches of:

• downloading, installing, configuring and making operational a mission critical application
• updating that application every time some important patch or update becomes available
• figuring out how to Webify that application so that it can be used from just about anywhere
• backing up the data on a regular basis
• worrying about availability, redundancy, and other issues related to fault-tolerance
• providing end-user support

More IT people.  More hardware (or hosting).  More costs.  More headaches.  And these are benefits that can accrue to businesses of any size.

Enough said. It’s worth a read, if only because he figured out a way to draw an analogy between SaaS and Tang. That’s right, Tang.

SystematicHR – A comprehensive and compelling blog centered on HR technology but free roaming around all sorts of issues that affect HR practitioners. One of the best around, period – from a guy who knows what he’s talking about. 

HR’s Brand New Experience – Regina covers some of the softer issues in HR, with consistently insightful stuff that has you clicking the subscribe button about 2 seconds after the site loads in your browser.

The Human Capitalist – Jason Corsello of The Yankee Group is one of the most respected analysts in the space. This is his personal blog, so you can find pictures of his dog alongside thoughts penned by one of the guys finding clarity in the ever-changing and sometimes confusing world of performance and talent management.

Software as Services – An unabashed advocate of SaaS, Phil Wainewright highlights some of the obvious (and not so obvious) things to know about Software as a Service and notes the hottest news in the space.

Presentation Zen – We all have to do them, so why not spend some time thinking about new ways of making your stuff pop! Presentation Zen inspires and focuses as it entertains.

Bona tempora volvantur by Guy Kawasaki – After just a few months blogging, he’s already considered one of the most popular bloggers around. The well known venture investor and author brings fresh ideas and perspectives to all kinds of business and workplace issues with his trademark writing style and incisive wit.

You can also take a click-walk through the blogroll on the right, mess around with the poll on the left, and don’t forget the archives. Have a great week!

Enjoy, and I’ll see you soon,
Max