SaaS: Come For The Savings, Stay For The Competitive Advantage

February 3, 2014 Alex Woodie

Organizations that initially move strongly toward adopting software as a service (SaaS) offerings to save money often find that it also leads to competitive advantage in the areas of collaboration and data analytics, according to a new IBM study on SaaS usage trends.

Through its Center of Applied Insights, IBM studied the SaaS usage trends of 800 organizations around the world to see how the use of SaaS was affecting their business performance. IBM says it found a correlation between companies that have the most widespread use of SaaS applications and the ability of an organization to use SaaS for competitive advantage.

The organizations with the highest use of SaaS are called “Pacesetters” in IBM’s study; 19 percent of the organizations surveyed fell into this category, with 41 percent being “Challengers” and 40 percent being “Chasers.” According to IBM, Pacesetters are nearly 80 percent more likely to have increased collaboration via SaaS, such as through hosted social media tools like IBM Connections, than the Challengers or the Chasers. The study also found that Pacesetters are more than twice as likely to have used big data analytics to squeeze insight out of their data sets.

These findings poke a hole in the theory that adopting SaaS applications–such as Salesforce, Netsuite, Marketo, Pardot, Cloud9 Analytics, SAP Business by Design, Oracle On Demand, or IBM Connections–is purely about cost savings. “It’s common knowledge that deploying SaaS broadly has economic advantages,” said Craig Hayman, IBM General Manager, Industry Solutions and executive sponsor of the study. “But the truly innovative companies have recognized that SaaS delivers real competitive advantage to fuel top-line growth as well.”

Source: IBM Center for Applied Insights.

Reducing cost is still the number one reason that customers initially adopt SaaS, and the study found that 41 percent of the organizations surveyed reached their cost-savings goals. What was surprising to IBM is the fact that 47 percent of organizations reported that SaaS was driving competitive advantage.

That is not to say that a marketing manager, for example, can run out and just start signing up for every SaaS program out there. The survey also indicates that, in the organizations of the most successful SaaS users–the Pacesetters–there was a close working relationship between the line of business managers who wanted SaaS and those organizations’ IT departments. Across numerous metrics, the message was clear: Getting the most advantage out of SaaS requires close collaboration with IT.

Social media tools were the number one most popular class of SaaS product identified by Pacesetters, whereas social tools were number twelve on the Chasers’ list. When it comes to SaaS analytics tools, about 75 percent of Pacesetters use them, whereas less than one third of Chasers have SaaS analytics subscriptions.