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SaaS Business Intelligence.... Hot or Not?

by Shawn Rogers, http://www.EMAusa.comThursday, September 2, 2010

A lot has been said about the disruptive aspects of Software as a service (SaaS) based business intelligence (BI). Does SaaS have the stuff of enterprise solutions or is it all hyperbole and buzzwords? In the early stages of this growing segment SaaS BI vendors relied on quick implementation times and a “pay as you go” pricing model to win over early adaptors. Much has changed since the first SaaS pioneers arrived on the scene; expectations have grown and so have the vendors competing in the space.

Industry Drivers

Speed to implementation continues to play a role in the adoption of SaaS BI but recently cost motivations have taken over as the main reasons to implement these solutions. A survey from Enterprise Management AssociatesÔ (EMAÔ) found that two of the top reasons to move towards cloud computing and SaaS were to reduce the operational costs of IT management and reduction of capital costs connected to IT projects.  Service issues also ranked in the top three.

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Other variations on the cost driver theme include SaaS’s ability to insulate companies from risk. When attempting to bring traditional projects online companies are faced with upfront capital costs that can make the penalty for failure hard to swallow. SaaS eliminates much of that risk and coupled with faster implementation times can deliver a great ROI for these projects. The elasticity of SaaS also acts to drive companies to the cloud especially in segments like retail that have massive seasonal business swings these companies can expand and contract their SaaS BI needs on demand as the season requires.

Many of the leading vendors are highlighting Fortune 500 clients which indicates that the space is moving forward in the right direction. Several years ago SaaS vendors were challenged to reach beyond small companies and the restricted revenue that came from them. Now that SaaS is becoming more mainstream some vendors are stepping away from the pay as you go models to licensing programs that mimic their on-premise software cousins. This trend is especially true with SaaS solutions that are sold through conventional channels. The small to mid size business (SMB) market continues to be the largest customer base for SaaS BI solutions. These firms want business intelligence too and see SaaS as an alternative to conventional on-premise options.

Barriers to Success

While operational and capital cost concerns drive businesses toward SaaS EMAÔ research results indicate that security/risk, management/performance and ease of implementation are the biggest concerns when ultimately deciding on a solution. Generally speaking the line of business executives play a larger role in investigating SaaS as a solution clearly based on its initial cost savings but in the final decision phase IT concerns are still prominent in the decision. Leading vendors recognize this and many are already utilizing (SAS) No. 70 Auditing Standards to help address security concerns. Greater levels of control on cloud-based data are also a growing trend allowing customers to control the location of their data and have a greater level of control over their individual application environments. Data integration is a hurdle as many providers are struggling with the chore of moving massive data stores to the cloud in a timely and efficient manner. At present real-time business intelligence is still a distant goal for SaaS BI vendors. Leading data integration companies have identified this market gap and over the last six months several companies have launched SaaS specific data integration platforms.

Return on Investment

Ultimately, the success of SaaS projects are measured much like on-premise software through return on investment (ROI). It’s critical for any customer to define “success metrics” prior to implementing a project and it’s no different with SaaS. Metrics will vary from project to project and can include a variety of measures including satisfactory SLA’s, cost reduction, revenue increases and better decision making. When asked specifically about the two largest drivers for cloud computing operational and capital cost savings 76% of EMAÔ research participants indicated that they had realized measurable cost savings for their organization. 23% of the respondents saw a 30% or more operational cost savings and 57% saw a 30% or greater capital cost savings. These are significant numbers and as more companies feel the impact of these types of results cloud computing and SaaS BI will benefit greatly.

Market Growth

In July of 2010 International Data Corporation (IDC) released research that sized the 2009 software as a Service (SaaS) market worldwide revenues at $13.1 billion. IDC is predicting a compound annual growth rate of 25.3% through 2014 and expect the market to grow beyond the $40 billion mark. EMAÔ research from the same year shows that 73% of respondents already have at least 40% their user community working with SaaS based applications. The research shows this number will grow dramatically over the next 24 months. Its clear that SaaS is on a tremendous growth curve and is gaining significant market share.

Hot or Not?

When you combine significant operational and capital savings with growing adoption from both enterprise and SMB markets, elastic and flexible platforms and a growing need to provide business intelligence to a wider and more diverse work force it seems clear that SaaS BI is in fact…. hot.

About the Author

Shawn Rogers has more than 19 years of hands-on IT experience, with a focus on Internet-enabled technology. He joined EMA this year as vice president of the business intelligence practice area. In this role, Shawn delivers comprehensive coverage of the business intelligence and data warehouse technology stack, with a focus on database technology, data integration, business intelligence management solutions, reporting, analytics, corporate performance management, as well as emerging technologies such as SaaS BI, embedded BI and social BI.  Shawn can be contacted at http://www.EMAusa.com or on Twitter at @shawnrog.

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