16 Mar 2008

Software: Do You Own or Rent?

In a recent article in ImageSource titled

16 Mar 2008

In a recent article in ImageSource titled Top 10 Industry Trends, authored by John Mancini, the President of AIIM, outlines what he believes to be the top 10 drivers within the DMS space… Being in the business of documents, I found the article compelling. Tonight we discuss the number 2 influencer in the DMS space this year:

2. The entry of “alternative” delivery systems for document and content capabilities.  Specifically the entry of meaningful SaaS players (for example, Spring CM) and Open Source players (for example, Alfresco).

I’ve said it in several posts, Software-as-a-Service (SaaS) is gaining momentum. This is not a surprise as the trend of outsourcing (the movie rental phenomena) really helped to spawn that SaaS industry as a whole (in my humble opinion). This model is extremely compelling for leadership, I can say from personal experience. I just reviewed the options for both an SFA and MPS solution for my company that ended up with the choice of using an SaaS solution rather than a traditional self-hosted model. I will tell you, in our industry, that was a fairly bold move. So what was it that swung the decision to an SaaS model?

Well, I can tell you it wasn’t really the price. In both instances, the licensing was actually a little more costly in the SaaS model. The biggest mistake most companies make, however, is they stop their due diligence at the “up-front” pricing. I dug deeper, and found that a cost avoidance strategy of not having to worry about hardware acquisition, maintenance, and upgrades really helped the total cost of ownership (TCO) case. I ran various comparisons to determine what I thought our real cost was going to be, and found in just about every case that an SaaS solution beat the traditional “you own it” model.

To really compare apples to apples, I had to look out over a 3 year time horizon. 1-2 years was much too short, whereas 5 years was much too long (the business can change too much in 5 years). I will tell you though, we expect these types of solutions to pay for themselves each year, so the typical investment scenario wasn’t as much in play. We are 6 months in to both solutions, so I will let you know how that goes!

Even if you are sold on the TCO strategy, one might think the SaaS model a slam dunk for the DMS – especially in the SMB market where acquisition costs and lack of in-house technical expertise are of prime concern. I think John is on to something here in that the case becomes more compelling each day, but there are some hurdles yet to overcome.

Primarily, the documents themselves are the major obstacle. For the same reasons discussed in yesterday’s post, how a DMS solution handles its documents is extremely critical. I would say this can be 1 of the most important criteria a decision maker can review. Predominantly, there are 2 models of how documents are handled within an SaaS solution: served up from the provider’s server or linked back to a local path hosted by the customer.

In my mind, this is the biggest hurdle of any SaaS DMS solution. We sell against this all day, and it is still a slam dunk for those seriously considering DMS. Why you ask, well the reaction times to render documents back to the desktop are tough, and the initial capture of the document can be timely as well. Lastly, be cautious of getting your documents back out if you choose to move to another solution. 

I saw something that has me really thinking in the February 18 issue of Information Week, a company called Azaleos. This is really intriguing, and somewhat of a hybrid of the typical “owned” solution and the SaaS solution. Azaleos is positioning itself to manage a companies e-mail, primarily Exchange. They ship you various configurations of appliances and take over the monitoring and upkeep of your Exchange environment.

The proposition is your IT staff can stay focused on delivering customer-enabling solutions instead of worrying about keeping the mail server going. What’s even better is you can turn off the service anytime you want, and you get a fully optimized e-mail environment to manage. Even though I don’t think anyone would want to do that after they have a taste, it is wonderful to have options and not feel locked in.

Once DMS reaches a similar point, I think this flavor will have a little more power behind the punch. Until then, do keep an eye on these players as they are quite formidable. If you are customer, definitely review these options, but be cautious of the gotcha’s. There are still some gaps the SaaS providers need to close, but they are closing fast.

Tomorrow, we will discuss number 3, and whether it’s good or bad for DMS to be part of your “infrastructure stack”, and just what is a stack of infrastructures?

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