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Product Thoughts

The Weight of SaaS

By February 1, 2010 2 Comments
Vintage Kodak Studio Scales Set and Bottle
Image by Capt Kodak via Flickr

Does Software as a Service (SaaS) truly scale? Just a question I’ve been thinking about recently. Not to knock SaaS companies, because I think that the good ones are definitely needed. That being said, most large organizations have varying requirements for the same type of tool. I would argue that in a lot cases, an SaaS company simply won’t provide all of the features needed to satiate a large organization.

And if that large organization is smart, they understand that they don’t need to put up with that.

For example, with all of the Twitter applications that currently exist, there isn’t one application that does exactly what a few different departments need in my large organization. Which begs an important question:

“Should we create our own team to build tools that truly work for us?”

Obviously I’m biased, but I would argue that in this day and age, the answer is yes more often than not. I realize that the approved solution has been to outsource as much as possible for some time now, but I think that mantra needs to be analyzed on a case by case basis in lieu of being accepted as a default. Here are some reasons why:

scalability One time development costs that can be depreciated over time may be cheaper than recurring monthly fees for your user population

inspiration I’ve seen first hand how working on “cool” projects can serve as an intrinsic motivator and recruiting tool

corporate knowledge Creating marketable specialties outside core competencies could provide added value to your customers

agile project management Six month dev cycles begone. Loose ideas can be brought to market rapidly and iterated on once they are tangible

the open api It is easier than ever to tap into external data sources and use those sources to do interesting things

overhead My organization is paying for the inefficiencies of my vendor’s organization… At some point I need to ask why

Opportunity Cost

I realize that there are a lot of factors in a make or buy decision in any given situation. I’m just arguing that making things has become less onerous than valuable in certain situations. I opened this post with a question about scale, and I keep coming back to it in my head. If I have thousands of associates, it just doesn’t scale for me to pay a monthly seat charge per person, if I want everybody to have access to a specific tool.

I do love the idea behind SaaS for a lot of reasons. However, it may not always be the right option in the long run.


  • Tricia says:

    I think it depends entirely on the service offered. Think Salesforce.com. They've scaled pretty well. I can't even imagine any company developing their own CRM.

    The other beautiful thing is who cares? While SaaS models might not scale as the largest companies have the infrastructure to handle some (many? most?) SaaS applications, there are plenty of midrange and small business to which many SaaS services are lifesavers. Plenty of market opportunity without ever having to go near the largest companies. Though I'm still not convinced some SaaS services won't scale.

    Which is my final answer. You're welcome. 🙂

  • Hallicious says:

    Totally agree on the small to mid size company track. Most of those kinds of companies can get away with using free on-line tools though as well. And I just dove into Google Apps last night… $200 per user per year for an entire Intranet infrastructure including 25GB of E-mail storage per user and internal video definitely scales… LOL

    But if your goal is to close the social media gap in a large organization, and by close the gap I mean get everybody to understand that it is useful or even important, I would argue vehemently that you should allow your employees to develop tools that serve their and their colleagues needs before looking outward to purchase some SaaS version of something. Best Buy is probably the best example off the top of my head, with their home grown internal social networks and social monitoring display.

    I'm working with some kindred spirits on the internal revolution at Humana, and am excited for some things in the works this month. 😉