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Thriving in a Down Economy – Is SaaS the Silver Bullet

By Greg Gianforte, CEO and Founder, RightNow Technologies

‘Buy more software’ isn’t something you expect to hear in a tough economy, but software as a service (SaaS) vendors continue to grow and may be more resilient than most in a soft economy. As the Wall Street Journal recently reported, leading SaaS vendors financial performance, ‘signals that makers of online software may do better during the downturn than traditional software companies.’

Forrester Research noted in a report titled, “Firms Can Benefit from SaaS in Times of Economic Uncertainty,” July 2008, “many firms see the value of SaaS regardless of the economic climate. However, when software buyers are faced with fears of potential recession, SaaS offers even greater value because it provides a more flexible way of investing in software.”

Forrester also noted in that same report, “SaaS makes it easier to roll out software incrementally, meaning that firms can prove the return on investment (ROI) of their purchase in one department or division before rolling it out to other divisions or the whole enterprise.”

Basically, in a tight economy, SaaS gives companies a way to deploy software quickly and confidently, while reducing the risk and burden associated with traditional approaches. Here are three reasons why I think SaaS could be the silver bullet for thriving in a down economy.

Rapid Time to Benefit with Quick Deployments
Companies cannot afford high-risk, lengthy IT projects that take a long time to see results. With SaaS, organizations can quickly deploy new applications or new features to existing applications and reap the rewards much sooner. For example, drugstore.com (online retailer of health, beauty and wellness products) decided they wanted to add live online chat to the web site, Beauty.com before the 2008 holiday shopping season. Using a SaaS Chat solution they were live in just a few weeks, rather than months or longer with traditional approaches. Beauty.com is now converting approximately 25 percent of chat sessions into product orders and during promotional weeks converting much as 40 percent. drugstore.com’s ability to rapidly deploy new customer service solutions helped boost holiday sales during a particularly difficult retail season.

Reduce Risk, Increase IT deliveries Burden
Traditionally, on-premise software vendors transfer ownership and most responsibility from the software company to the customer. With SaaS, the software company retains the critical responsibility for application deployment, tuning, management and service delivery. SaaS also consumes much less IT resources by eliminating software upgrades, much of system administration and lifecycle management headaches. At Shaklee Corporation, a provider of natural, environmentally friendly nutrition, personal care and household products, CIO Ken Harris embraces this concept whole-heartedly. Harris has said he will leverage new technologies that enabled faster time to market, a reduction in the amount of infrastructure that needs to be built and maintained, and a reduction in costs. For him, this means SaaS.

Try, Before You Buy
Another valuable aspect of SaaS is that organizations are able to try, before they buy. With SaaS, it is possible for software providers to offer production pilot programs that give clients a low-risk way to try out software. It is much easier to justify a purchase of software based on actual production results rather than just a slick suit and PowerPoint presentation. Forrester also noted, “SaaS makes it easier to roll out software incrementally, meaning that firms can prove the return on investment (ROI) of their purchase in one department or division before rolling it out to other divisions or the whole enterprise.”

For business leaders, SaaS simply makes sense, especially in a tough economy. You get fast business impact, low risk purchasing decisions and lower upfront costs. These are just some of the reasons why RightNow grew our revenues 25% last year while expanding margins. Believe it or not, there are companies out there today that are growing and making money in the current economy.

My best recommendation to organizations is that as you identify areas where you think technology will help you compete better in this tough market, be sure to evaluate all your the SaaS options first.

Greg Gianforte is CEO, President, Chairman and Founder of RightNow Technologies. He has led RightNow from its founding in 1997 to 31 consecutive quarters of revenue growth, 14 consecutive quarters of cash-flow positive performance and a successful IPO. Greg founded Brightwork, a pioneering developer of network management applications, in 1986. He is also the author of “Bootstrapping Your Business: Start And Grow a Successful Company With Almost No Money” and “Eight to Great: Eight Steps to Delivering an Exceptional Customer Experience.” Greg was also the Ernst &Young Entrepreneur of the Year (Pacific Northwest software category) in 2003 and has won the Stevens Honor Award from Stevens Institute of Technology in 2003. For article feedback, contact Greg at ggianforte@rightnow.com 

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