Talk to the typical SaaS executive about the complexities of customer service in Cloudland, and they give you a blank stare. What’s the problem. We provide our service. We guarantee it. We do a better job than

Well, yes. But that’s not all. When you’re getting cloud services, the services are often coming from multiple providers. Each of them can think they’re doing a good job or the right job. But even so, delivery can fail. And when that happens, it’s a nightmare for the customer. A nightmare.

Here’s a simple example. I have a Blackberry Pearl. My web site and domain name are hosted by XO. Two SaaS providers. I get my Blackberry e-mail from XO, which forwards it to the Blackberry domain name (tmo.xxx.com).

All of a sudden, this weekend, I started lots and lots of new spam–you know, the usual, sex stuff, plus a lot of spam with a Facebook return address, etc., etc., stuff that had been filtered. The new spam appears on both my Blackberry and in the e-mail delivered directly to my POP3 Mail account on my Mac. But much more new spam appears on my Blackberry.

Obviously, something happened to one or more of the spam filters that are provided to me. I know of at least two of these filters: one at XO and one on my Mac. Is there another one at RIM? Who knows.

I’d like it to stop, but I don’t have the time to troubleshoot this problem. Did XO change its forwarding policy? Did RIM install a new filter and screw up? Who knows.

If I just had one provider, I’d have some chance of solving it. But when I have two, I just have to sit and wait. The worst of it is, it might be the case that neither provider will ever realize that there’s a problem.

I wonder if the iPhone has a spam filter on it?

The point? Well, cloud service providers need to start thinking about this–and taking responsibility for the actual delivery of services, not just for making those services available.

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Four-Five Years

March 31, 2009

Within the tiny world of SaaS executives, there’s a little-known rule of thumb. I call it the Four-Five Years Rule. The rule is this. “When comparing the cost of SaaS offerings against an equivalent perpetual license offering, the break-even point comes in four-five years.” That is, when you add up the total cost of leasing a SaaS offering and the total cost of a perpetual license offering, the latter including hardware, the software license, and maintenance, and even the cost of money, the SaaS offering is cheaper for four years-plus; after five years, you’ve spent less on the perpetual license offering.

Did you know that? Bet you didn’t.

So is that an argument for SaaS, or is it an argument for perpetual license? After all, most installations last longer than 5 years. So maybe you should bite the bullet and pay up front, right?

No. You see, there’s a big, big difference between the two at the break-even point. With a perpetual license application, the application you’ll have is four-five years old. (You see, I’m not including the cost of upgrades.) But with a SaaS application, the application you’ll have is brand new and up-to-date.

It’s sort of an inversion of the old automobile lease-vs-buy conundrum. At the three-year breakeven point, if you buy you have a car, but if you lease, you have an empty parking space. With software, if you lease, your installation stays new. If you don’t, it gets old.

It’s also an inversion of the standard idea about SaaS, that it’s cheaper, but you get less. Not at all, after five years, it’s more expensive, but maybe worth it, because you’ve got a superior product, one that’s been kept up to date.

Not necessarily worth it, mind you. If you don’t need all the stuff they put in to keep the software new, or if you need to customize, you’re definitely better off with perpetual license. A lot of it depends on what you think the useful life of the old software will be.

One last argument for perpetual license, of course. If you do think the old software will have a long useful life, you can plan to save a boodle by going off maintenance sometime after those five years are out. If you do that, perpetual license can be way cheaper.