The sky is falling! Lawson CEO offers evidence showing cloud computing, software-as-a-service will soon collapse.

Harry Debes, CEO of Lawson Software, is predicting the failure of software-as-a-service (SaaS). In an interview with ZDNet Asia, he claims the SaaS market will collapse in two years. Debes says history is repeating itself -- offering as evidence the past failures of ASPs, among other initiatives. As a refresher, WebGuild Silicon Valley provided this summary of SaaS offerings:

Here's an excerpt from the ZDNet Asia interview: "Q: All the other big players are going 'on demand'. Is cloud computing the next big thing?

Debes: This 'on demand', SaaS phenomenon is something I've lived through three times in my career now. The first time, it was called 'service bureaus'. The second time, it was 'application service providers', and now it's called SaaS. But it's pretty much the same thing. And my prediction is that it'll go the same way as the other two have gone--nowhere. SaaS is not God's gift to the software industry or customer community. The hype is based on one company in the software industry having modest success. Salesforce.com just has average to below-average profitability. People will realize the hype about SaaS companies has been overblown within the next two years.

"An industry has to have more than just one poster child to overhaul the system. One day Salesforce.com will not deliver its growth projections, and its stock price will tumble in a big hurry. Then, the rest of the [SaaS] industry will collapse."

So, do the failures of ASPs and the performance of SalesForce.com provide enough evidence to justify Debes' claims? If he is wrong, what variables are different now than before? Many still believe the SalesForce.com model is the way of the future -- including me. Here's my evidence: Times are different. Vendors are much smarter about offering services that improve quality and reduce customer effort. Technology has advanced, and delivery costs are lower. And most importantly, customer expectations have changed. Only time will tell, I suppose -- but I expect the cloud to win over software that's licensed and delivered traditionally.

Comments

[Thesis papers]

Hi,
I personally like your post; you have shared good information.

[Redhuan D. Oon]

It really depends on what you want Saas for. If it is for handling your core business, then i will send you some roses.

So if your core business asset is your salesforce, then i don't think it is wise to keep it remotely no matter how big your pipe is. You should invest more into an on premise open source SalesForce software, customised to a 'T', hooked up to all your slaves' chuckleberries.

So is with ERP. If your core business is your trading volume, fine, but pay and go through the pain for it, making it a good on premise server system.

Ask yourself this tell tale question, "Why would you want to go Saas?" Is it to save money? Then your business aint making money. Get it?

If you re making tons of money you wouldn't compromise an iota of risk on having it close at heart, and away from other sweet worded sales talk.

Of course there may be the small mom and pop stores that cannot afford a CRM or ERP, but they re fine otherwise they wont be mom and pop.

Anyway, just having fun here!

[Dan D. Gutierrez]

By Dan D. Gutierrez
CEO of HostedDatabase.com

Maybe 10 years ago I might have given credence to Mr. Debes argument about the demise of SaaS. We had just launched a new SaaS product and it was risky business. I too have been around long enough to personally witness the extinction of the service bureaus and ASPs, but I think this time around there are prevailing factors that will allow the SaaS model to flourish.

My firm launched the web's first Database-as-a-Service back in 1999. This was pre-burst-bubble mind you, and we're still going strong with our SaaS offering. Is nearly 10 years long enough to proclaim victory? Maybe not, but we do see many very positive signs along the road. In 2008 hardware technology is more of a commodity than it was during the ASP days. You can address load requirements much easier today. In addition, the quality of the UI for the application is lightyears ahead of the ASP days. The costs of maintaining a quality SaaS is significantly below what it was for ASPs.

Mr. Debes has a good historical perspective, but I feel the timing for SaaS success has never been beter.