Just weeks after AMR turned up the volume on its On Demand/Software as a Service (SaaS) research, Aberdeen Group has countered with its third in a series of benchmarks on the subject. The On Demand Supply Management Benchmark Report avoids retrodding estimates of time-to-deployment and total cost of ownership (TCO) and gets right to what matters: performance levels of On Demand supply management solutions and the value derived from them.

Report authors Sudy Bharadwaj and Vishal Patel offer several insightful findings. The most compelling include:

• On Demand outperforms installed software in nearly every category. The majority of the 135 supply management executives participating in the Aberdeen benchmark reported that On Demand solutions outperformed in every major performance category — from system uptime to customer service. (One caveat: benchmark participants felt installed software held a slight edge in the area of application response time.) Respondents reported that On Demand held the greatest performance edge over installed software in the areas of return on investment (ROI), faster and easier deployments, more frequent and easier upgrades, and system adoption and usage. These three factors were also cited as the prime motivators driving enterprises to adopt On Demand solutions. Interestingly, lower TCO — largely touted as a leading mantra for On Demand adoption – was listed as a prime driver by about a third of benchmark participants.
• On Demand users get more spend under management faster than users of installed supply management software. The above performance factors accelerate and improve system adoption and usage across the enterprise. The result: On Demand users are able to drive 28% more spend under management within the first year of deployment than those using installed software. The payoff: For a $1 billion company, Aberdeen estimates that, in year one, this increase in spend under management yields a $410,000 to $2 million hard dollar supply cost savings advantage for On Demand users over those using installed supply management software.
• Data security and application integration capabilities remain top perceived concerns for On Demand. No news here. Security and integration have long been positioned as the Achilles heel of the On Demand/SaaS model. (A perception fostered no doubt by nervous purveyors of installed software applications.) What is news doesn’t show up in Aberdeen’s benchmark data. Well aware of these perceptions, leading On Demand providers have made great strides in elminating these issues. In fact, with disparate application environments and scarce IT resources commonplace, On Demand/SaaS providers are in many cases delivering better security and integration performance than can be satisfied through an on-site installation. (Although Aberdeen’s report suggests that On Demand providers need to do a better job of evangelizing these enhancements.)
• Enterprises view On Demand solutions as 3-year commitments — at least initially. This finding only tells part of the story: the uneducated perception part. During a pre-publication debrief, I asked Sudy and Vishal to run a cross tab to determine how the perceived longevity for On Demand solution usage varied between enterprsies that had deployed On Demand solutions and those that were only considering deploying On Demand solutions. I will report their findings when I receive them. But, to some extent, this was a trick question. I already know the answer: I oversaw Aberdeen’s initial Supply Management On Demand Study last year which found that “…by the six-month [deployment] market, user perceptions change dramatically with nearly all users planning to continue On Demand deployments as mid- or long-term solutions.” This point was corroborated by a recent AMR study which found that ”While many early SaaS deployments started out as temporary fixes, AMR Research hasn’t found many companies that then dropped their On Demand for on-premise software deployments.”

Kudos to Sudy and his team for continuing its fact-based investigation into how On Demand/SaaS solutions accelerate supply management improvements. The report findings should provide some much needed clarity to a marketplace that is rapidly heating up.

In the coming week, I will be examining some of Aberdeen’s other recent research in this area. I am glad to see that that they continue to outpace the market in pure research in the supply management area.