A AMR Research recent article sheds some light on the real value of SaaS in the eyes of customers. As with any business decision, the assumption is typically that price is the most important factor. Luckily, as AMR’s research shows, that’s not the whole story in terms of buyers’ approach to SaaS.

Of course everyone is well aware of the rapid deployment and lower TCO benefits of SaaS. But AMR’s interviews with leading companies uncovered the biggest benefits have less to do with budgets and technology and more to do with results and innovation. Despite the tilt of many SaaS providers’ marketing campaigns, AMR “did not find any companies that have made the case for SaaS based solely on a favorable total cost of ownership (TCO) over on-premise software.” Long time SE readers and anyone in a spend management role has long been aware that there’s a lot more to decision making than lowest price. So it’s great to see that concept making its way into the value assessment of other corporate departments.

So what are buyers really interested in?

That’s easy. Results.

A couple of decades of massive spending on ERP systems, software, hardware and every other technological product imaginable proved that companies aren’t afraid to spend money. But oftentimes the failure of those technologies to live up to their touted potential left buyers weary of vendor promises. Now rather than hype, they want results and if you can’t deliver them, they’d like to move on to someone else who can. Given that environment, is there any wonder buyers would move towards the flexible, usage- and subscription-based pricing models of SaaS?

The bottom line is, in a SaaS delivery model, the vendor must help the client achieve adoption and results. If they don’t, the customer will search out a better fit when their renewal is up. And, since they’re no longer tied to the vendor through massive hardware and support personnel expenditures, switching costs are comparably low. So the vendor must be more of a partner than ever before. Customer loyalty is driven by one thing only: adoption and results. (Okay, that’s two things, but they’re tightly related.)

In the SaaS world, solution providers must do more than just deliver great technology that’s easy to use. That’s just the opening ante. They must also deliver the necessary expertise, service and support to help the customer drive rapid adoption and sustainable results.

This new service-oriented relationship also requires that solution providers be more responsive to customer requests for feature enhancements. The good news is that SaaS is designed for such responsiveness. Most SaaS vendors deliver incremental releases on a quarterly basis. Some do so even more frequently. Compare that to the 18-month release cycles (or three-year release cycles in the case of certain ERP-vendors-who-will-remain-nameless) and it’s easy to understand why enterprises view rapid innovation among the most alluring attributes of SaaS.

And, unlike the traditional installed software model, which require individual customers to fight for internal resources to deploy upgrades and reformat customizations, in the SaaS world, innovations are immediately available to all customers. In fact, even if traditional software vendors could deliver innovations more frequently, the resource requirements and cycle times for upgrades would be too onerous for most organizations to fully capitalize on these enhancements.

When you think about it, the decision to adopt SaaS is less about technology cost than it is about responsiveness and service. Subscription renewal is a powerful thing for a customer to hold in their hands. (Why do you think you get so many promotions from long-distance carriers, urging you to switch?) If you’re a decision maker, who will ultimately be judged on the impact of your investment decisions, wouldn’t you feel more comfortable pulling the trigger knowing you have some leverage in the equation? And as a vendor, aren’t you going to do whatever you can to keep that customer happy?

In an era of social networks, “new” media and rapidly changing technology, the collaborative nature of SaaS always seemed to be a logical fit for the times. So it’s great see that AMR’s research shows buyers and vendors are working together to achieve results.

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