David Raab Article Archive

Taking Advantage of Software as a Service for Marketing Systems
David M. Raab
DM Review
December 2006

.
What’s the most exciting development in marketing software these days? Hands down, and it’s the continued growth of “software as a service” (SaaS) as a viable alternative to traditional in-house systems. As the number of conventional competitors continues to diminish through industry consolidation, look the survivors are concentrating on expanding the breadth of their offerings. This means any significant innovation must come from outside the ranks of the established vendors. The most likely candidates are the SaaS vendors, who have less to lose and are freer to concentrate on specific functions rather than trying to be all things to all people.

The biggest challenge facing the SaaS vendors happens to be the conventional vendors’ primary line of defense. The issue is integration across company systems: SaaS vendors must find ways to allow such integration, while conventional vendors rely on integration difficulty as a reason for clients to buy components within their “integrated” suites. That the suites have often been cobbled together through acquisitions and are not internally well integrated is a topic many would rather not discuss–although, to be fair, having prebuilt connectors and a single vendor responsible for making them work do help quite a bit. One weakness in the conventional vendors’ strategy is that changes which facilitate integration of their acquired products, such as rebuilding their systems on J2EE or .NET platforms, often make it easier to interact with external products as well.

The SaaS vendors have come at the problem from the opposite direction. Knowing that they would always be outside the core operating structure of their clients, they have worked to simplify integration with external systems. This originally meant making it easy to import outside data and, later, to send data back into its corporate home. More recently, SaaS vendors have taken a more aggressive approach, opening up their systems via APIs and Web Services connectors so their internal components can be used in other contexts as well. The goal is less to ease transfer of data across boundaries than to make those boundaries disappear. In physical world terms, it’s the difference between making it easier to travel and using the telephone to communicate without traveling at all.

It’s easy to root for the SaaS vendors as plucky rebels fighting a ponderous, centralized empire. From a corporate IT perspective, the freedom to mix and match components from multiple sources is more appealing than being restricted to the offerings of a single suite. The SaaS approach is also very consistent with the general movement towards service oriented architectures: in this situation, a properly exposed SaaS product is nothing more than another service.

But the SaaS vendors’ triumph is not assured. Integrated suites do have advantages in terms of existing installations, richer functionality (sometimes), and more established vendors. Although SaaS solutions are almost always cheaper to implement than conventional software, the long-term costs can be higher. Most enterprises have not transitioned to a service oriented architecture, and so cannot take full advantage of SaaS components. And many vendors of conventional marketing software now offer some type of SaaS option—although this is a competitive threat to individual SaaS vendors, not to the notion of SaaS itself.

Corporate IT managers who want to take advantage of the choice and cost opportunities presented by SaaS will want take several actions:

– familiarize yourself with the options. Nearly every marketing software function is available today in a SaaS fashion. Some, like marketing resource management, are particularly well suited to SaaS because they serve networks of users that span geographic and corporate boundaries. The Web-based nature of most SaaS offerings makes them particularly well suited for sharing information and processes across such lines.

– reconsider the boundaries of your current applications. Just as early computer systems often intermingled data, business logic and presentation functions that were later split into separate layers, today’s marketing systems often combine data preparation, execution and analysis. Different SaaS solutions might handle these independently, reducing redundant effort and allowing consolidated processing. For example, a SaaS customer behavior analysis system that combines data from multiple sources can replace behavior analysis components built into the channel-specific execution systems. This simplifies the buying decision for the execution systems, since analysis capabilities are not required. (Of course, you could get the same benefit from a non-SaaS customer behavior analysis system too.)

– remove barriers to SaaS deployment. Many organizations have formal policies or informal biases that prevent them from sending customer data or key business functions outside of their corporate data centers. These should be replaced with a more neutral approach that assesses the business and security risks of all approaches. In many cases, external services are actually more secure and more reliable than in-house systems. Companies should also review their procedures for financial justification to ensure that calculation formulas are not unnecessarily biased for or against SaaS systems. For example, in-house systems are often funded as depreciable capital investments while SaaS systems are treated as operating expenses. This difference that can significantly impact which is chosen.

– move towards a more open IT infrastructure. In the long term, this means working towards a service oriented architecture that will simplify sharing of data and functions. But it also means making openness a consideration when evaluating conventional (and SaaS) systems. There may still be times you purchase a closed product for functional or cost reasons, or when it makes sense to expand you existing investment in such a product. But you should at least be aware of the lost future opportunities this choice imposes, and factor that into your decision-making.

* * *

David M. Raab is a Principal at Raab Associates Inc., a consultancy specializing in marketing technology and analytics. He can be reached at draab@raabassociates.com.