Where SaaS Makes Sense

As an ARC Advisory Group enterprise software analyst, I am acutely aware of the promotional activities surrounding the software-as-a-service (SaaS) delivery model. In fact, it sometimes concerns me that the SaaS model is being promoted as the ideal means of application deployment for all customers in all situations. I do not believe it is such a cut and dry argument. Clearly the decision is complex. However, I do believe there are a few key characteristics that determine the suitability of the SaaS model for a given situation and set of requirements.

I have conducted research on a number of enterprise software markets and this process has revealed a wide disparity in SaaS adoption across application types. Possibly the greatest determinant of SaaS adoption is the degree to which the application manages transactions and processes that are internal to an organization, or across organizations. Those applications that support transactions and processes between trading partners have experienced greater SaaS adoption than those applications that serve as an internal corporate platform. For example, SaaS adoption has been robust in the strategic sourcing, transportation management, and global trade management markets. At the same time, SaaS adoption has been limited in the ERP market.

SaaS applications that connect organizations and support trading partner transactions are well positioned to deliver demand-side increasing returns, also known as the “network effect.” Once established, the network increases in value with the number of users. Descartes Systems is one technology provider that is successfully leveraging the combination of network connectivity and SaaS applications to expand its client base and solution footprint.

Descartes’ Global Logistics Network (GLN) has long been the foundation of its technology platform that also includes a broad suite of logistics applications. This messaging network offers capabilities such as connectivity, document exchange services, transformation, and other communication services. More recently, Descartes acquired IES, and incorporated the IES eCellerate product into its expanded vision of a networked community. Descartes eCellerate is a collaborative suite of solutions that enables customers to manage shipments, customs filings, and other disparate transactions on a single web-based platform.

At the 2013 Descartes user conference on November 12-14, they discussed the launch of the Descartes Community and the role of eCellerate in supporting partner collaboration within the community. The Community expands the GLN with improved collaboration tools and a single interface to communications and Descartes applications. It further facilitates multi-party processes, which I believe to be central to the value of a SaaS solution that supports transactions and processes between trading partners. The ability for community members to develop private sub-communities is a feature that I consider to be of great potential. This will allow subsets of Descartes customers to develop their own closed networks with information security levels that promise to encourage greater information sharing among participants. Descartes has also developed a data warehouse of shared and secure Community data on shipment activity that can be accessed and leveraged by participants. The shipment data warehouse also offers graphical display of data for intuitive comparison and analysis.

The Descartes Community further extends the benefits of the Descartes GLN. It offers further value to customers and provides additional tools that can ultimately increase the “network effect” of Descartes solutions. The technology is now in place, with future user adoption now the main determinant of the value that will be realized by customers.

Note: Descartes is a Logistics Viewpoints sponsor.

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