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How to Tell the Difference between SaaS Vendors

Chuck Schaeffer – CEO, Aplicor

It seems that when surveying the software as a service (SaaS) business applications market, surveyors often either feel there are too many similar vendor solutions or believe that there are still many market voids. I suspect the differences stem at least in part from the depth of the particular survey.

If you only look at the SaaS CRM or ERP markets from a broad perspective, there can appear to be a number of seemingly like business software solutions. However, if a deeper investigation continues, the primary differences among the SaaS solutions become apparent and the market voids become visible.

My view and investigation of the SaaS business software market shows strategic differences among SaaS vendor solutions in seven primary areas – architecture, customer target market, software scope or breadth, software depth, hosted delivery, information security and continuous uptime capabilities.

In this blog post I’ll highlight some fundamental differences in the first category of architecture. In subsequent posts, I’ll comment on the remaining differences.

If there is one deep-seated architectural difference that SaaS vendors are split on it’s the multi-tenancy versus the isolated tenancy hosting models.

Multi-tenant Saas Vendors

Multi-tenant SaaS vendors such as Salesforce.com, NetSuite and Entellium embrace the shared architectural services model and claim that it provides efficiencies of scale, in terms of both IT management and cost savings, and that such operational and cost benefits are extended to their client relationships.

Isolated Tenancy SaaS Vendors

Isolated tenancy SaaS vendors such as Aplicor and SAP claim that only when every customer operates within their own autonomous database are performance, security, privacy and integration flexibility truly maximized.

Who’s right? Depends on who you ask.

In my experience, I find this issue to be less relevant in the small business market (which generally doesn’t show as much interest in IT architecture) and much more relevant in the middle and enterprise markets (who often either have IT architectural preferences or absolute requirements).

It’s also possible that environmental factors may influence growth of one model over the other going forward. If cost pressures elevate, the multi-tenant model may become increasingly popular. If compliance issues such as SOX, privacy issues such as HIPAA or information security move even further to the forefront, the isolated tenancy model may take precedence. The bottom line is that there is no one best answer that serves all interests. Varying architectural strategies and opinions will favor one model over the other based upon any particular organization, person or interest.