Why is SaaS only popular in small business?

While Software as a Service (SaaS) has been gaining popularity recently, it is remarkably noticeable that its popularity is limited to small and medium-size businesses (SMBs). Larger enterprises are still reluctant to embrace hosted application for their IT needs.

According to a recent Forrester Research paper, “The Truth about Software as a Service,” which is a result of a late 2007 survey of IT decision-makers from North America and Europe, only 16 percent of respondents are using SaaS applications. On the other hand, 80 percent are still reluctant to adopt SaaS. Of the 80 percent, only 47 percent expressed interest, while 37 percent were “not interested at all.”

If SaaS has been gaining popularity recently, the gap between big-business IT decision-makers who were interested in it and those who were either partially interested or totally uninterested is too wide. As if to counter the SaaS advantages that were cited in the previous blog, researchers and tech workers in big enterprises cite various reasons why it is not being widely adopted outside the realm of SMBs.

One of the top reasons why big businesses are reluctant to adopt SaaS is business continuity. Put simply, the market’s atmosphere is fraught with uncertainty that SaaS vendors could just shut their doors easily. When it happens, where do the hosted data go? What alternatives are immediately available to end-users?

Next to business continuity, data security, vendor lock-in, and accountability are some of the issues that clients—both large and small or medium-size businesses—raise most of the time. Because many large enterprises are sensitive about their company data, they are reluctant to hand company information to third parties. In terms of accountability, there have been complaints about vendors’ dishonesty about real downtime rates and the speed with which they address it. If a service is suddenly cut off, IT departments ask how long it takes for the service to be available again and what kind of assurances are provided to address such issues.

SaaS are typically fit-for-all, so customization is another nagging issue. Maybe small businesses’ IT needs are not complex, that is why they are more willing to sign up with SaaS vendors. On the other hand, enterprises that provide more than one type of service, sell more than one product, are present in different locations, and employ thousands of employees have IT needs that are as complex as their multinational presence and multiple businesses. That most vendors do not offer customizable services to match big businesses’ needs is one of the signs that it is still in its infancy.

Related to downtimes is the issue of scalability. Can a hosted service support thousands of users who access the application simultaneously? If it cannot, can a business enlist the help of another vendor? This is where the issue of interoperability and portability also come in. In most cases, transferring data from one SaaS provider to another takes time and considerable effort.

That SaaS became popular among SMBs means it is promising. However, this promise does not translate well in big business.