Implications: SaaS offers three benefits that make it very attractive in these times: 1) No Capital Expense; 2) Variable Cost; and 3) Scalability. These benefits are tailor made to address the challenges businesses face now. We are undergoing major changes in national and global economies and at the same time there is also rapid advances in technology. Companies need to try out new business ventures and products to see which ones work and they need ways to manage the risks inherent in doing this. SaaS is part of how they can manage that risk.

Analysis: Given the pace of economic, technical and social change, companies need to actively try out new products and service offerings if they are going to keep up. Trying to play it safe and stick with traditional product offerings is clearly not going to work. Yet many new ventures will fail for every new venture that succeeds.

This makes the three benefits of SaaS irresistible. Given the credit crunch and the uncertain outlook for any venture, it is important to try out new ventures without incurring large capital expenses. SaaS offers companies a way to get started without large up front costs.

The SaaS cost model is a pay as you go month to month arrangement that is based on actual usage. Over the long run a company may incur more costs using this model if a new business venture is successful and grows to a large size. But that possibility is far outweighed by the uncertainty over whether a new venture will actually succeed. So a variable cost business model is the best way to protect cash flow because costs will only rise if the business grows and if it does not grow then costs will not rise and there will be no large sunk costs if the venture has to be abandoned.

Scalability is another attractive option offered by SaaS. Companies do not have to guess how much system capacity they will need and they do not have to guess which technology to use to get that capacity. They can leave those questions to the SaaS provider. The SaaS provider typically has better information to make those decisions and can spread the costs over a wider customer base than any individual company.

In times of great change there are great opportunities. Now is the time for companies with new ideas to test them out and gain market share while their competitors are laying low and just trying to survive. Business agility requires an agile IT strategy to make it happen and SaaS is central to any agile IT strategy. My blog Doing Business in Real Time at CIO.com covers these SaaS benefits in a recent post titled "Tough Times and Three Unequivocal Standards of IT Agility"