It’s been six years since SaaS BI came to be. As recently as last month, an industry report from TechNavio said, “the traditional on-premise deployment of BI tools is slowly being taken over by single and multi-tenant hosted SaaS.” I have a feeling this is another one of those projections that copies a historical growth rate forward for the next five years. If you do that with any new offering that starts from zero, you will always project it to dominate a marketplace, right?
I thought it would be interesting to discuss why I think this won’t happen.
In general, there is one legitimate driving force for why companies look to SaaS solutions that helps drive the demand for SaaS BI specifically: outsourcing of IT. The types of companies for whom this makes the most sense are small businesses. They have little or no IT staff to set up and support enterprise software, and they also have limited cap-ex budgets so software rentals fit their cash flow structure better. While this is where most of the success for SaaS BI has happened, this is only a market segment opportunity. By no means do small companies dominate the IT marketplace.
Another factor for turning to SaaS solutions is expediency. Even at large companies where there is budget for software purchases, the Business sometimes becomes frustrated with the responsiveness of internal IT, and they look outside for a faster solution. This makes sense for domain-specific cases where there is a somewhat narrow scope of need, and the application and the data are self-contained. Salesforce.com is the poster child for this case, where it can quickly be set up as a CRM for a sales team. Indeed the fast success of salesforce.com is a big reason why people think SaaS solutions will take off in every domain.
But business intelligence is different. A BI tool is meant to span multiple information areas, from finance to sales to support and more. This is where it gets complicated for mid-sized and global enterprises. The expediency factor is nullified because the data that business users want to access with their SaaS BI tool is controlled by IT, so they need to be involved. Depending on the organization’s policies and politics, this can either slow down such a move or kill it.
The very valid reason why enterprise IT would kill the idea for an SaaS BI solution is why ultimately I think SaaS BI has such a limited opportunity in the overall market. One of IT’s responsibilities is ensuring data security, and they will rightly point out the security risks of opening access to sensitive corporate data to a 3rd party. It’s one thing to trust a vendor with one set of data like website visitor traffic, but trusting them with all of a company’s financial and customer data is where almost all companies will draw the line. This is a concern I don’t see ever going away.
What are some pieces of evidence that SaaS BI has a limited market opportunity? When SaaS BI first came onto the scene, all of the big BI vendors dabbled in it. Now they no longer champion these hosted offerings, or they have shuttered them. Our company, too, experimented with a SaaS BI offering years ago. It was first targeted at salesforce.com customers who would want to mash up their CRM data with other enterprise-housed data. We found mostly small, budget challenged companies in their customer base, and the few large enterprises that we found balked at the idea, asking instead, for our software to be installed on-premise where they would connect to any cloud-hosted data on their own. Another observation to make, while there have been a handful of pure-play SaaS BI vendors, one named “Lucidera,” came and went quite quickly.
In summary, yes, there is a place for SaaS BI in the small business market, but no, it’s not going to overtake traditional on-premise BI.
Mark Flaherty is Chief Marketing Officer at InetSoft Technology, a business intelligence software provider. InetSoft’s application enables self-service BI that is both end-user and IT friendly.
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