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GCN Home > 10/09/06 issue

Warren Suss | Another View: Software as a service

On-demand software: The next big thing in federal IT

By Warren Suss, Special to GCN

Corporate America is replacing traditional buy-and-run-your-own IT application models with software-as-a-service purchased by the seat from Oracle, IBM, Microsoft and SAP, as well as from newcomers like Salesforce.com, 24SevenOffice and eProject.

The best way to appreciate what’s happening with on-demand software is to look at the Salesforce.com example. Salesforce.com provides on-demand customer relationship management (CRM), including sales force automation, marketing automation, customer service automation and analytics, as well as forecasting, contact management and online lead capture. Not only has Salesforce.com grown at over 1,000 percent during the last four years, but it has also begun to capture business from major U.S. corporations, including ADP, SunTrust Bank and Staples. Two-thirds of major corporations recently surveyed are either using on-demand software or are currently considering its use.

The acceptance of on-demand software by major corporate users is important. The federal government models its IT best practices on the best IT practices in corporate America. As the Office of Management and Budget’s power grows in determining federal IT investments, the government increasingly takes its lead from corporate IT business case models. In addition to top-down pressure from OMB, as the top layer of federal CIO leadership becomes increasingly populated with corporate executives, there will be growing agency-level pressure to adopt the latest corporate models in the search to maximize value from agency IT investments.

On-demand software isn’t just the return of another IT fad. There are strong business-case justifications for the move to software as a service. System upgrades are free. The direct cost per user is lower. The total cost of ownership is lower. These savings reflect reductions in software costs as well as efficiencies based on outsourcing software support functions. There are reduced requirements for agency and contractor system development personnel, system managers, system operators and help desks. By using on-demand software, application development and implementation times are shorter. And when important applications get into the hands of users earlier, users are able to get program results sooner. The total-fixed-price-per-user, on-demand software model also reduces risk in the budget planning process, which is often just as important to agency decision-makers as total-cost-of-ownership considerations.

More news on related topics: Software Applications, Acquisition / Contracts, IT Management



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