SaaS and Risk Mitigation: A Real Life Example

A co-worker notified me that SaaS CRM provider Entellium has potentially gone under due to its funding drying up. In this economic climate, relying on a recurring revenue model and VC cash as a proprietary start up (for lack of a better label for Entellium) can be tricky. I expect this downturn to have a lot of effects on smaller companies who just got started. Nothing shocking here…

But the fact that a number of SaaS providers can and will go under in these shaky economic times proves the value of two things that we hold dear at SugarCRM: open source and multi-instance SaaS.

To address the first – this is a no-brainer. Open source means that even if the vendor no longer can offer a SaaS delivery model, a company can take their application and data on site in hours or days. No big hiccup in operations. Proprietary SaaS vendors may shut down and only be able to provide the data to customers (if that), leaving them locked out of a system they spent time, money and good faith customizing and training employees to use. And, let’s not get into the conundrum of SaaS self-service portals. (Imagine – relying on a third party to expose data to your customers, only to wake up one morning with all of that nonoperational.)

Multi-instance follows suit here. While open source allows users to go on living with their applications on their own site, multi-instance allows them to keep the customizations, process flows, etc. that are unique to their organization intact in a migration to an on-site deployment. Under the outdated multi-tenant model, providing an exact replica of each customers’ customized versions is difficult, or potentially impossible depending on which type of infrastructure or type of application is being moved out of a SaaS model (ERP would be far more difficult than a contact management-based CRM tool, for example).

I don’t see any of the major SaaS plays going belly up any time soon. But, the case of Entellium and some other smaller providers should be a lesson to IT decision-makers. Vendor viability means a lot more in a SaaS world, and with open source alternatives more and more prevalent, application viability means a lot more than vendor viability these days, and buyers should take time to factor this into any considerations.