Midsize CIOs Increasingly Look For SaaS-Based Applications

Slowly, surely, more midsize companies are embracing software-as-a-service (SaaS) over traditional software licensing, said CIOs at Everything Channel's Midsize Enterprise Summit in Los Angeles this month.

Several CIOs said they're not ready to permanently eliminate all their traditional licenses, but in this economy SaaS has become a cost-effective way to keep up with the latest applications.

"Two years back, I thought [SaaS] was the stupidest thing. But we've finally started seeing some applications that make sense," said Peter Larsen, manager of information technology at National Frozen Foods, Seattle, Wash.

National Frozen Foods now is looking at some sales applications via SaaS because the cost to upgrade his current business intelligence solution will cost $1 million, which Larsen can't justify because of how often it gets used.

"I'm not going to spend $1 million on a CRM application for seven people, but I will spend $50 a month," Larsen said.

Robert Bence, vice president of technology at SouthwestCredit, Plano, Texas, said he looks for SaaS solutions first if the application is not a core part of the business.

"For a commodity-type application, it makes sense. We allow our spyware, anti-virus in the cloud and we're looking at the possibility of moving e-mail to the cloud. For things like patch management, if we can reduce costs by not having our resources do it, it makes sense," Bence, said.

But some companies said they're not ready to make the SaaS dive just yet.

"It's a buzzword. We're not looking at it right now," said Dirk Anderson, vice president of technology at C.R. England, a Salt Lake City, Utah-based transportation services company.

Russ Tomlinson, information systems manager at Chaparral Energy LLC, Oklahoma City, Okla., said security needs to be tightened before his company will move core business processes to the cloud.

"Give it three years and maybe we'd look at it. Our CEO wants to keep it in-house and I agree. There are two many security lapses in SaaS environments right now," Tomlinson said.

NEXT: Why Some Companies Are Not Making The SaaS Move

Michael Gauthier, IT director at International-Matex Tank Terminals, a New Orleans-based bulk liquid services company, is running SaaS in a few non-critical applications now but is not ready to fully embrace the model.

"I believe that as the market matures, we will consider using this for other applications. However, we have some applications that are considered business critical " meaning we must host them locally to ensure 24x7 access. We prefer to provide our own high availability through server redundancy if needed," Gauthier said. Another barrier to running some SaaS applications is confidentiality, Gauthier said.

"We continue to run payroll and HR applications in house instead of using an outsourcing provider simply because management wants payroll done in house. As long as management feels that way, these applications will not go to the cloud."

But more CIOs at MES seemed interested in SaaS a means to save money and become more efficient. Novus International Inc., started its larger cloud-based initiative after sending its infrastructure manager to VM World, said Dave Ploch, CIO and director of IT at the St. Charles, Mo.-based company.

"He came back highly energized about the cloud and the concept of a corporate cloud," Ploch said. Last year, the company virtualized all but one of 50 servers to support the global organization. This year, it plans to extend that strategy to SaaS, including its SAP environment, Ploch said.

"This has been highly successful," he said. "[We] have decided to do it in an outsourced environment. We have negotiated for them to also run and maintain the environment up to, and including part of the, SAP applications. This is only a hop, skip and jump away from being in the cloud," Ploch said.

In addition, he's challenging his staff to see if Novus can deploy non-mission critical systems into the cloud. "Also, [we] see no reason not to consider a hosted Exchange or heaven forbid Google Apps," he said. "The argument is to get away from much of the day to day support that it takes to run these environments. The possibility of outsourcing the DR efforts would be a tremendous gain for our enterprise if it would work."