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Benefits Do Happen
More than two centuries ago, Adam Smith coined the term "division of labor" to describe a more productive way of doing work. With specialization, companies can improve their use of resources to generate increasing returns to scale (i.e., the same amount of work produces an increasing quantity of goods).
Producing the same output with reduced input is one of the basic concepts of SaaS. It makes sense to let the experts -- those operating at the appropriate scale, using the most advanced training and tools -- develop software for you, particularly when software is not your firm's competitive differentiator.
According to Wyly Wade, the former director of technology at General Land Corp. and now a general partner at XAltitude, "The more you look at the SaaS marketplace, the more we are learning that it's like a clothing designer owning a cotton farm. That person is not good at running a farm and will end up with a bad, inferior product."
In the future, enterprises will depend on software. Thus, how effectively that software is obtained, deployed and maintained will play a major role in these firms' success or failure. And SaaS can have a big impact.
Among respondents, 15% of midmarket and 20% of large companies are moving forward with SaaS applications. While those deploying SaaS represent a small group of pioneers, a majority have achieved positive benefits from doing so (see Figures 4 and 5). A think tank CIO, for example, says her organization uses SaaS for identity rights management, videoconferencing, purchasing, customer relationship management (CRM), and a library catalog.
A county government CIO also uses SaaS. "The county has a few implementations already in place, and it's having good success in the process of implementing a couple for HR and [the department of public works and transportation]."
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