Dharmesh Shah

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BusinessWeek On SaaS: Article Smells Like That Thing In My Refrigerator

By Dharmesh Shah on July 29, 2008

Warning:  I'm about to go on a bit of a rant.  I usually only reserve these kinds of articles for when things really irritate me, and this is one of those times.  I'm generally a patient, considerate person, really I am.

Here's the source of the most irritation I've felt from a technology article in a long time (and this from BusinessWeek, a major brand that I respect): 

Beware The Hype For Software As A Service

I actually hesitated to even include a link to the article, because you might be tempted to go read it.  But it has to be done.  It's kind of like when you smell something really awful that's been growing in your refrigerator.  Then, you give it to your spouse and say:  "Hey, check this out -- can you believe how bad it smells?" 

Disclaimer:  I work for a tiny little startup that provides marketing software as a service.  So, I guess I could be biased.  I'm not wrong on this one, but I could be biased.

Back to the article.  Here are some of the issues I had:

1.  SUVs Suck, So SaaS Must Too:  The author does some strange build-up in the opening paragraphs using "SUVs are cool" and "cell phone causes cancer" as examples.  The point?  That both of these are/were surrounded by "hype".  And, we should always beware of hype.  Think of the children!  I'm already irritated.  For the record:  I don't think SUVs are cool.  Oh, and these inane examples are what drove me to the title of this article.  Fight fire with fire and all that.

2.  SaaS Is Cheaper:  The article tries to refute the "myth" that SaaS is cheaper by providing this cogent argument:  "Most service providers charge each user by the month."  There's no discussion of the economics of installed software, drive-by sales in enterprise software, or the cost of capital for small businesses.  Hey, those SaaS vendors charge monthly, so it must be more expensive.  Right?  That must be why Salesforce.com has been so successful -- they just charge more than Siebel.

2.  SaaS Reduces Hardware Investment :  It refutes the "myth" that SaaS requires less hardware investment by arguing that although you don't have to pay for all the servers and stuff, you still have to pay for fast access to the Internet.  Here's the quote:  "Sure, the SaaS providers deal with the servers, and all the Windows headaches and patches and builds and versions and whatever. That's their problem. But you still need fast access to the Internet."  The rest of this particular argument just gets worse from there.  Now, I'm really irritated. 

3.  SaaS Is Quicker To Setup:  Yep, this is a myth that is "busted" too.  The example provided:  "It's kind of like assembling furniture."  The author provides as evidence that SaaS is not easier to setup, the fact that he's got a lopsided bookcase in his den.  This "proves" that little theory about SaaS being quicker to setup, wrong.  Sure, setup costs for SaaS can be high (based on level of customization), but on average, SaaS offerings are simpler and quicker to get going on.

4.  Data Can Be Secure In SaaS:  The article argues that data backup and reliability in SaaS is a myth.  Once again, we have extreme (and in one case totally unrelated) examples offered as proof.  Yes, data security is always a risk, but I'm not convinced that the risk is any higher for SaaS than businesses (especially small businesses) than running the software on your own servers, sitting in your closet somewhere.

If you think I'm being overly harsh, please read the article.  I dare you.  And, if you do go read it, please don't forward it around to your colleagues.  Sometimes, you don't need validation that the thing in your refrigerator really does smell that bad.

End of rant.  Back to our regularly scheduled program next time.

Topics: saas
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Facebook Acquires Twitter and 4 More Deals That Should Happen

By Dharmesh Shah on July 23, 2008

Today's big news from TechCrunch is is that Google is in the final stages of acquiring digg for about $200 million.  Makes sense to me.  Particularly given some of Google's recent experiments having social voting in their search results pages.

I'd been thinking about startup acquisitions earlier this year (and started keeping a side list of deals I thought should get done).  Just as an amusing exercise.

The 5 Tech Deals That Should Happen

Disclaimer:  When I say should happen, it's not a prediction, just something that I think makes sense.

1.  Facebook should acquire Twitter:  Let's face it, back in the early days, some of us wondered how Twitter was different from an enhanced version of Facebook status updates.  I think the two products would work well together, and Facebook has the resources to help Twitter get over some of the current platform stability issues.

2.  Google should acquire FriendFeed:  This would be a bit similar to the FeedBurner acquisition (although FriendFeed is nowhere near as far along).  Google gets a good product that can further it's social networking stuff.

3.  Microsoft should acquire Xobni:  This one's already been talked about before, and almost happened.  It should happen.  Xobini's got a great team, Microsoft needs some new energy in the Outlook group.

4.  Intuit should acquire Freshbooks:  You may not have heard of Freshbooks, but it's a cool company with a cool product for invoicing.  Intuit needs a much better web offering, and the Freshbook folks have great design and are great entrepreneurs.

5.  Ning should acquire Mixx:  Ning is growing, but needs more "best of breed" style social networking apps.  Mixx is brilliantly executed and more and more people want/need some type of focused social news product as part of a larger social network or community.

So, what do you think?  What's your vote for the acquisitions in the remainder of 2008 that should happen?  Leave 'em and debate 'em in the comments.

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