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Summary:

In what is probably not a shocker, new research shows more companies are turning to SaaS-based business intelligence over traditional on-premises BI. About a third of IT managers surveyed said they plan to use at least some SaaS-based BI in the next year.

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In what is probably not a shocker, new research shows more companies are turning to SaaS-based business intelligence over traditional on-premises BI.

Business intelligence, or analytics software from such companies as SAP (which bought BusinessObjects for this purpose), MicroStrategy or Oracle  (which bought Hyperion)  helps companies make sense of their data — to visualize what’s happening with sales or marketing pushes, for example, and to make sales forecasts. But now those legacy players, which are all adding their own Software-as-a-Service (SaaS) capabilities, face new SaaS-oriented rivals like Birst,  Jaspersoft and Cloud9Analytics. And Google has gotten into the act with Google Analytics.

One third of 1,364 IT managers surveyed by Gartner last quarter, said they plan to use some SaaS-based BI soon. Specifically, 27 percent of respondents said they already use or plan to use cloud- or SaaS-based BI options in addition to their existing core in-house BI applications for some workloads in the next year. Another 17 percent said they had already replaced or plan to replace their current BI solutions with SaaS.

That means a lot of potential upside for the aforementioned new-look SaaS providers (although it should be noted that Birst went from a SaaS-only model to offering both SaaS and on-premises options). Still, the momentum for SaaS is strong. Valuations of SaaS-oriented software companies are off the charts compared to their traditionalist rivals more rooted in the on-premise software world.

Gartner said customers see too much value in the SaaS model to resist. In a statement, Gartner Research Director James Richardson said:

Business users are often frustrated by the deployment cycles, costs, complicated upgrade processes and IT infrastructures demanded by on-premises BI solutions. SaaS- and cloud-based BI is perceived as offering a quicker, potentially lower-cost and easier-to-deploy alternative, though this has yet to be proven.

He also injected a note of caution, however, saying the market “remains confused about what cloud/SaaS BI and analytics are and what they can deliver.”

It’s interesting that Gartner did not sign onto the usual operating expense versus capital expense rationale as a SaaS motivator. The usual spiel used to justify a SaaS move is that software subscriptions can be expensed and don’t need to go on the capital expenditure (capex) budget, whereas big capex purchases need approval from a high-ranking executive.

“Buyers often think that SaaS is cheaper, but the reality is that this is unproven,” Gartner said.  Its cost models rather show that SaaS can be cheaper over the first five years but not thereafter. Instead, long-term savings from SaaS lie in reduced IT support costs and other factors, Gartner said.

Still, as long as there are savings from SaaS, even if they come from reduced personnel costs, it’s likely corporate IT dollars will continue to flow to this model.

Cloud photo courtesy of Flickr user karindalziel

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  1. Rachel Delacour Thursday, January 26, 2012

    “Its cost models rather show that SaaS can be cheaper over the first five years but not thereafter.” … remember that with a Cloud BI solution, you’re always in the very last version of the solution while you don’t pay for upgrades like in the traditional on-premise BI world. It has to be taken into consideration before saying that SaaS BI apps can be more expensive thereafter…and Gartner knows it !

    1. it’s been interesting watching vendors go back and forth on this SaaS vs. on premises cost question. In the early days Msft used to say salesforce.com crm was cheaper than Msft crm up until the third year, at which on-prem crm was cheaper. It stopped saying that when it started offering its own hosted crm, however.

  2. Agreed Rachel :)

  3. I think a key phrase here is, “Business users are often frustrated by the deployment cycles, costs, complicated upgrade processes and IT infrastructures demanded by on-premises BI solutions”. In other words, SaaS BI is more a departmental thing than a corporate things. BI is frequently an application that departments use to gain some freedom from what they see as the constraints of corporate IT. The SaaS model makes this easier for them to do so.

  4. In my opinion, this article is spot on. When we started developing our service at http://www.Brightmetrics.com we had the choice to develop a premise or SaaS based product. We went with SaaS for many reasons. One of the main reasons was the ability to easily push this information out to the edges of the organization. Typical premise solutions require centralized infrastructure (both technical and personnel) to manage. With SaaS we can make it easy for anyone in the organization to access the information in the way they need it from anywhere.

    It’s really about putting the power in the hands of the data consumer rather than the historical model of that power being wielded by the data creators.

    And IT departments that strive to be strategic, and add value to their organizations are embracing this model. Whereas IT staff that want to create fiefdoms and be the owner of everything technical will be relegated to dinosaur status over time largely because of this type of trend.

  5. As far as the ROI on cloud vs. in-house, you obviously need to run the numbers. For small to mid-sized businesses with no in-house expertise with the tool, it often makes sense. The biggest hurtle is usually more political, with the idea of IT losing control of an application and more importantly, the data security.

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