Everyone’s on the software-as-a-service bandwagon. The economics make it easy to love: Running your own applications is a costly endeavor; turnkey software, running on demand, can dramatically reduce the cost of IT. A recent McKinsey study found that over 70 percent of companies surveyed want their software on demand — and that includes big enterprises.
One branch of the on-demand evolutionary tree is what I’d call (at the risk of yet another unfortunate acronym) peripheral-as-a-service. As we move from a desktop to a mobile client, we’re unplugging familiar devices. And they’re all getting plugged back into the cloud.
Take faxing, for example. Rather than plugging in a phone cord, I can use efax. If I want storage, Jungledrive, box.net, and the fresh-out-of-beta Joggle will do fine. Printing? Scanning? No problem: I just tell someone to use a custom coversheet from drop.io, and the document they send shows up in an online drop.
Useful as these services are, it’s wrong to call them SaaS. My fax machine doesn’t need a lot of maintenance, and my backup drive works pretty well. I’m not paying an annual support license for either of them. The economic tradeoff to software doesn’t apply.
So how should we value them? Here are two ways:
How well do they improve on old-fashioned peripherals? Joggle acts as a media player as well as storage. Box.net integrates across several SaaS tools. Drop.io lets me collect various types of content, then share it with loosely secure URLs. So when valuing these firms, we have to look at what processes they’ve wrapped around their core functionality and how well they integrate with the SaaS platforms.
How big is their addressable market? A 2006 study of Internet-connected devices showed that the vast majority of computing will be done from our pockets, on cell phones. Extrapolating from a graph in the study, a conservative estimate would be that cloud peripherals have eight times the addressable market of PC-based peripherals. So anyone with a mobility play has a huge potential upside if they let you handle printing, faxing and file storage from your iPhone.
On-demand peripherals offer reliability, scalability, and all of the other things we’ve come to expect from the cloud. But we have to use different criteria to establish valuations; software economics don’t apply.