ITARALDE, MARK DEAN D.

DLSU FEU/ MBA- JD PROGRAM

INFORMATION MANAGEMENT MR. RAYMUND GANOTICE

CASE STUDY - SALESFORCE.COM: SOFTWARE-AS-A-SERVICE GOES MAINSTREAM 1. What are the advantages and disadvantages of the software-as-a-service model?

There are advantages and disadvantages of the software-as-a-service (SaaS) model as discussed by Laudon1. As to advantages, the following were cited: 1) as it is based on on-demand model, it eliminates the need for large up-front capital investments; 2) It also minimizes operations costs, since it is no longer necessary to maintain hardware, it has no operating systems, database servers, or applications servers to install, no consultants and staff, and no expensive licensing and maintenance fees, as the system is accessible via Web browser; and, finally 3) the model offers products that can be easily customized to fit the customers unique business processes. Simply put, SaaS eliminates cost and the complexity of managing multiple layers of hardware and software. Several disadvantages identified in Laudons article include: 1) inconvenience of having to pay either monthly or as needed, instead of paying one-time upfront cost; 2) the problem of accessing the software whenever there are outages or internet connection problems, for 24/7 operating customers. My further research on the matter offered further analysis of the disadvantages of Saas. Accordingly, SaaS is actually a cloud computing system, and being so, presents security risks and the problem that it may take more transactional time as compared to traditional approach, making SaaS model not suitable for applications that demand response times in the milliseconds. Finally, SaaS total dependency on Internet means that data is transferred to and from a SaaS firm at Internet speeds, rather than the potentially higher speeds of a firms internal network2.

2. What are some of the challenges facing Salesforce as it continues its growth? How well will it be able to meet these challenges? As illustrated by Laudon, some of the challenges being encountered by Salesforce.com are the following: 1) Big competitors, like Microsoft, SAP and Oracle, have started to replicate their success building their own new and improved subscription-based versions of their CRM products (customers familiarity with Microsoft is a firm challenge Salesforce) while new entrants competitors are also building up their market share; 2) Also, Microsoft will employ its tactic of offering its competing products at half of the price of Salesforce.com to pressure competitors and attract more customers. 3) Salesforce.com is mainly used by sales staff and has not yet spread to other areas, presenting a challenge for Salesforce.com to expand its business model. Using the Porters competitive forces model, we can clearly picture out the interplay of traditional competitors, new market entrants, substitute products and services, customers and suppliers in challenging Salesforce.com survival and progress. Salesforce.com must be able to sustain, if not increase its profitable market share, expand its business fortfolio and ensure solutions to disadvantages
1

Laudon, Kenneth C., Salesforce.com: Software-as-a-Service Goes Mainstream. Essentials of Management th Information System; 10 Edition. 2 http://theprofessionalspoint.blogspot.com/2012/12/advantages-and-disadvantages-of-saas.html

of its business presented above. Notably, Laudons article mentioned Salesforce is working hard to face its challenges. They are already partnering up with Google, so all that they need to do is spread to larger companies and create software that will benefit them as well as smaller companies.

3. What kind of businesses could benefit from switching to Salesforce and why? What I can figure out from reading Laudons article is the relation of Saas to CRM. My proposal then is that large kind of enterprises dealing with huge base of customers could actually benefit from using Saas. However, unlike the question posted which requires switching to SaaS or Salesforce for this matter, Id like to believe that enterprise could actually benefit more, if they try to harmonize their existing system with Saas instead of switching everything to Saas. The security and internet dependency disadvantages mentioned above are real risks that could actually be detrimental to the business if total reliance to SaaS of Salesforce be implemented. Carraro and Chong3 concluded that Enterprises would do well to consider the flexibility and risk-management implications of adding SaaS to their portfolios of IT services. Integration and composition are critical components in a business architecture strategies to incorporate SaaS successfully as a fully participating member of its service-centric IT infrastructure. 4. What factors would you take into account in dedicing whether to use Salesforce.com for your business? For me, the integration of information management system is always a question and analysis of the control and cost for the business. If the answer for both issues would be beneficial for the business, then I will consider SaaS or Salesforce.com products for my business. But for factors to be taken into considerations, I would consider the points raised by Carraro and Chong4 and include the following: a. Political considerations. Sometimes, the decision can be short-circuited by resistance from within an organization, if important people insist that certain functionality remain internal, under the control of IT; b. Technical considerations. SaaS applications typically provide some flexibility for customer configuration, but this approach has its limitations. If an important application requires specialized technical knowledge to operate and support, or requires customization that a SaaS vendor cannot offer, it might not be possible to pursue a SaaS solution for the application. Another factor to consider is the type and amount of data that will be transmitted to and from the application on a regular basis. Internet bandwidth pales in comparison to the gigabit Ethernet links commonly found in enterprise LANs, and data transmissions that take a few minutes to transfer between servers in your server room might take hours to transmit to and from a SaaS application located across the country. Because of this, it might make sense to consider a solution that takes network latency into consideration c. Financial considerations. Consider the total cost of ownership (TCO) of a SaaS application, compared to that of an equivalent on-premise application. Although the initial cost
3

Carraro, M. & Chong F. Software as a Service (SaaS): An Enterprise Perspectiv; http://msdn.microsoft.com/en-us/library/aa905332.aspx

4

Carraro, M. & Chong F. Software as a Service (SaaS): An Enterprise Perspectiv; http://msdn.microsoft.com/en-us/library/aa905332.aspx

of acquiring software capabilities through SaaS is normally lower than that of on-premise applications, the long-term cost structure is less certain. Factors that can affect the TCO of a SaaS application include the number of licensed users; the amount of custom configuration you will have to perform to integrate the SaaS application with your infrastructure; and whether your existing data centers already provide economy of scale, thereby reducing the potential cost savings of SaaS. Additionally, you might decide to delay implementing a SaaS replacement for an expensive or recently implemented application until it produces a satisfactory return on investment (ROI). d. Legal considerations. Some industries are subject to regulatory law in different parts of the world, which imposes various reporting and recordkeeping requirements that your potential SaaS solution candidates cannot satisfy. Consider the regulatory environments in all the different jurisdictions in which your organization operates and how they affect your application needs. MIS IN ACTION QUESTIONS: 1. What are the most popular applications on App Exchange? What kinds of processes do they support? What appears to be the most popular applications/ products being offered by Salesforce.com include sales cloud and service cloud, which basically support the sales representation and marketing management and customer releations, services and engagement management. They also offer applications like Sales platform, and sales chatter, which supplements their major apps in establishing collaborations between and among, employees, customers and sales representatives of the firms using saleforce.com products. 2. Could a company run its entire business using Salesforce.com and App exchange? Explain your answer. Again , Id like to believe that enterprise could actually benefit more, if they try to harmonize their existing system with SaaS instead of running its entire business with SaaS. The security and internet dependency disadvantages mentioned above are real risks that could actually be detrimental to the business if total reliance to SaaS of Salesforce be implemented. Using control and cost tests, there will be better appreciation and mitigation of risks involved in the management of information system. 3. What kind of companies are most likely to use App Exchange? What does this tell you about how Salesforce.com is being used? Companies dealing with huge number of customers will radically benefit from the products of Salesforce.com, particularly those in the locations where internet connections are 100% reliable and faster connectivity is in place.