Midsize CIOs Increasingly Look For SaaS-Based Applications

by Jim Berkowitz on September 22, 2009

Here’s an informative article by Scott Campbell about the thoughts of CIOs at mid-size organizations concerning cloud computing / SaaS,  Midsize CIOs Increasingly Look For SaaS-Based Applications:

Slowly, surely, more midsize companies are embracing software-as-a-service (SaaS) over traditional software licensing, said CIOs at Everything Channel’s Midsize Enterprise Summit in Los Angeles this month.

Several CIOs said they’re not ready to permanently eliminate all their traditional licenses, but in this economy SaaS has become a cost-effective way to keep up with the latest applications.

“Two years back, I thought [SaaS] was the stupidest thing. But we’ve finally started seeing some applications that make sense,” said Peter Larsen, manager of information technology at National Frozen Foods, Seattle, Wash.

National Frozen Foods now is looking at some sales applications via SaaS because the cost to upgrade his current business intelligence solution will cost $1 million, which Larsen can’t justify because of how often it gets used.

“I’m not going to spend $1 million on a CRM application for seven people, but I will spend $50 a month,” Larsen said.

But some companies said they’re not ready to make the SaaS dive just yet…

Russ Tomlinson, information systems manager at Chaparral Energy LLC, Oklahoma City, Okla., said security needs to be tightened before his company will move core business processes to the cloud.

“Give it three years and maybe we’d look at it. Our CEO wants to keep it in-house and I agree. There are two many security lapses in SaaS environments right now,” Tomlinson said.

Michael Gauthier, IT director at International-Matex Tank Terminals, a New Orleans-based bulk liquid services company, is running SaaS in a few non-critical applications now but is not ready to fully embrace the model.

“I believe that as the market matures, we will consider using this for other applications. However, we have some applications that are considered business critical “ meaning we must host them locally to ensure 24×7 access. We prefer to provide our own high availability through server redundancy if needed,” Gauthier said. Another barrier to running some SaaS applications is confidentiality, Gauthier said.

“We continue to run payroll and HR applications in house instead of using anoutsourcing provider simply because management wants payroll done in house. As long as management feels that way, these applications will not go to the cloud.”

But more CIOs at MES seemed interested in SaaS a means to save money and become more efficient. Novus International Inc., started its larger cloud-based initiative after sending its infrastructure manager to VM World, said Dave Ploch, CIO and director of IT at the St. Charles, Mo.-based company.

“He came back highly energized about the cloud and the concept of a corporate cloud,” Ploch said. Last year, the company virtualized all but one of 50 servers to support the global organization. This year, it plans to extend that strategy to SaaS, including its SAP environment, Ploch said.

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