Gartner got it wrong about SaaS for SMEs

Gartner put out a report on Thursday entitled Gartner Fact Checks the Five Most Common SaaS assumptions.

Whilst a lot of the observations made by Gartner possibly hold true for larger companies (I wouldn’t know), they certainly don’t for the small businesses of the size that use our online accounting software.

Costs
The Gartner report says:

SaaS applications will have lower total cost of ownership (TCO) for the first two years because SaaS applications do not require large capital investment for licenses or support infrastructure. However, in the third year and beyond, an on-premises deployment can become less expensive from an accounting perspective as the capital assets used for the on-premises deployment depreciate.

This is wrong. As Mary Hayes Weier points out at Information Week, most companies would upgrade their software at least every 3 to 5 years. More often than not this is a forced upgrade. For example, the software vendor will say that version X is no longer supported – if you want support then you must fork out the cash for version Y.

What’s worse is that they try to make it look like they’re doing you a favour by giving you an upgrade discount or by including a couple of months free support.

With KashFlow and most other SaaS apps, free support is included in the monthly fee. There’s no concept of “upgrades” – you’re always using the most recent version.

Implementation time
This bit nearly made me fall of my chair. It really illustrates the difference between the hundreds of thousands of small businesses that are the target market for KashFlow, and the businesses that Gartner are talking about.

[SaaS] vendors often quote time frames of 30 days to implement but neglect to say that SaaS deployments can take seven months or longer.

Seven months or longer??? I can’t fit that into my brain to even comment on it. Does not compute.

So lets take the smaller number of 30 days. Even this is crazy in our world. 30 minutes is more like it. That’s how long it should take you to get up and running with KashFlow, familiar with it’s core functionality and be ready to roll.

The more I read about SMEs the more I see stuff that just does not relate to my reality or the reality of the businesses I know. I think the term SME – Small to Medium Sized Enterprise – is too wide reaching. The European Commision say that an SME has a headcount of less than 250 and a turnover of less than €50m.

It seems a lot of people, myself included,  use the terms “small business” and “SMEs” interchangeably. When what they actually mean by “small business”  is  what the EC call a “micro enterprise”. The EC define a micro enterprise as having less than 10 staff and a turnover below €2m. That’s certainly what I mean when I talk about small businesses.

For these small businesses, software-as-a-service is a total no-brainer. They don’t need an analyst to point out the obvious benefits for them.