April 2009 | Commentary | Checking In

SaaS: A Distribution Model For Tough Times?

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The lead article in our annual technology issue 15 years ago featured Barbara Barnhill, transportation supervisor for Elizabeth Arden. She excitedly shared the details of her company's "revolutionary" inbound transportation program, which racked up million-dollar savings by using the latest technology—a fax machine.

Times have changed since the fax machine and its dial tone were the technology of choice. Today it's logistics IT tone driven by Software as a Service (SaaS). The popularity of subscription-based technology services is fast changing the ability of business logistics managers to inexpensively cope in these times of supply chain strain. SaaS provides companies with power and flexibility, without a large capital investment. And, like a dial tone, SaaS is there when you need it.

While some solution providers explore value-added services to capture more consistent revenue flow and keep customers from moving on to the next, newest, IT offering, technology investment is still becoming less like a traditional capital expenditure and more like a contractual expense. Scalability, facility, and speed of use allow software buyers to engage and disengage at will. Consequently, IT solutions providers grapple with the challenge of engendering long-term buy-in for a delivery mechanism that flaunts short-term appeal.

Our annual logistics IT research study (IT Perspectives, pg. 29) bears this out. "We're seeing increased demand for a complete software service solution," reports one IT vendor. "Customers want not only the IT solution, but a higher level of support, new development, customer service, and a variety of pricing/payment options." This singular sentiment reflects near-unanimous agreement among survey participants that "technology service" is a phenomenon with staying power. Further proof: 89 of this year's Top 100 Logistics IT Companies (pg. 38) offer on-demand, Web-hosted solutions; this represents a double-digit spike over last year.

But SaaS is not without its limitations. The robustness, long-term economy, and security of home-grown legacy systems are "must-haves" for some IT buyers, regardless of initial investment and operational ease. Notably, 65 of the Top 100 Companies offer both local and hosted solutions, while 11 target this niche alone. Technology's value is equal parts functionality and accessibility. An on-demand solution deployed without a targeted demand, or a dial tone without a number to dial, leaves companies on the hook with a bad IT connection.

Market and end-user scalability define today's best-of-breed solution providers. These merits also define our technology issue. IT Perspectives identifies where user demands are trending; the Top 100 Logistics IT list dials up companies deemed best to meet diverse shipper needs; and our online IT Decision Support Tool helps connect demand pulses with solution provider dial tones.

As always, we welcome your feedback. Shoot us an email, pick up the phone, or if the urge strikes, send us a fax—it's there if you need it.

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