I just finished reading a post on Sandhill.com titled “Best of Breed vs. Suite in the SaaS Era“, a Q&A session between Maryann Jones Thompson, editor of Sandhill.com and Sina Moatamed, CIO of BendPak/Ranger.
The general premise of the article is that SaaS point solutions or “best of breed” are going to eventually be replaced by suites – just as what happened with traditional enterprise software applications.
In the interview, Sino makes 5 significant points as they considered SaaS-based ERP solutions:
- “The major problem with a best-of-breed ERP solution is integration.”
- “If I’ve got three different best-of-breed applications supporting the process, how can I be sure the integrity of the data remains intact across all of them?”
- “In essence, best-of-breed products would create a new set of integration challenges…”
- “Support was another key consideration.. “
- “Throughout the purchase process, cost was an overriding concern.”
Sounds pretty familiar doesn’t it? The issues that Sina outlines are identical to the issues that drove consolidation of traditional enterprise application point solutions.
His conclusion: “The overarching need for a business “truth” pushed us to a single suite solution that was capable of tying all master business data and processes together.”
Saugatuck Technology, a research firm, has also been predicting the arrival of SaaS suites sooner v later for some time. They predict that full SaaS suites become widespread toward the end of “SaaS Wave III” (2012-2013) and the beginning SaaS Wave IV (2013- ).
We’ve seen how this play turns out in the traditional software sector which is why it is fairly obvious why the market values SaaS companies CRM and SFSF at an 8X EV/Rev multiple.