In spite of on-demand's increasing popularity, on-premise solutions are still high in demand.
Posted Feb 22, 2008
It seems that all we hear about these days is software vendors coming out with an on-demand or hosted solution. Yet despite the advantages offered by on-demand applications -- also known as software-as-a-service, or SaaS -- on-premise solutions are still highly popular in the general market. That dichotomy is what Alterian, until now a SaaS-only provider of enterprise marketing software platforms, was facing when it announced an on-premise alternative this week. The new initiative, according to Michael Fisher, the vendor's senior vice president of commercial operations, will allow Alterian to reach the more than 50 percent of the market that currently stands by the on-premise model.
"[We] get requests fairly often from organizations that want Alterian technology but want that access in their own data center," Fisher says. He firmly states that Alterian will remain committed to focusing on a channels-only strategy and will not sell directly to the end user. Partners, Fisher says, will have to be "deliverers of marketing services." With this business model, Alterian will not only augment the knowledge of its own staff by leveraging the expertise of its channel partners, but provide marketing and marketing automation expertise, analytical skill sets, and strategic skill sets for all companies -- those that want a hosted solution as well as those that don't.
In opening up the on-premise option, Alterian will partner with direct marketing and database consulting firm David Shepard Associates (DSA), which will aid in the sale, design, support, and implementation of the Alterian Marketing Services Platform. Fisher is confident that DSA will "deliver the software and the analytic firepower that is required to make this solution very effective." The motivation behind this partnership was reinforced by the fact that DSA has a strong background in marketing and, more important, shares Alterian's belief in the importance of analytics in every aspect of marketing.
"What Alterian's doing is addressing the broader market as it stands today -- because today, they can't address those who want an on-premise solution requirement," explains Suresh Vittal, a senior analyst at Forrester Research. The market is still in the early days of on-demand, he says, and industry players have to remain patient. "Philosophically, [on-demand] is a very different approach both from a vendor's side -- how they make money moving from a licensed to a subscription model -- and for the marketers," he says. At the core of the issue, the difference between on-demand and on-premise is largely a matter of preference, most often associated with privacy and security concerns. "There are certain organizations that want their data to never leave home," Fisher says. That desire was one to which Alterian had previously been unable to cater.
Nevertheless, Vittal asserts that, if it isn't already, SaaS will be the solution of the future as demand continues to rise significantly. According to a Forrester forecast, on-demand solutions have been enjoying a 20 percent compound annual growth rate. Still, whether or not on-demand will fully take over one day still remains uncertain. Vittal says it depends on how the market evolves in terms of its technological needs and adoption. At the rate it's growing now, on-demand has a bright future: Switching costs are low, tools are easily configurable and customizable, and the learning curve will become shallow. However, the model does face some important challenges: data transference, data privacy, and the ability to effectively handle a massive query.
Fisher says that the initiative to go on-premise will not detract from Alterian's focus on its original solution. "They're all going to be on the front burner," he says. "We've just added another burner." The trick is to offer both options while making it possible for companies to transition from one model to the other as painlessly as possible. To Alterian, whether companies want on-demand or on-premise is not of the utmost importance, Fisher adds.
"As long as the marketer receives the services necessary to make the technology effective through our service provider network for us -- that's the major win for us," he says.
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