Customization – friend or foe of SaaS?

I was pointed to a Phil Wainewright blog entry on Customization: curse or
blessing?
by Denis Howlett from a twitter
conversation a few days ago
.  In the twitter conversation, I’d
been questioning the scalability of Microsoft Sharepoint, and it
appeared that the way to scale Microsoft Sharepoint was to look to remove
as much complexity at the app tier
as possible (would assume this
means custom applications) and use reverse proxies (eg cache as much as
possible).

I’d already read Phil’s blog entry. But after the
conversation with Denis, I reread the entry in detail. The following
paragraph got my attention "As computing shifts to the cloud, the way in
which vendors enable customization may become the key determinant of
success or failure. It all revolves around what kind of platform for
customization the market really wants."

To me this is a key
statement, because customization of work processes, through custom code,
in my mind no longer offers a sustainable competitive advantage to most
businesses. My guess (if someone has some solid statistics please leave
a comment), is that the majority of IT budgets (70% to 80%) is spent in
support of software, that has been extensively customised on-premise,
for that business and is now considered somewhat legacy.

Are
workflow tools or platform APIs the key for customization? Partially,
but having the right type of applications/components and means of
personalizing (a form of customization) those applications for the given
users is as well. Allowing the applications to communicate through a
composite interface will also add value to those looking to tailor the
applications for their use cases.

I do agree with the statement
commented, by Phil, from Nelson "There’s a world of hurt coming to the
IT services industry based on the SaaS model". Current IT Service
companies make revenue through customising software on-premise. So as
the SaaS market matures, they will fight the move of existing
customisation software off-premise to equivalent capability in SaaS
providers, marketplaces and aggregation points.

Thus
customization is a friend of SaaS, as it is currently very costly
on-premise; but the degree of customization, afforded to each user
community, is a foe of SaaS because of the performance impact as
concurrent usage scales.

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