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SaaS adoption is happening faster and slower than you think

Commentary: Cloud adoption seems to have hit overdrive, but actual enterprise adoption will take a lot longer, according to Goldman Sachs.

Software as a Service SaaS
Image: putilich, Getty Images/iStockphoto

Buried at the bottom of a recent article on digital transformation, machine learning and mainframes by analyst Benedict Evans is a worthy phrase: “gradually, then suddenly.” Evans borrowed the phrase from Ernest Hemingway’s “The Sun Also Rises” (a character asks “How did you go bankrupt?” and the answer is “Two ways: gradually, then suddenly”) and utilized it to enterprise IT. I’ve pointed out that as quickly as we may think tech is shifting, enterprise IT tends to move slowly. Evans provides some interesting color.

SEE: The most necessary cloud advances of the decade (free PDF) (TechRepublic) 

Getting ahead of ourselves

Speaking of cloud and Software-as-a-Service (SaaS), it’s easy to assume that CIOs have embraced cloud en masse–easy, but inaccurate. As I’ve highlighted, though we like to talk about cloud as if AWS, Microsoft and Google are divvying up an established market, the reality is that as much as 95% of all IT spending stays firmly on-premises. Will we get to a cloudy prospective? Sure. But in enterprise IT, the prospective tends to take a lengthy time.

Moving past Infrastructure-as-a-Service (IaaS, which we often conflate with “cloud,” though it’s just 1 element of cloud computing) to SaaS, it’s much the same story. As Evans wrote, referring to Goldman Sachs research (Figure A), “If you live in Silicon Valley, it would be natural to think that cloud and SaaS are old and done and boring, but…less than a quarter of [enterprise] workflows are in the cloud so far, and they’re shifting slower than they anticipated.” Why? Because “This stuff takes time, and you don’t necessarily have the budget or justification to rebuild everything overnight.”

Figure A

Image: Goldman Sachs Global Investment Research

Even those forward-looking 3-year projections may be optimistic, absent a pandemic to expedite digital transformation initiatives. Enterprise IT happens gradually, as Evans noted.

Until it happens suddenly, that is.

The ongoing COVID-19 pandemic is presenting plenty of “suddenly” moments, Evans said:

I’ve spoken to a huge CPG company that might be perfectly pleased with its ERP, except that it can’t ship less than 1,000 units per order and now they want to do direct-to-consumer (this is part of the Shopify story). I’ve also spoken to people at a huge retailer that was perfectly pleased with its point of sale system, but discovered that it can’t be extended to ‘buy online pick up in store’. The old systems are fine at the old things. 

“Old systems are fine at the old things.” This works fine…until it doesn’t. Customer expectations have shifted due to the COVID-19 pandemic or other factors, and suddenly the old tech doesn’t work to solve new problems. All of which may be a lengthy way of saying that cloud, SaaS and [name your technology trend that you figured was already done] are increasingly mainstream, but that doesn’t mean they’ve hit mass adoption. 

Disclosure: I work for MongoDB, but the views expressed herein are mine.

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