TCO of On-Demand Applications Is Significantly Better for SMBs and Mid-Market Enterprises

On-Demand Application Solutions Are a Disruptive Technology

To capture more SMB and mid-market enterprise wallet share, some upstart application vendors are offering viable alternative delivery and pricing models that provide end users with enterprise-level capabilities they can implement rapidly and more affordably without additional IT infrastructure or staff. A careful investigation of the various options can lead to a significantly better TCO for deploying a business application solution.

It's imperative for enterprises to understand how on-demand solutions are changing the IT landscape in SMBs and mid-market enterprises. In his book, The Innovator's Dilemma,Clayton Christensen describes disruptive technologies in the following way: most technologies are "sustaining," in that they incrementally improve the price or performance of a particular product or service over time. But disruptive technologies dramatically reduce the price or performance of a particular product or service and create a new path. These disruptive technologies are pernicious, because most vendors that are sustaining their products or services can't immediately adopt the new path since it changes their whole economic model.

The on-demand applications delivery model propagated by vendors such as Salesforce.com and NetSuite can disrupt giants such as Siebel, as seen in its recent financial results. Siebel now offers Siebel CRM OnDemand, which targets the IT-constrained mid-market enterprises.

As described in the May 2005 DecisionNote, Appeal for On-Demand Solutions Is Expanding, almost 50% of medium businesses and mid-market enterprises want on-demand solutions for accounting/finance, CRM, inventory management, merchant services and CRM.

What Does the TCO for the On-Demand Model Include?

The TCO for on-demand models should include the