To SaaS or not to SaaS

I just saw an announcement from 37signals about a “new” initiative to sell old-fashioned purchased, installed-on-premise software. Is this a legitimate reversal of the seemingly inevitable march to SaaS software, or merely another option for customer?

My first reaction: this is a breath of fresh air. Personally, I’ve been miffed seeing software I’d purchased when I wanted and upgraded when wanted move to a subscription model. It messed with my sense of self-determination. But when I took five minutes to work out the math, the subscription model worked out to just about what I’d been spending on purchases and upgrades. As an individual consumers, that stigma was all in my head.

But 37signals sells enterprise software, and for enterprise software, there are some pretty interesting implications if the pendulum starts to swing back. I’m interested to see how some of these turn out.

One of the largest implications of the SaaS model for companies is way these purchases impact accounting. While purchased software is typically treated as a capital investment that’s amortized with expenses incurred over the life of the software, the SaaS model typically shows directly as expenses. I’m curious whether this has factored into the shift back to purchase-once software.

Another defining characteristic of SaaS is its continual delivery model. Agile methodologies in general favor frequent deployment, and a true CI/CD model can see this happen very frequently — much more frequently than any enterprise would want to install on-prem software. So, an on-prem delivery model implies going back to distributing releases and hot-fixes that will be installed by customers. Anyone who’s ever supported that model will tell you it’s no piece of cake.

Finally, the announcement from 37signals triggered a mental model that I believe exists in a lot of business decision-makers. The model is rooted in that same CapEx accounting model, and suggests that software can be bought, installed, and left to run as you would treat a filing cabinet. While this model may be appropriate for some applications that change very infrequently, I think this idea can prove harmful when applied to software that needs to grow and change with a business. There’s a nuanced view of the care and feeding and evolution of an application that can be lost in the filing cabinet model, and I’m frankly nervous to see that model perpetuated.

I’ll be watching this development from 37signals as it’s rolled out. They’ve always been thought leaders in the industry, and I’m curious to see if this the beginning of a pendulum swing back toward a self-hosted model.