The Argument Against Software as a Service

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A few weeks ago we wrote an article called The Downside of Free in which we talked about the potential downsides of offering a free version of your application. We concluded that in order to make money off free, you had to “find the sweet spot for the free version that offers just enough to keep people interested, but not enough that they’ll never upgrade.”

However, there’s another potential downside to free that we neglected to talk about: the potential risk for customers in using free applications. As the economy continues to turn south, many companies are starting to eliminate non-revenue producing business units, which often means free products. If your business relies too heavily on a free product you might find yourself up a creek without a paddle if support for that product is pulled overnight

A caveat here: this won’t apply to all free applications — many apps using the freemium model are successful and profitable.

But we have started to see free apps begin to get the axe. When he was (presumably) unable to keep up with the cost of providing free services, Rafael Dornfest took a job at Twitter, and his apps Stikkit and I Want Sandy will close for good in a couple of weeks. Mostly free service Pownce was acquired and will shut down (it was a case of hiring by acquisition). Even Google has started to axe under performing free programs (such as Lively).

Many of the apps we called “must have” in our list of communication tools last month have a free option. Some of these companies are probably in a good position to weather the economic downturn, but perhaps not all of them. We won’t speculate on which are best positioned to survive, but maybe it isn’t a great idea to have too much riding on free, online services. What could save a buck or two now might cost a lot in the long term if the service disappears with all your data.

In a recent article at WebWorkerDaily, Mike Gunderloy laid out three rules to live by when evaluating software for your business. We think it’s pretty good advice, so we’ve reprinted them below.

  1. Prefer in-house servers for mission-critical applications.
  2. Prefer portable data.
  3. Prefer backed-up services.

“In the current software and economic environment, I’m re-evaluating my dependence on free services, and pulling some things back to less trendy but more reliable client-side applications,” says Gunderloy.

It’s Not Just Free, It’s SaaS

We’re big fans of software as a service (SaaS) apps here at SitePoint, and use many on a daily basis, but Gunderloy’s concern could be extended to any SaaS application, free or paid. The more you rely on third parties to get your work done, the more difficult it becomes to stay afloat if those you rely on run into trouble. SaaS applications have allowed business owners to gain access to high quality software at lower prices and with a high level of convenience, but at what potential risk?

If all your customer and sales lead information is in Salesforce.com, what happens if Salesforce.com goes under? That might create a mess that’s harder to clean up than if your CRM data was stored locally, for example. Using Google Docs might save you a bundle on site licenses for Office, but if all your internal documentation is online, what happens if Google decides Docs isn’t worth it and axes the product line? It’s something to consider, certainly.

What about you? Are you scaling back dependence on free software or software as a service apps? Are you putting more effort into setting up in house applications to manage your business rather than relying on third parties?

We teamed up with SiteGround
To bring you up to 65% off web hosting, plus free access to the entire SitePoint Premium library (worth $99). Get SiteGround + SitePoint Premium Now