When it comes to technology, every “next big thing” is adopted by an initial cohort of bleedingedgers, followed eventually by the vast majority of decision-makers, who wait to see if it pans out. The technology that makes the cut then moves from curiosity to “can’t-do-without”. In the Enterprise Content Management (ECM) world, Software as a Service (SaaS) is starting to shift into the second phase when it comes to enduser customers, according to vendors and a technology analyst.

As businesses consider not just the most convenient ECM solutions but also the most economical, SaaS, they say, both in the short run and the long run, deserves a second look, because it’s return on investment (ROI)—in some applications, at certain enterprises—can be stunning.

“In general, we’re seeing a growing adoption of SaaS because of low initial and ongoing costs, faster time to deployment, and less risk,” says Rebecca Wettemann, vice president of Nucleus Research (www. nucleusresearch.com), a firm that specializes in technology ROI studies. “For the content management space, this means two things: First, companies can attack content management problems that wouldn’t have been cost-effective to do before, because traditional solutions are more expensive. Second, more companies—such as those with limited IT staff or challenges like geographical distribution—can access and benefit from content management.”

CEO-startling numbers
Nucleus Research says it has the numbers to back up its claims and that it is the only technology analyst firm certified by the National Association of State Boards of Accountancy. It also says that in hundreds of studies conducted since its founders split from IDC (www.idc.com), it has documented an ROI for SaaS ECM applications that can stop objectors in their tracks.

Bigelow Tea (www.bigelowtea.com), a company using ImageSilo, an ECM SaaS product developed by Digitech Systems (www.digitechsystems.com) in Denver, Colo., posted an audited ROI of 813 percent after adoption by its Human Resources department. Bigelow has since adopted ImageSilo in other units at the $100 million, family-owned business. Nucleus Research showed that the company enjoyed a two-month project payback and dropped by two-thirds its time-per-call for customer service inquiries.

Customers are asking for it
“Customers are seeing ROI in two significant ways,” explains Christopher Ryan, vice president of marketing for SpringCM , an SaaS ECM firm based in San Mateo, Calif. “First of all, there is a quick time-to-value because of SaaS’s rapid deployment, and second, for equivalent functionality, an SaaS solution will conservatively cost 50 percent or less than legacy software designed specifically for your company.”

Because SaaS ECM is sold as a service and the customer is not paying for the creation of a software product designed specifically for them, implementation costs are little to none. This alone makes SaaS an attractive alternative to companies who are feeling the pinch of a tough economy, vendors say. “So, companies are paying as they go, reaping the benefits as they’re paying for them, and the total cost of ownership over the lifetime use of the product by the company is so much lower. You’re getting the payback quicker and a greater ROI,” Ryan says.

The Gumby Analogy
There’s an expression being used in the SaaS ECM industry called the “Gumby Analogy”: It’s “green” in that it can save paper and printer ink, like any other ECM product used correctly. But more than that, it’s “flexible” in that once a company is using SaaS ECM to manage, store, and share documents among a far-flung group of people, then by definition the organization is more nimble.

“The customers say they’re able to respond to requests quickly, assemble content easier, deliver it, and collaborate around projects in such a way that they not only save money, they make money,” says Jim Till, chief marketing officer of San Francisco-based Xythos, Inc.

Till points to a hospital using Xythos On Demand , the company’s SaaS product. “A small department within the hospital was competing for a grant against a number of larger institutions. They were able to connect disparate parties, pull documents, and share them across geographical space to bring in expert opinions and references that otherwise would not have been possible. They won the grant. So by connecting knowledge experts to serve a common need and address a common requirement, they could reach across the boundaries that otherwise would have stopped them.”

Another example from Xythos is a recruiting company, Isaacson Miller , which provides extensive resume and background material for its clients and previously spent a considerable percent of its budget on recreating paper documents and mailing them to prospective hiring managers. With SaaS ECM, they can securely share electronic copies of these documents.

“They are very pleased with their calculation of the ROI from increased customer responsiveness due to SaaS ECM, and in addition, they are realizing hard-cost savings related to the production and distribution of resume books. This process is now taking place in an electronic format, so they are experiencing significantly reduced printing, assembly, and distribution costs,” Till says.

Looking at the Numbers
Nucleus Research in July 2007 listed the key SaaS ECM “vendors to watch” in a report entitled ROI Opportunities in On Demand Content Management as being Xythos, Hyland Software (www.onbase. com), Digitech Systems, and SpringCM.

At that time, Nucleus Research did a benchmark study and found that only five percent of American businesses were using SaaS ECM, but that 12.3 percent were considering adoption. Today, with businesses facing even more regulation in a tight credit market, the potential for customers demanding this solution is considerably greater, the firm believes.

“SaaS content management is an opportunity for both large organizations with existing on-premise content management applications to complement their current practices with a more cost-effective delivery and for small organizations that otherwise couldn’t afford it to leverage the benefits of content management,” says Wettemann.

“From the VAR (value-added reseller) perspective, this is very transactional,” says Sean Morris of Digitech Systems. “The On-Demand model gives them a monthly recurring revenue stream and provides them with new ways to go to market and shortens their sales cycle tremendously. The end-user customer is seeing that it’s much more affordable than an on-site solution, and the ROI is much quicker. So this has really changed the economics for the end-user community and the resellers who are offering it.”

Beating the objections
While many end-user companies feel uncomfortable sharing their internal ROI results, those who do are often almost palpably proud of their decision to make the move.

“This product saves lives,” says Dr. Robert Anthony, emergency room physician and volunteer member of his hospital’s technology committee, which chose Digitech’s ECM SaaS solution for their electronic medical records (EMR) needs last year. Anthony believes that the speed and ease of finding records has led to better patient care, while also helping the hospital save a calculated 3,000 hours of employee productivity previously spent managing records and meeting the hospital’s HIPAA compliance requirements. Frisbie Memorial Hospital in Rochester, Conn., is now sharing records securely with attending physician practices and others who are caring for patients.

According to Xythos, a customer who was about to give a presentation at a conference turned on his computer minutes before the session was to start and realized with a groan that the machine was dead. He raised his hand and asked if he could borrow a laptop from somebody in the room, then logged into his SaaS ECM service and completed his presentation using documents he accessed remotely. According to Till, he called Xythos afterward and said, ‘I just paid for my investment, because I didn’t lose the business I landed from this presentation.’

Ryan of SpringCM adds, “CEOs are now looking for SaaS solutions for their companies, when it used to be they’d have nothing but legacy software. I ask the nervous how they do their personal banking. ‘Online’ they tell me. ‘Well, that’s SaaS,’ I tell them. Then they get it.”

--Lee Ann Fleming is a public relations and marketing consultant and freelance writer. She works with technology companies, including those in the SaaS ECM industry, as well as energy, telephony and healthcare. She can be reached at 303-594-1750 or leeann.fleming@yahoo.com.