Old versions and tracking the value curve

Cloud applications deliver value. We looked at the numbers and found a 1.7 times greater ROI when an application is delivered as a cloud service versus an on-premise solution (here). Old news, and well-worn territory, but among the benefits, and there are many, SaaS-based applications allow the organization to closely track the value curve, and that delivers competitive value.

Many organizations, if challenged, will reluctantly admit to being more than a few versions behind with their on-premise applications. Often these are the critical applications that drive and support the organizations. The excuse is usually testing but I think we all know it’s fear. Fear that an upgrade will upset the delicate balance of customized code and integration that keeps their critical applications running precariously. I have yet to find a CIO who confidently uses the word “robust” to describe their environment.

The problem from an ROI point of view is the stair step value curve. If we consider the value curve rising to the right as new versions are released, the organization that delays an upgrade loses out on new features for some amount of time. These organizations are delaying an upgrade until the benefit of the upgrade exceeds the total of cost of upgrade plus the fear that something will go wrong. Best case, with each upgrade they touch the value curve, but only for a moment as they then stay stable until the next push to upgrade. That stair step triangle is the lost value between SaaS and on premise due to version mismatch. Worse, on-premise applications have a longer cycle time between upgrades compared to SaaS applications, further increasing the benefits of SaaS over on premise.