The knock on SaaS (or on-demand /cloud computing), as we are told by on-premise software providers, is that it is only compelling for small and medium sized businesses (SMBs). This notion is harder and harder for the on-premise folks to make as it becomes clear that one of the most compelling benefits of SaaS is its scalability.
The difficulty in scaling on-premise software is legendary. Consider the challenges facing a recent client in the non-profit disaster response business. During Katrina their systems went belly-up almost immediately and didn't come back up for weeks due to the tremendous increase in traffic experienced literally (not virtually) overnight.
In the aftermath of Katrina, the organization spent millions on new hardware so that their systems could respond effectively in the event of "two simultaneous Katrinas". Can you guess what their CPU usage has been in the years since? Never more than 2%. All this power sitting idly by waiting for the next national disaster. Scarce resources tied-up in technology that may never be used.
Now consider how this picture would change if the organization built this system using the Cloud. The Cloud could handle the limited load normally experienced by this system and it could scale almost without limit to handle the needs of a country during a national emergency. The vendors involved would bend-over-backwards to help, as did the vendors during Katrina, only this time they would be able to make a real difference.
One could argue that not many enterprises will ever need the scalability of a disaster response organization, but the lesson is nonetheless relevant organizations of all sizes. Enterprises constantly fall down when an application encounters unexpected popularity due to poor planning or execution. By leveraging On-Demand infrastructure, unlimited scalability is almost free because you'll only pay for what you use.
Enterprises of all sizes will soon realize that On-Demand computing isn't just for small to medium sized businesses. It may be that it is even more compelling for large enterprises.
