"Pay-as-you-go" Computing Adoption Greater Than Expected

New survey by Saugatuck Technology indicates significant interest, early implementation by user firms -- but many vendors are missing the opportunity.

Westport, CT (PRWEB) January 20, 2004 --- The use of on-demand, or "pay-as-you-go" (PAYG), IT services has grown tremendously in the past year, to the point where more than 20 percent of firms recently surveyed report using one or more such services. An additional 45 per cent of firms are considering using PAYG services, with the majority of those expecting to use pay as you go IT and business services within 24 months.

These are among several key findings from a year-long research program being conducted by Saugatuck Technology Inc. of Westport, CT. Although different IT vendors and service providers have slightly different models, approaches and naming conventions (on demand", Adaptive Enterprise", utility computing"), all are essentially talking about the same thing -- how computing is evolving into a shared resource billed like telephones, cable TV or electricity.

"While we recognize that some applications such as Payroll and CRM have been available on a pay-as-you-go basis for some time, frankly, we were surprised at the high percentage of companies already taking advantage of pay-as-you-go services," states Saugatuck senior program director Michael West, responsible for the PAYG research program. "It's especially intriguing given that the majority of the vendors we have polled don't think their customers will be ready for these types of services for another two years or more."

Saugatuck's research includes executives' perceptions of the value that PAYG IT delivers to user firms. Survey responses from line of business (LOB) executives, finance executives and IT executives include the following business value to be gained from PAYG services:

• Value to LOB Executives:
-- Reduced costs of doing business
-- Shorter ramp to gain control and optimize business process

• Value to Finance Executives:
-- Reduced costs of doing business
-- Broadest functionality with lowest risk for best price
-- Pay-for-usage model ensures predictability of cost

• Value to IT Executives:
-- Reduced costs of doing business
-- Reduced IT resources needed to deploy and manage solutions
-- Flexible, loosely coupled architecture
-- Integrates well with established implementations

"We see the same basic value propositions of pay-as-you-go offerings that resonate with buyers across all disciplines," explained West. "These are:

• Outsourcing non-critical systems and functions.
• Leveraging provider expertise and best practices and
• Paying for what is actually used.

"These are powerful business arguments that CFOs, CIOs and LOB executives believe are real, right now," West added.

Saugatuck's research also examines the unexpected disconnect between user PAYG actions, and vendor beliefs that the market may not be ready. West believes that the plethora of hype, terminology and messages from vendors (and consultants) is causing early market confusion, as is vendor concern about cannibalization of revenue sources from traditional delivery models.

"Some revenue cannibalization is unavoidable, but our research indicates that vendors who dont aggressively pursue pay-as-you-go offerings are leaving money on the table and may be missing the market window," said West. He suggests that IT and business service vendors and providers will be successful in this rapidly-emerging market if they follow some simple strategic steps, including:

• Efficiently deploy resources across multiple customers
• Enable the right level of user customization through configuration
• Establish win-win pricing metrics

RESEARCH SURVEY AND INTERVIEWS
The research project, entitled "Pay-as-you-go IT: Where's the Business Value?" examines not just the costs and benefits of vendor-provided IT and business services in the emerging "on demand" workplace, but the underlying user business and IT management factors and beliefs used to evaluate, justify, purchase and utilize such offerings. The project was developed by Saugatuck Technology with partner CFO Research Services and is being executed by Saugatuck Technology.

The findings above are based on Saugatuck's initial analysis of more than 100 web-based surveys and interviews of user finance and IT executives. The final, comprehensive analysis report including survey data, market trends, and recommendations to users and vendors, is scheduled to be published in March 2004 by Saugatuck Technology and CFO Research Services. The final report will additionally provide insight into differences among Financial, LOB and IT executive perspectives as well as differentiate attitudes by vertical industry.

ABOUT SAUGATUCK
The company uses a research-centric consulting model that combines business planning and market assessment with first-hand research of executive technology buyer trends. Founded in 1999, Saugatuck is headquartered in Westport, CT (www.saugatech.com 1-203-454-3900).

MEDIA CONTACT:
Chris MacGregor, Saugatuck Technology
chris.macgregor@saugatech.com
203 454 3900, x251

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