Software industry pundits assume that SaaS solutions have lower switching costs and low barriers to entry.  These positions are repeatedly showing up in commentaries on salesforce.com and the related SaaS sector.  I question whether these are valid positions for the following reasons:

Switching costs - as noted the assumption is that switching costs are lower in SaaS solutions than in traditional software solutions from Microsoft, SAP, Oracle, IBM and Symantec; the sister thought of this is that barriers to switching are lower.  The reasoning is that, hey, I can subscribe to a SaaS caution and be up and running in an hour or two or less.  This is not necessarily true from a user experience or for a functionality perspective.  The ease of customization in the SaaS model, at least in the approach that salesforce.com brings to market, is in my view a strong point for keeping customers attached, raises the barrier to switching in usability and functionality, even if it doesn't do this in hard dollars.  The ability to customize the SaaS experience through the AppExchange, I believe will add strong barriers to switching in the future.  My own personal example:  I use the Enterprise edition of salesforce.com and have added new functionality from Conga Courier, FaceForce, Vertical Response and ZoomInfo.  As my use history expands and my interactive data continually gets richer, the less likely I will be to switching to a competitive product.  I mean, how many companies will  be able to match my exact setup?

Second, the point about using only what you need also has a flip side that is positive.  The user that is not encumbered with the overhead of fat client applications with its inherent licensing and maintenance fees, also brings barriers to switching.  The penetration and adoption of a SaaS solution may be much deeper into an organization when reaching out to key decision makers that only need certain portions of information or functionality from the SaaS offering.  Whereas previously certain employees would rely on other team members to access and use the system, now a simple interface that is custom and only gives them the functionality that they need can be delivered to their desktop or mobile device.  This creates a barrier to switching due to superior ease of use and distributed functionality.

Just because a product is easy to implement on the front-side does not mean it will be quick to discard on the back side.  Time will tell for Salesforce.com and others like them, but I'm betting that peoples resistance to change will win out over the long-haul.  Like many relationships as software adapts over time and gets comfortable barriers to entry to up.

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