Tim Chou delivered an impassioned case for SaaS, tearing down the objections he’s heard from IT people in his years as head of Oracle’s on-demand unit. The economics of corporate IT are fundamentally poor, he said. “At most IT shops I’ve visited, well over 75% of the budget is spent managing existing systems,” he related.

SaaS reshapes the basic economics of IT, making them much more efficient. “Every innovation in IT that has changed the economics has been successful,” he said. A big reason is that SaaS companies can build their infrastructure on standardized components, greatly simplifying the delivery systems. Most corporate computing environments are far too complex. “If I took a paint brush and colored every computer running SAP a different color representing its software stack, its hardware and storage configurations, and what processes it’s running, I would venture to guess I would run out of colors,” he suggested.

“Google has 400,000 computers and my guess is we’d paint them all the same color. That standardization enables specialization and repetition. If all my computers are different, I have no ability so specialize or repeat.” He estimated the fully-loaded cost of supporting a typical corporate user is $1,000 per month. SaaS puts users in control of their server environments. “The user has become disempowered,” he said. “No one wants to upgrade software. The vendor pushes that. With SaaS, we have the opportunity to shift the playing field from vendor-centric to user-centric.”