This post was written by , PhD Candidate in Information Systems and former database administrator at .
It seems that every now and then new buzzwords pop up, whether in newspapers and magazines (yes, they still exist), the Internet and everyday conversations with people. Today, slightly irritated by some of the commercials I have been seeing in the media, I wanted to talk about Software as a Service, or SaaS.
When we are looking at the history of IT in organizations, it seems that our track record is somewhat mitigated. Failed implementations, delayed deliveries, budget overruns are only but a few examples of issues that C-level people think of when they hear about a “great new tech”. The very recent example of the major hiccups of the U.S. healthcare web platform springs to mind as I write this. All this happens despite the large sums of money thrown at these systems and the fact that they are developed by vendors who are supposedly highly competent. Heck, if I were a CIO, I would worry too when I hear about a “great new tech”…
It is with these images in mind that I want to talk about SaaS, what it can give, and what issues it may also trigger. The great promise of SaaS, like many pieces of software, is that it allows you to focus on the business rather than the technology. By moving some of the technological burden outside of your organization, you effectively free up some resources to do other, more interesting things (and by that I mean things that bring in $$$).
First, the idea behind SaaS is not really new. Basically, one pays to consume a service, except the service in this case is software. You may pay for it on a monthly basis, on a per transaction basis, or a combination of both. Either way, the promise of SaaS lies in the fact that the vendor takes care of the burden of maintaining the hardware and software infrastructure for you. In most cases, you will simply access the software via a browser interface.
In theory, this is a win-win, especially in models where pricing is proportional to usage. Use it more, pay more. Use it less, pay less. Doesn’t that sound great if you run a seasonal business? In the “old days”, the fancy equipment would sit largely idle most of the year while it would still require maintenance, upgrades, and incur other related costs (e.g., depreciation of asset).
NOTE: The Thomasholmes Rater, the Thomasholmes transportation management system, is considered a software as a service, but the price to use it does not increase as you have more users or use it more often. Our business model provides this software as a service, in conjunction with managed services such as claims, freight accounting, freight auditing, and carrier relations, and there is no cost to use our tool, only the cost of your freight invoice from us.
Look at Your Own Needs to Know if You Should SaaS or Not
But perhaps there is more to it than that… And I would argue that going for SaaS or switching some software needs to SaaS simply for the sake of money is probably not a good idea. If we look at IT as something that can potentially generate value for a business, it can take on a strategic value of its own. Instead, we often look at IT as a cost center that we want to keep under control. This is arguably a recipe for disappointment, unless your strategy is to compete exclusively on costs. And even then, Wal-Mart may compete on costs but its investments in IT are pretty impressive.
So the argument here is to look beyond the money you can save and look into the value you can create with SaaS. Perhaps this means that costs will not be lower with SaaS. However you may gain a competitive advantage. Take the example of an ERP (enterprise resource planning, e.g., SAP). ERPs are great but they are heavy and often effectively create templates for “best practices” that end up being followed by organizations implementing them. Bottom line, the best practice becomes the baseline for everybody and therefore, not a source of competitive advantage. If on the other hand, you do your homework and find a way to answer your business needs using a variety of interconnected pieces of software (e.g., some using SaaS, others not), you may not only retain but also create a competitive advantage. In other words, rather than using a standardized pipeline, you can assemble the puzzle yourself and truly shape it to your business’ needs.
So, to SaaS or not to SaaS? The question is more: what are your business needs? How can you answer them? If it turns out that a SaaS vendor holds the answer to these questions, then SaaS away. If not, then don’t. We tend to be blinded by the trendy things but the essence of conducting business has not changed. In that respect, one must find the technology that answers one’s needs rather than trying to fit a clunky piece of software for the sake of it.
There is some research that is starting to pop out on these issues. We are moving away from some of the technical questions related to SaaS and looking into the business questions that SaaS can help answer. This is a good thing, because we will be able to move away from the trendy toward the essential. So to finish on this, here are some of the questions which I think are relevant when considering going for SaaS. As you will see, many of these questions can deal with any piece of software, whether or not it is based on the SaaS model.
GENERAL QUESTIONS around SaaS
- Why do you need it? What is the business imperative behind the question regarding the use of SaaS?
- What can you do with it? When evaluating a piece of software, what is the potential for value-creation beyond any short-term cost savings you may anticipate?
- How will you use it? How would the SaaS piece of software “fit” in your IT architecture?
- Do you have special integration needs with other applications (e.g., an ERP’s financial module)? If so, are they covered by the vendor?
- How will the use of the SaaS piece of software free up IT resources (e.g., staff, equipment)?
- How would you allocate these freed up resources?
- Will your IT staff be in charge of managing the vendor? If so, are they trained to do so?
- What are the implications? Would you have to tell your clients that data about them may potentially be hosted outside of your organization’s boundaries? Could it be an issue for them?
- Is it even feasible? Are there any laws or regulations you must follow regarding the storage of data? If so, do vendors comply with them?
- How would you survive in case of issues with the vendor?
- In case of service disruptions (e.g., network outage)
- In case the vendor goes bankrupt
- What service level agreement (SLA) does the vendor provide?
- How are the software maintenance and upgrade windows arranged by the vendor?
- Do you need to be able to retrieve your own raw data from the vendor at any time? If so, how long would it take the vendor to do so, and in what format would you get this data?
- How does the vendor handle the multiple clients and environments they have to host? Do they share computing resources, have their own dedicated resources? Your IT staff may help understand what the implications of these choices are!
- Can the vendor provide a trial version of their software? If all you need to access it is a browser, a sandbox environment should be easy to provide.
So, unlike what some of these commercials claim, there is no miracle, no silver bullet. SaaS is just another option availble to your business. It may be the best thing since sliced bread, but that is up to you to decide.
Written by , PhD Candidate in Information Systems
Blog, originally posted at . Reproduced with permission from the author.