What if companies could sign up for software when they want it, add or subtract users on demand, and switch to new software when requirements change? What if, instead of each company managing its infrastructure separately, many companies subscribed to one infrastructure provider with lower costs because of economies of scale? This is how the logic went for the implementation of software as a service (SaaS) when Marc Benioff (or Larry Ellison or a number of others, the debate over who actually gets credit is ongoing) first thought it up years ago. Not everyone was immediately persuaded, but now the case for implementing SaaS is strong and getting stronger. NEOS has identified the top reasons companies are choosing to employ SaaS as an important IT strategy.
Companies who innovate will set themselves apart from their competition. SaaS lets companies worry less about the technology and more about the functionality, freeing up costly resources to drive creativity. NEOS’s Randall Love maintains, “SaaS will allow a company to focus its efforts and investments on those activities that do provide a competitive advantage.” Instead of maintaining and supporting an application, as it becomes a legacy system, the IT team can focus on continuing to build business capability through technology innovation, deploying sometimes limited financial and human resources towards more value-added activities.
Companies benefit in many ways from an improved and more favorable relationship with their SaaS vendor. SaaS providers must maintain strong, productive relationships with their customers and deliver consistent benefits to keep their customers in the competitive SaaS market. Andy Meigs, NEOS Consultant, points out that “vendors are far more accountable for the quality of their product and the client relationship with SaaS since they need to persuade you of their value constantly instead of just one time up front.” SaaS vendors have incentive to provide higher levels of support for their products, meet or exceed SLAs, and work proactively with their customer.
Getting a group of users to full productivity is often the greatest challenge in a software implementation. Traditional implementation of software costs money and takes a lot of time. SaaS eliminates many of the tasks associated with infrastructure and environment, reducing cost and accelerating the timeline to full productivity. SaaS vendors will often provide support and resources, such as a help desk or advanced training to help a company’s user population engage and use the software correctly.
Incorporating SaaS as a part of your overall IT strategy contributes to reducing risk in three important ways. 1) The SaaS model makes it easier to conduct a proof of concept before buying enabling companies to ensure a good fit before committing, and is a tremendous risk reducer. 2) By definition, SaaS enables you to switch providers, making the choice of SaaS vendors less risky. 3) SaaS contributes to disaster recovery and business continuity planning because a vendor’s hardware and infrastructure is generally more geographically distributed.
The SaaS model offers lower up front cost by nature. SaaS implementations do not require the extensive hardware setups or as much customization as a traditional purchase and on-site deployment. The total cost of ownership can be lower with SaaS as well. By slashing upfront costs and passing on in-house maintenance costs to the vendor, research has shown that SaaS often comes out cheaper overall. Furthermore, the cost and effort associated with implementing upgrades is usually much lower in SaaS setups. Based on one study conducted by Hurwitz & Associates Research, the total cost of ownership for a SaaS corporate performance management solution is a much as 77 percent lower than comparable on site solutions.
Many companies currently use legacy applications or systems to perform their business functions. Due to the cost and difficulty of upgrading, some companies find themselves unable to upgrade on a routine basis they fall behind on releases by a few or even more. SaaS allows for upgrades that are less resource intensive for companies allowing them to get the latest versions and updates that solve some of the functionality issues with the software, leading to more business value and capabilities.