Software As a Service - SaaS

CapGemini Chief Technology Officer Carl Bate reported that he thinks the IT department in its current form is soon become history. He has identified 3 trends that he thinks points to major changes forecast in IT.

• Workers and their IT equipment have become “fused”
• More and more people are becoming connected (to the Internet)
• Businesses are looking towards IT as a service (SaaS) rather than products

Carl was speaking about the growing interest in Software as a Service (Saas) and the effect he thinks it’ll have on the business structure that we are all familiar with.

So, what exactly is SaaS?

Software as a service (SaaS, typically pronounced 'Sass') is a model where a software application is hosted as a service – that is accessed by you and your colleagues via the Internet. By eliminating the need to install and run the application on your own computer, SaaS alleviates the burden of software maintenance, ongoing operation, and support. Using SaaS also can reduce the up-front expense of software purchases, as it is typically charged per seat per month – not by way of license fees. The SaaS software supplier may host the application on its own web server, or this function may be handled by a third-party – application service provider (ASP). This way, you may reduce your investment on server hardware and IT department costs.

You may also hear it being called;

• Software on demand
• Hosted systems

What should you think about when considering SaaS?

If the implementation, maintenance and updating of your IT infrastructure is a burden on your business either disproportionately financially or to resource it, it could be beneficial to you to think about having your core business applications and other supporting office functions delivered and supported by a third party.

In our experience of discussing SaaS with businesses that have traditional licensed software the immediate questions and concerns are:

• Insufficient knowledge about it
• Reliable internet access to deliver an on-line solution
• Security of data
• Flexibility of such a system to suit specific requirements and ability to configure (customise)

All fair points that we will address below. Before we do, we’d like you to consider the following:

• Simplicity of access, maintenance, upgrade and infrastructure
• Availability and flexibility for remote working
• Reduction in Capital Expenditure v’s cost of ownership
• Reduction in energy costs – is this a greener option?
• Opportunity of greater collaboration with professional advisors

Reliable internet access to deliver an on-line solution

There has been a widespread increase in the availability of low cost internet access with much higher speeds than previously available. Although many businesses are more confident to place reliance on the internet for access to their systems, 1 in 7 report that SaaS is not in their current thinking. This can be due to a number of factors; not least due to lack of knowledge about Saas, or the idea being impractical if the company has yet to realise ROI (return on investment) on current systems and equipment and investment in their current infrastructure.

There is a very sound argument for a mix of in-house and outsourced systems. This is the case in my own business; we host and maintain our core system and use a few hosted solutions for some administrator functions. Both suit our purpose very well as they are low cost, hassle free and deliver as we require them to.

Security of Data

Historically the web hosting industry has been considered to be fragmented with a large number of providers offering very similar services – the impression being that “web hosting” is synonymous with small, cheap and unprofessionally managed businesses.

If this is your impression think again. The market is consolidating with a tier of leading providers emerging. Since 2005, the market has seen a rapid increase of datacentre prices which has forced many of the “low cost” providers to rethink their model, diversify or exit the market all together. In the mid to large size provider space many have merged or grown by acquiring their competitor(s).

Whether you are considering purchasing an IT solution or considering SaaS the financial security, professional standards and competence of your chosen provider should be scrutinised. Specifically, any reputable SaaS provider should be able to satisfy you that they have high levels of; security, back up and recovery. A good supplier is highly likely to have a second data centre, a robust disaster recovery strategy and will offer Service Level Agreements (SLA’s). They should also offer assurances around confidentiality regarding data.

Customisation

Most SaaS solutions will require you to use what they offer. If your business is highly specialised you may find that you need to compromise. More sophisticated solutions provider higher levels of customisation. See the examples of providers below. Let’s think about the many positive attributes to SaaS.

Simplicity of access, maintenance, upgrade and infrastructure

Most SaaS solutions are “ready to use.” You just “tap” into them. No complicated contract, project management or implementation. Automatic updates to the system will be offered as standard – so no costly upgrades or work required from you or your team.

Availability and flexibility for remote working

Many SaaS solutions are designed for the browser environment which means that you can access them from anywhere using any devise, desktop, PDA (personal digital assistant) or laptop via the internet – great for remote, field and home workers.

Reduction in Capital Expenditure v’s cost of ownership

SaaS will certainly reduce your Capital Expenditure as it is very conveniently accounted for as a subscription.

Whether it is more cost effective is a very individual question. If you were to take your entire IT costs (and expected costs) for the period you expect to own your software and related hardware and compare it to a cost per person per month over a 3 – 5 year period you’ll probably have a good idea of how it works out for you.

Reduction in energy costs, is this a greener option?

Not an obvious point but one that we are becoming more and more concerned with – particularly as the cost of energy is increasing so dramatically.

By 2010 it would not be unreasonable to expect 35% of a company’s IT expenditure per year to be spent on electricity.

Many server utilisation rates are as low as 10% - huge inefficiencies like this are creating unnecessary cost.

The increase in energy costs is seeing a shift in the responsibility of the datacentre’s power expense from facilities management departments to the IT department. There have been reports of some company’s entire IT budget being consumed just by the power costs alone.

It stands to reason that a hosting partner will be able to achieve economies of scale and will be able to share the cost of infrastructure across a number of customers and reduce the power consumption per server. In addition to this they should be able to negotiate more favourable terms with their suppliers making the SaaS proposition altogether cheaper and greener.

Opportunity of greater connection with your accountants and other key professionals to your business

Having areas of your system available to professional advisors to your business can drive efficiency. For example making your system available to your accountancy firm will save you time creating reports – they can have a real time view of your business at a given point in time allowing them (from the comfort of their own office) to assist with many areas. This will also save unnecessary journeys, time travelling and meeting time helping to reduce carbon footprinting.

Offering this to other advisors such as outsourced marketing or legal resources could also be of benefit.

Conclusion

The chances are, like our business, you will conclude what solutions are best kept in-house and which make sense to adopt on-line. Whatever the outcome, there’s no getting away from the growth of this market. The software developers have been working on developing these solutions for the last 5 years or more and Gartner reports that the market will triple from 2006 to 2011 and the USA are reporting that on average each year 20% more SaaS solutions are adopted.

If you would like help understanding the best solutions for your business please contact us on 01787 282228.