When does SaaS make sense?

Friday, 12 February 2010 09:49 Written by Bjoern Linder

Especially for small and mid-sized companies, project management software is not always an optimal solution. In addition to the cost of software licensing, there are costs for installation, configuration, and long-term maintenance of the software and hardware (server).

In contrast, Software as a Service (SaaS) is simpler. With SaaS, software is not purchased outright, but used as-needed, with costs incurred on a pay-as-you-go subscription basis.

SaaS Definition Wikipedia:„Software as a Service, SaaS for short, is both a software distribution model and a business model based on the idea that all of the value of an application can be managed, operated, and delivered to a business customer via Internet.

With SaaS, it does not matter whether the software is something as basic as an office application, as process-intensive as project management software, or as data-intensive as an enterprise resource planning (ERP) application.

Via Internet and web browser, employees can have access and may use the rented software anytime, from anywhere. More and more companies are learning exploit the advantages of SaaS.

For example, the American software company salesforce.com, a pioneer in the market for subscription software, already has more than one million SaaS subscription customers.

As a general rule, the SaaS scenario is as follows: You search the Internet for a SaaS provider of project management software (provider list see below). You register and pay a fee for a specified period. Thereafter, the service is ready and available. You use the service directly via the Internet. Many SaaS providers also offer new customers the opportunity to try out a service for free during an evaluation period.

Advantages of SaaS

No installation or maintenance effort. Quick ramp-up time.

The SaaS provider assumes complete responsibility for the operation of the application. All computer-related operations are overseen by the service provider. This allows the user, following a short period of training or familiarization, to dive right into the application. The need for procurement, installation and support structures falls away. This can be a huge relief for small and midsized companies without their own IT departments. SaaS can also be a very cost-effective alternative for temporary project organizations that would incur software costs only during the life of the project. In addition, Software as a Service can be quickly made available to a broad base of users. Even for longer-term projects supported by a professional IT department, SaaS can still represent a more cost-effective solution.

Collaboration Beyond Company Borders

Company-wide project organizations often have a requirement for common use of the software, including the data. For most distributed development teams, collaboration on documents, project plans and schedules, is a core requirement. In principle, external access to an application may be possible even when installed on a corporate server. But such remote access is associated with increased effort and a huge security risk. For such access arrangements, companies need not only highly trained IT administrators but also a secure solution. A correspondingly large and well-known software vendor is an essential precondition for this. With smaller suppliers, caution is definitely advised.

In contrast, deployment of software by an SaaS vendor is part of his daily bread. But even with SaaS, security considerations should be looked at closely at the outset. And, again, with smaller and newer providers, caution is advised.

Professional Service Offerings

Installation and deployment of project management software can, as a rule, be trusted to IT professionals. But what if software disturbances happen during software use? A server failure or complete loss of data will give you a good picture of the quality of your internal support structures. Here you have to cast a critical eye on your opportunities and your internal processes. What types of service agreements do you have, for example, you’re your hardware and software vendors? How is data backup carried out? Is data is regularly backed up and stored offsite? Keep in mind, with all due sympathy for your in-house colleagues. IT departments are rarely overstaffed. As a rule, savings are also frequently sought here due to cost pressures, and problems become apparent only when there is an emergency.

With your SaaS provider, on the other hand, you can agree on dedicated service levels. Service levels range from support-as-available, to routine upgrades and backups up, to 24/7 support.

Software Evaluation

There is typically no cost for evaluating an SaaS solution. Most vendors make their applications available for evaluation over a time-limited trial period. You can thereby spare yourself the burden of installing a server or the expense of installing costly software. The same is true if you decide to introduce a broader PPM solution in you organization. Before committing to any vendor, you need to be absolutely clear about your organization’s needs. But if you have no experience with such solutions you will also lack the necessary expertise for this. Under such circumstances, it would make sense to test carefully selected pilot projects on a SaaS solution. After the pilot, you would then have the necessary know-how to make an informed choice of software for your business. Only then would it follow to pursue a long-term decision about whether to host your own software solution in-house.

Disadvantages of SaaS

For small and midsized companies in particular, SaaS offers many advantages. But there are a few drawbacks, as well.

Loss of Data Sanctity

Your project data - whether it be planning information, document objects, or controlling data - are no longer within your network, but hosted by a service provider. Is your data sensitive or critical? Is a special relationship of trust needed between service provider and you? In the case of personal data in particular, have the legal aspect been discussed with your data protection supervisor? Would it therefore be advantageous to choose an ISO 27001-certified, or equivalently trustworthy partnering data center? SaaS vendors try to neutralize the sanctity issue with a variety of assurances of safety. Nevertheless, although a provider may have confidence in its own services, without high security standards, clear data access protocols and clear division of duties, employees of a service can make data vulnerable through abuse of security privileges.

Decentralizing the IT Infrastructure

When you use SaaS, the service is operated outside of IT. This means that one of your business processes is running decentralized. If the SaaS application is only one small planning tool, this should not lead to major problems. But if, for example, you seek a greater PPM scenario, you will necessarily require other data or need additional process interfaces. The result is that you may need to tie your distributed IT solution back into your centralized IT infrastructure. If you use not just one but multiple SaaS services, you will be facing a larger integration scenario.

Another SaaS problem is network availability. If you divide a distributed service between Internet and Intranet, there is a greater likelihood of network failure or degraded network performance. From a security standpoint, a distributed operating an external service through a company Intranet is never a desirable solution since any breach of an Intranet poses clear security risks.

Using a shared platform

SaaS success and profitability depend on high numbers of customers using the same service. This can make it difficult for a provider to tailor a solution directly to your business needs. If you may be looking forward to an enhancement to the standard application to meet your business requirements, find out ahead of time whether the vendor offers such customization. Such customized delivery requires, as a rule, that your application not be delivered off the platform shared by other customers, but given its own dedicated delivery system. In some cases, providers will make changes to the common application to meet your needs.

SaaS Conclusions

SaaS hosted applications make sense when ...

intercompany projects are initiated
Partners and customers need to be connected within a project
new software is being tested in pilot projects
you expect to use new software, unencumbered, straight out of the box
Your organization lacks an internal IT department

In our opinion, SaaS has a future in the areas of service-oriented businesses or in intercompany collaboration.

A resident application makes sense when...

your organization has professional IT support
your data is highly confidential and may not be shared with third parties
your organization typically has a large number of ongoing projects with many participants
you foresee a need for applications or interfaces to be customized or extended

In our opinion, SaaS holds little potential for a project-oriented company with its own IT. Here, the advantages are not sufficient to consider a change of business model.