ABC of Software as a Service (SaaS)

SaaS applications are simply software applications that are provided online instead of being desktop applications. For example, Microsoft Outlook (although it already has its cloud version) and Apple Mail are traditional desktop email applications, while Gmail is a SaaS email application.

SaaS vs Cloud Computing

When many people try to understand what SaaS is, they equate it to cloud computing. This is partially correct because SaaS is a subset of cloud computing.

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Cloud computing can be defined as a broad set of computing services where some aspects are handled online rather than all on the user's computers and servers. Rather, we can define SaaS as a piece of software that is accessed remotely through the cloud. In SaaS, all software-related data is typically stored on the software provider's servers rather than on the company's computers.

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A good comparison is the Microsoft Office suite. If you buy traditional one-stop-shop software and store some of your documents online for easy sharing, you're using cloud computing but not SaaS. However, if you've switched to their 365 monthly billing model where you can access software in the cloud or have your desktop version automatically upgrade to the latest version, that's SaaS.

Why should you consider switching to a SaaS model?

Launch time: Each SaaS application is already installed and configured in the cloud. This minimizes the common delays that result from the often lengthy traditional software deployment.

Once development is complete, the software is ready to use. There is no additional time to wait for installation or resolve unexpected issues with company hardware once the software is deployed on-site.

Scalability: There is no need to worry about capacity as software usage or users grow. Moving to a SaaS model means organizations can add users as needed without worrying about purchasing new hardware and other infrastructure components.

Customers can receive additional storage space or bandwidth with the push of a button. When additional user licenses are needed, such as for new hires, they can be obtained by creating a new user ID and password instead of having to purchase additional physical software.

The product owner must be prepared to provide additional capacity but achieve economies of scale by hosting multiple products in the same place. Therefore, these costs are much lower than what they would be for you to upgrade your hardware. In addition, the product owner can recover incremental costs through usage-based billing.

Costs

SaaS costs are also lower in several other ways.

Initial setup costs: Initial setup cost reductions include much lower initial software costs if any upfront fees are charged. In addition, you also avoid buying new hardware and buying or renovating a physical space to store it.

Support rates: Efficiencies in the provision of support provide further cost reductions that you can capture as profit. These include a greatly reduced need for on-site visits, incremental development serving as preventative maintenance, etc.

Maintenance: Eliminating hardware dramatically reduces maintenance needs and downtime. You never have to shut down your system for hardware upgrades or repairs. Your IT team can also avoid spending time and money by performing preventative checks to ensure system reliability and prevent unnecessary downtime.

Additional considerations

There are also several points that you should consider as a benefit when changing to SaaS.

Budget flexibility: A subscription model provides the ability to change or stop service at any time without losing a large upfront cost. You can quickly add features when you need them, then scale back if you need to cut costs.

Configuration and integration: The built-in configurations still provide a high degree of ability to customize the software to your needs. Integration with other services, whether their own or from third parties, gives you the possibility to adapt a solution to your specific needs and at the same time obtain the efficiency of having a single connected system.

Usage: You can achieve a shorter sales cycle. Once a SaaS application is up and running, the time to launch is almost immediate. There is little to no need for custom development and no setup time. In many cases, you can create your account and start using the software the same day you sign the contract.

Simplicity: By focusing on core features, current needs, and ongoing, incremental improvement, subscription software and services can be much easier to use.

Who is a SaaS model suitable for?

As the benefits above show, the answer to when to use SaaS is when you're looking for:

• Reducing your time to benefit
• Lowering costs
• Making your software easier to use
• Expanding into new markets
• Having a more stable and predictable business model

SaaS models are gaining most of the enterprise application market share because they provide substantial benefits. While switching to a SaaS model may require an overhaul of your business strategy, there's a good chance that switching will greatly increase your chances of long-term success.

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