With all the hype today, you’d think this article be titled “why you need to get your self some SaaS today”. That may have been a cute title but I’d be doing my visitors a disservice. The truth is, there are pros and cons of service software models. Weighed against the options of building or buying, renting software services might be a good decision. But before making the decision, ensure you’re ready to exploit the pros and deal with the risks associated with the potential issues and cons.
Potential Pros of Saas:
- Automatic updates. You will always be getting the latest version of the software, with no work required. But these features are only valuable if you can leverage them to create value. Does your organization have the agility to improve processes and services, train users, and really get some value out of the upgrades?
- Fewer compatibility issues. You’ll have less to worry about in terms of compatibility issues. As long as you run a standard web browser, it’s likely you’ll be able to use the service.
- No installs. You won’t have to worry about installing the software on multiple machines or automating this with installation packages.
- Small upfront costs. You’ll be able to space payments out over time (regular monthly fees) and minimize the large upfront capital investments.
Potential Cons of Saas:
- Online connectivity is required to use the service. (No catching up on email in an airplane, unless the service specifically supports a download/upload.)
- Data. Someone else is responsible for your data. This can be a great thing if you haven’t a clue how to manage your data, but if you collect highly sensitive information you’ll need to scrutinize your potential vendors about their practices. This includes security, back-up, and recovery.
- Up-time and availability. Someone else is responsible for making sure the software works everyday. Again, this is a double-edged sword and you’ll want to set expectations with your service providers (and validate them).
- Limited customization options are available through most services. And even if they are offered, you could run the risk of finding issues when those automatic upgrades occur. Tread carefully on customization paths…
Other Saas issues for consideration:
- Single-sign on. Does the system support integration with your existing user management service or will your users need to remember yet another set of login information?
- Ongoing payments required. Just like the difference between renting a home and owning one, ongoing payments are required to keep the service available. Unlike software you purchase and host yourself, you won’t have the option to stay status quo if funds are running low.
- Integration with other services. Is it important that you are able to pull accounting and CRM data into your email or intranet sites? How about make your CRM system and accounting system talk together? How about that time tracking system? These types of integrations might be easier or more difficult, depending on the services you choose and how you choose to manage your data.
I’d like to thank and acknowledge Ben Reubenstein of Excellent Creations for his presentation at Denver’s SaaS Consortium, a heavy resource for the ideas in this post.
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By Laura Brandenburg. Laura Brandenburg is an independent business analyst consultant. She is passionate about the BA profession and is committed to contributing by supporting this blog as a forum for business analysts to build on each other's experiences. View more blog posts by Laura Brandenburg |
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SaaS seems to make the “housekeeping” of upgrades much tidier, which is a big plus as long as the software is a good fit to begin with and remains a good fit as the business grows and changes. Potential holes in functionality could force the business to grow in a less advantageous direction.
You make excellent points about data storage and security. In addition, it is very important to get clarity about who “owns” the data should the partnership terminate or if circumstances require that all or part of the data be purged.
SaaS is another word for outsourcing.
This could be seen as a pro (putting management of a technology into the hands of experts who should be providing it a lower cost and risk), and also as a con (potentially, you’re eliminating your competency in this technology, which means if you ever wanted to insource it again you have to re-build the competency).
Nice post!
Possibly one additional item for the Pro side – reduced hardware expense. As the amount of SaaS reaches critical mass for an organization, there comes a point where the server/workstation refresh rate slows.
Think of it as opting out of the new software-higher resource requirements-new software cycle. Reducing (or stabilizing) hardware requirements allows longer equipment cycles and, in some cases, changes the role of the hardware. Workstations become thin clients, while servers drop some of their application roles and serve as local storage. At this point, the critical functions move from local client/server to WAN and bandwidth.
Reading your posts is most interesting to me becuase I am preparing a presentation entitled, ‘SaaS – The Pros & Cons’ to be used as the final round in applying to work for a SaaS provider (small UK based company with rapid growth). Internet searches have enabled me to find lots of information on the pros and cons for business end users but what about the pros and cons / risks and rewards for a software company moving from selling boxes / traditional software with upgrades to a SaaS model?
Can I please pick your learned brains on this topic?
Many Thanks;
Kerry
London.
Hi Kerry,
That sounds like a great opportunity. I’m posting on Saas as I’m learning. I’d say two of the key challenges are that as a SaaS provider you are responsible for other people’s data (which can be a huge liability) and the uptime (also a potential liability). But on the flip side, you have lots of opportunity to meet customer expectations through iterative software cycles and updates. Great SaaS providers have reduced the obstacles to delivering quality customer-driven products and increased expectations overall.
If you haven’t already, you might want to check out Simon’s posts on the topic–he’s much more knowledgeable on this than me:
http://www.simonstapleton.com/wordpress/2008/06/19/whats-this-software-as-a-service-saas-all-about-a-laymans-view-and-implications-for-technical-professionals/
And Ben’s website (referenced in the article). From what I recall, Ben is a SaaS provider. I had to leave his presentation early, but he was starting to talk about this from pros and cons from a SaaS provider perspective too.
Best,
Laura
No installs. The best part. Installation waste too much of precious time.
Quick question. With the increased uptake of Google Apps. What are your view on where this sits with Saas? I (possible vendor) don’t own the hardware or data but do need to charge for the use of the software.
Thanks
David
Hi David, This is an interesting question, but I don’t have the technical expertise with Google Apps to have a good answer. Hopefully one of our readers will come along and have an informed opinion for you!
David, are you specifically using Google Apps or just referring to them as an example of a cloud-based application suite? Google Apps, as you know, are offered free of charge, so if you’re using that suite, a good revenue model might be based on consulting services. If you were just referring to Google Apps as an example and are speaking conceptually, you could license the software through the hardware vendor or ISP. Less control, but frees up your time for other projects. Or you could contract for the necessary hosting services and sell directly to the customer. More control, more details to manage.