Software as a Service (SaaS) Definition and Solutions

• What is SaaS?
• How is SaaS different from an ASP (application software provider)?
• I’ve heard that SaaS is cheaper than traditional packaged software. Can it save my business money?
• What other business benefits does SaaS offer?
• Is SaaS secure?
• How do I decide whether SaaS is right for my organization?

I’ve heard that SaaS is cheaper than traditional packaged software. Can it save my business money?
SaaS deployments are cheaper (at least initially) than on-premise installations. SaaS customers generally pay a flat monthly fee per user for the software. SaaS implementations are also cheaper because companies don’t have to buy additional hardware or infrastructure to make the software work, so there are no capital expenditures with SaaS. You also generally don’t have to hire an army of consultants to get the software installed as you often have to with traditional enterprise software. (There are, of course, exceptions to that generalization. For details, see Stephanie Overby’s article, “The Truth About On-Demand CRM.”) SaaS customers like the idea of a low up-front investment and a predictable expense stream, even though the cost advantages of the SaaS model may be a wash after three to five years of monthly fees.

What other business benefits does SaaS offer?
There are many advantages to going the SaaS route as opposed to installing software on site. First, SaaS deployments usually take less time than on-premise software implementations simply because you’re not installing software on every user’s computer. SaaS vendors like to claim that they can get customers on their software in three months or less, but realistically, implementations can take between three and six months (sometimes more, depending on the size and complexity of the implementation). Because SaaS is easier and quicker to implement than traditional software, you can achieve your ROI faster, too—provided, of course, your users adopt the software.

Upgrades also tend to be pretty seamless (because you haven’t customized the software), and you’re always on the most recent version of the application, unlike with traditional packaged software. (Hello, Windows 98!) The SaaS vendor just pushes the upgrades and updates out to the customer base.

Finally, the software is less buggy. “Having one version of the software reduces the complexity that can lead to errors,” writes Galen Gruman in “The Truth About Software as a Service.”

Is SaaS secure?
Many users of hosted software say that SaaS is just as secure and reliable (if not more reliable) as their internal systems. They note that SaaS vendors are heavily invested in making sure their software is secure and available 24/7 since that’s the vendors’ business.

Nevertheless, companies have legitimate concerns about keeping their data in a SaaS vendor’s systems because they have no direct control over those systems—and because of the horror stories that emerged from the ASP implosion of 2000 and 2001. When those ASPs went out of business, many of them left their customers without access to their data, and some ASPs even sold the data they hosted. This experience taught customers valuable lessons in negotiating contracts: Always make sure you’ll have access to your data and the software or source code in the event your service provider goes out of business.

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