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?

SaaS can be risky in the post-Sarbanes-Oxley world—where a company’s ability to certify the integrity of its financial systems and the data contained in them is of paramount importance. Chief compliance officers tend to be particularly wary of hosted software because they’re the ones who are on the hook for the integrity of the systems used by their company, regardless of who’s supplying those systems. Consequently, some companies would rather maintain data internally because they can hold someone accountable for safeguarding it. If you decide to use SaaS, writes Galen Gruman in “The Truth about Software as a Service,” “make sure you get the same auditing and control requirements” from your SaaS vendor that you would get from any third-party provider, including “safe harbor” provisions for ensuring data privacy and the ability to audit the vendor’s controls.

While no application is bulletproof, SaaS vendors have worked hard to address customers’ concerns about security, and today the security of SaaS is much less of an issue than it was five years ago. Still, you would be wise to evaluate your vendor’s security measures, including its firewalls, encryption techniques, socket security features, intrusion-detection systems and other protections the vendor has on its servers. You might also request copies of the vendor’s security audits to give yourself even more peace of mind. However, those measures may not be adequate if your company handles particularly sensitive customer data, such as information about individuals’ health and finances.

If you’re concerned about reliability, make sure you discuss the number of transactions your vendor’s system can handle and write clear financial penalties for downtime into your service level agreement.

How do I decide whether SaaS is right for my organization?
SaaS is not right for every company, nor do all applications lend themselves to the SaaS delivery model. The key criteria to consider when evaluating whether SaaS is right for your organization are:

• the type of process or function for which you’re considering a SaaS solution
• the extent to which you need to customize the SaaS solution
• the extent to which it needs to be integrated with other systems (both internal and external)
• the maturity of the application

In general, SaaS solutions work best for non-strategic, non-mission-critical processes and functions such as expense and travel management, procurement and employee performance management that are simple, standard, and not highly dependent on or integrated with other business functions and systems. SaaS also works well for processes that are being automated for the first time, because there are no legacy processes to replace and thus fewer change-management challenges.

If your company is looking to adopt established processes for a particular function, like CRM, sales force automation or warehouse management, a SaaS solution could work for you. But if you’re looking to differentiate your company through your customer service or supply chain practices, you’ll want to stick with a flexible packaged application. For that reason, applications that touch on the core of the enterprise, such as ERP and business intelligence, don’t lend themselves to SaaS. Similarly, if the functionality you’re seeking is core to your operations, you might want to stick with an onsite solution so that you can manage the application in the event it goes down.

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