SaaS against in-premise

The SaaS delivery model is gaining more and more. Especially in hectic times like these, reducing costs more important than ever before. This post will attempt to give an idea of how SaaS can bring benefits to your organization, but also how new considerations emerge to the mind of the CIO and the CEO.

First of all let’s define the SaaS delivery model. You may find a lot of definitions about that on the Net, but for this discussion let’s keep it simple: SaaS is the delivery model, where the enterprise does not “buy” the software and does not “install” it on its servers. On the contrary, the application resides on some remote host and the enterprise pays per usage of the software (obviously, over internet). Therefore the software is “rented” instead of “being bought”.

What are the main advantages of the SaaS model?

  • Zero cost of initial investment of the application software

  • Zero cost of initial investment of the system software (operating system etc.)

  • Zero cost for the building of the infrastructure (servers etc.)

  • Zero cost for the maintenance of the infrastructure? This is one very important factor and people sometimes tend to forget about it. Maintenance includes salaries for dedicated or semi-dedicated personnel to keep the service running, “side-hardware” costs (such as backup devices) time consumed on trivial tasks (such as antivirus protection, hardware failures, the respective maintenance contracts etc). Let alone the fact that probably the IT dept. has to build some skills that it didn’t have so far.

    The above is a collection of “financial” advantages of SaaS. On that you should add the cost of money that will not be paid upfront!

    Now, let’s have a look on the technical aspect, too:

  • SaaS vendors tend to provide upgrades of the application software very often (much more often than the traditional delivery model). Therefore, you may assume that new functionality and bug fixes are received very quickly

  • Buying SaaS, you become a member of a larger community of users. Remarks and change requests coming from this community will result in more frequent functionality upgrades. The cost of it will either be borne by the Provider itself, or split between all customers (in the long run), which will have almost zero effect on your bill!

  • If you don’t like it, you may stop it at any time. In that case, you need to be aware – beforehand – of what happens with your existing data. All providers will give you a solution or two. It’s up to the CIO to decide if these solutions are adequate and acceptable by the enterprise.

  • Guaranteed up-time. Close to 99%, in some cases. This is better than an internal IT dept. can provide (and guarantee!)

    OK, so if SaaS has all these advantages, why isn’t everybody following this path? Let’s have a look on the other side of the coin:

  • The SaaS delivery model is not suitable if you require heavy customization on a – otherwise well-defined – process. If you wish to have the debits on the right and the credits on the left (!), then probably your SaaS application cannot do it!

  • There are security considerations, for an application that runs on a remote server (outside your premises). In some cases there are regulatory constraints. E.g. what does it mean for a bank to host its customer database and customer analytics, off-premise? What happens if this database is compromised?

  • Before you buy, you must measure when the SaaS bill will exceed the in-premise investment. Perhaps, this will never happen, but there are case where the service is expensive and you reach that “turning point” very fast (e.g. in a couple of years)

    There is no doubt that SaaS offers significant advantages on the enterprise. First but not last the reducing of TCO (Total Cost of Ownership). There is also no doubt (?) that SaaS will dominate. If you are interested in learning more about how we have done it, contact me directly!
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