Catalyst to success or cautionary tale?
If you are a technology professional, the term Software-as-a-Service or SaaS would have come up dozens of times in your business conversations. Even if you have not heard of SaaS, chances are you are probably using it already in some form or the other. Remember the Netflix app on your phone? That’s SaaS right there for you. Your cloud-based Microsoft Office 365? SaaS, again. Adobe Creative Cloud, Zoom, Dropbox? SaaS, SaaS and SaaS.What is SaaS and how is it different from a traditional software product? Think of buying a house vs renting it. Buying a software license to use it on premise, or on a particular device, is the equivalent of buying a house, while SaaS is the equivalent of renting it – that is, enjoying a software without its baggage such as on-premise deployment, a huge team to manage it and provide support, or the need to maintain massive supporting infrastructure requirements.
It is part of the broader family of applications under cloud services, also comprising Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS).
The SaaS movement has gained much momentum in the last few years. So much so, its scope is no longer confined to small and medium businesses due to its comparatively lower cost, but has moved on to even industry behemoths who rely on its scale and convenience. A Gartner report pegs the Cloud Application Services or SaaS market at 138 billion by 2022[ https://www.gartner.com/en/newsroom/press-releases/2020-11-17-gartner-forecasts-worldwide-public-cloud-end-user-spending-to-grow-18-percent-in-2021]. Reports say that by the end of the year, 99% of businesses will be using at least one SaaS solution.
Why the hype around SaaS?
There are many reasons why companies are adopting SaaS at an accelerated pace. B2B SaaS products offer many benefits over traditional software and cloud computing services.- Versioning: You can access updates and new versions from the vendor without waiting for a time-consuming upgrade of your systems by an army of engineers at your premises, or purchasing a new license. Your IT staff does not need to spend time on patch jobs, freeing up their valuable time for strategic work.
- Scalability: For any growing enterprise, scalability is a big area of concern. Seasonal or unprecedented changes in demand can severely impact the bottom line, either due to the lack of infrastructure to instantly scale-up or the cost of unutilized software eating into the profit margin.
- Lightweight: SaaS products are typically distributed over the internet so you may not need to install any software on your computer. Where installation is needed, the deployment is quick and easy.
- Costing: With SaaS, customers incur reduced costs when compared to traditional licenses that have fixed capacity. Hidden costs are minimal. SaaS is a cost-effective option because the apps usually require no heavy upfront investment or significant maintenance. That is, SaaS converts the capital expenditure of traditional license based software into an operational expense.
- Flexibility: Payment options are wide-ranging, from basic to premium, and monthly, annually or one-time payment – these could be based on business volumes, by usage hours, etc. There is also the added flexibility in terms of when and how you use the software. This is a big boon for businesses with varying activity at different points of time – a travel portal for example would handle higher load during vacation time and lower load during other times.
- Freedom: With SaaS, apps are built and managed at the vendor’s end, which reduces the need for dedicated, in-house IT staff.
The flipside
One of the important aspects that you have to review before signing up for a SaaS product is to check if you have wider options for customizations in terms of functionalities. For ease of scalability across customers, some vendors may have a few variants of their standard package.
It is also true that having control of the data may be another area to review as it could be challenging. While data is maintained securely with world class servers, data leaks and privacy concerns do surface once in a while – Linkedin and Yahoo being recent examples. In the unlikely event of the vendor’s company closing down, there is a possibility of data loss, and it may be difficult to migrate your data to another provider given the technical nuances.Conclusion
To summarize: The benefits of SaaS far outweigh the risks. SaaS does away with the need for physical installation. You can access it irrespective of the device and location. It is cheaper because it eliminates the need for maintenance and installation costs at the user-end. SaaS products are up to date, and it happens almost automatically due to the centralized nature of the process at the software vendor’s side.
But before going all-out on SaaS, companies need to weigh the pros and cons. The first thing they must do is research multiple different providers and their offerings. The second thing is to create an internal list of the company’s needs as well as their unique business process. Then map them against what they’re getting out of the SaaS solution. For example:- What kind of pricing model are you looking at? This will determine the cost savings over on-premise models, in the context of a business given its volumes, etc.
- What kind of customer support do you require? Is it 24×7? Is it a mission critical application like transaction banking, which requires a higher level of uptime capability?
- What sort of integrations and interfacing do you require?
- What are the data privacy and localization norms to be adhered to?
- What functionalities do you go live with initially, and what can come later?
Author
Shankar Ravichandran
Senior Manager, Credit RiskHis profound expertise in the field of corporate and retail banking spanning across Credit Risk, Transaction Banking, Service Delivery and Product Management is close to decade. He is an MBA graduate from Indian Institute of Management, Bangalore.
