The Secret to Getting High ROI Through SaaS

Many SaaS companies with high ROI have addressed emerging trends through actions that drive cost reduction and leverage the adoption of the cloud for IT service providers. Leading IT suppliers of software and hardware services seeking to address the needs of their customers have thoroughly evaluated and adopted a cloud-style strategy. The challenges and issues must be expressed in a language that users understand: investment, cost reduction, and business performance. Return on Investment (ROI) is one of the most widely used measure of businesses’ success. If you want to use cloud computing rather than in-house IT, how will you assess it? What properties of cloud computing do affect ROI?

The Secret to Getting High ROI Through SaaS

To answer this question, you must understand how cloud computing contribute to ROI. A number of fundamental drivers affect investment, cost, revenue, and timing and they can positively be influenced using cloud services. They include productivity, size, quality, and speed. Below is the secret of getting high ROI through SaaS and how some of the above-mentioned drivers contribute to ROI.

Resource Utilization

Resources sized to handle peak loads are often under-utilized at off peak times. Additionally, in many enterprises, you will often find that servers are dedicated to specific departments or functions, and can be very much under-utilized. It is also a common practice for departments to request for new servers for upcoming new projects, yet other departments have capacity to accommodate them. Different loads can share resources and in turn improve utilization, thanks to cloud computing. The sharing can occur between enterprises that have public or community cloud, or just within an enterprise that has private cloud. This can lead to high rewards.

Resource sharing – at the infrastructure level – means supporting several platforms and applications on one physical resource or same physical resources, using virtualization techniques. At the platform and application levels, however, providers can use multi-tenancy to achieve resource sharing. For SaaS, this simply means clients sharing the same application instance. By using specially-designed application architectures, clients can improve utilization of the underlying assets rather than if each one of them used a separate application instance on one operating system or rather another virtualized instance on one hardware.

Usage-Based Pricing

This translates the higher utilization attained by providers into lower costs for SaaS consumers. Traditional licensing associated with software ownership, number of users, maintenance costs and support and services lead to capacity-utilization gaps similar to those that characterize hardware resources. The on-demand cloud computing pay-as-you-go principle addresses these gaps.

Skill Specialization and Economies of Scale

Apart from the advantages of load sharing, lower IT costs also results from cloud computing, mainly because of skill specialization and economies of scale. For instance, a large cloud provider – or private cloud division within an organization – can be much more effective at offering IT services than a small IT unit or department. The cost of problem solving can be amortized over a large user base: some of the problems experienced by a single user may, once solved, be proactively fixed for all other remaining users of SaaS.

Get High ROI through Speedy SaaS

Improved speed of operation is yet another way through which cloud computing contributes to ROI. Let’s consider time to deployment, for example. Cloud computing offers an increase in provisioning speed, enabling enterprises to acquire the resources they require faster. Elastic provisioning provides a new way for enterprises to scale IT so that their business can expand. Compressing provisional time from weeks to hours demonstrated by cloud providers provides a means of rapid execution that is more than just time-saving. It also defines a new business operating model. Businesses can review and develop their business plans and deploy infrastructure and services more rapidly and proactively.

Personalization and development, application testing and support can also be viewed from a different perspective with the provision of IT services in a more dynamic fashion directed at business needs. With a ready-to-use deployment platform for cloud, there is no time wasted on purchasing, installing, or hardware and software setup. Production versions can be tested in their deployment environment in the cloud, without any need to build special test-bed systems. This dramatically reduces the time from concept to launch, allowing the product to stay ahead of its potential competition.

Lifetime cost model 

Apparently, increased speed of execution positively impacts on lifetime cost models. Ideally, cost is reduced over the entire product or service lifetime with the decrease in depreciation cost of purchased assets and introduction of efficiencies; thus leading to high ROI. With cloud computing, the speed of cost reduction can be higher (much higher) than with traditional investment and divestment of IT assets. A higher rate of cost reduction only means that profitability increases more rapidly, leading to shorter payback times and high ROI.

Just as it accelerates business process execution, SaaS speeds up the IT asset management process. The use of IT today has become an enduring and integral feature in virtually every organization. The investment in knowledge, data, and infrastructure assets, including software, today represent lifeblood operations for many enterprises. However, many businesses have IT asset portfolio that do not reflect their true requirements. Cloud computing facilitates the total asset portfolio optimization. An enterprise may use it to achieve the objective of a more cost effective asset management process for a particular IT portfolio. This optimizes design and run-time performance.

Conclusion

While a high ROI is what most businesses look for, a SaaS application should offer something more than what can directly be quantified in terms of ROI. It should be more of something intangible. To do this, you need to understand what your customers’ goals, problems, opportunities, etc are. Addressing issues such as cost reduction, proper resource utilization, usage-based pricing, and taking advantage of economies of scale can significantly increase your ROI. Allowing departments to share servers can save you the cost of acquiring new hardware. You can use virtualization techniques – at the infrastructure level – to support many platforms and applications on a single physical resource but use multi-tenancy to share resources at the platform and application levels to get a high ROI.

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Omri Erel
Omri is the Head of Demand Generation, as well as the Lead Author & Editor of the SaaSAddict Blog. Omri established the SaaSAddict blog to create a source for news and discussion about some of the issues, challenges, news, and ideas relating to SaaS and cloud migration.
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