Software as a Service (SaaS) can significantly transform how IT departments view their role as chief providers of IT and computing services to the entire enterprise, as the advent of the SaaS delivery model will completely revolutionize how organizations view the IT department function. With SaaS, IT support can shift their focus from application deployment and support to managing services of those particular applications. A service-centric IT will, in turn, generate more business value by offering services that draw from internal and external sources, aligning side-by-side with business objectives.
Understanding SaaS and the SaaS Delivery Model
SaaS can be defined simply as software deployed online as a hosted service and availed over the Internet. SaaS is not a new concept, as it is often associated with ASPs (Application Service Providers) of the 1990s that offered “shrink-wrap” applications to users (particularly business users) online. The early attempts at online software delivery shared a lot with traditional on premise applications than with today’s SaaS applications in the following ways: architecture and licensing. Since they were originally developed as single-tenant applications, they had limited ability to share data and even processes with other applications. In addition, they had few economic benefits over their on-premise counterparts.
However, SaaS applications have evolved over the years and are today expected to leverage the advantages of centralization via a self-instance or multi-tenant architecture to deliver a feature-rich user experience that can compete with counterpart on-premise applications. Typically, a SaaS application is provided either directly by the vendor, or by an aggregator – an intermediary party that assembles SaaS offerings from various vendors and bundles them together to offer a unified application platform.
On-premise software is characterized by a one-time licensing model. Conversely, SaaS application is often sold via a subscription model that allows users to access the application online. Customers have to pay an ongoing fee to continue using the application. However, fee structures may vary from one application to another, with some providers charging a flat rate for unlimited software access, while others segregate the market to allow for access to additional application features for an extra fee. A couple others charge various fee rates depending on usage. Regardless, the general idea is that all payment models are subscription based and structured according to the needs and wants of customers.
Technically, SaaS delivery model is founded on the idea that providers host the applications and data in a central location and deploy patches and other upgrades to the SaaS application in a transparent manner. The service enables end users to access the application over the Internet via a web browser or other smart-client applications. Several vendors offer APIs (Application Programming Interfaces) that expose the application functionality and data to developers for use in developing composite applications.
Vendors use various security mechanisms to keep the client’s data safe during both transmission and storage. However, application providers may offer tools that allow clients to modify the workflow, data schema, and other elements of the application’s operation according to their user needs.
Benefits of Using SaaS
The fact that you can add SaaS to your company’s IT infrastructure is not reason enough to do so; you must have a viable business reason as well. So, SaaS delivery model presents substantial opportunities for virtually any organization to shift the inherent risk of software acquisition that is characterized by a reactive cost center, to a proactive, value-adding part of the business enterprise.
Managing the Risk associated with Software Acquisition
Logically, deploying large scale business critical software application systems, such as CRM and ERP, is a major undertaking with significant business risk. An enterprise can incur hundreds of thousands of dollars in licensing cost (often paid upfront), but still require a platoon of qualified personnel and IT consultants to come together and customize and/or integrate it with organization’s existing system and data. The resources – time, human resource, and budget – involved in the deployment of such a magnitude present a massive risk for any organization. This puts software out of reach of micro enterprises that otherwise might have been able to derive substantial utility out of it.
With SaaS applications, organizations do not need the deployment of large infrastructures on-premise, drastically minimizing the upfront commitment of organization’s limited resources. An organization that deploys a cloud based application and experiences disappointment can pull out of the commitment without having to think about the disposal of an abandoned, expensive on-premise infrastructure.
In addition, if you do not require custom integration, SaaS applications can be easily planned and executed without much effort and rollout activities. This creates short time-to-value intervals for major investments in IT. This is another reason why many SaaS vendors can offer risk-free trials for a limited time period.
With SaaS, the day-to-day task of deploying a SaaS application to ensure it runs smoothly – including testing and installing patches, monitoring performance, managing updates, ensuring high availability just to mention a few – lies with the provider. Transferring the overhead activities to another third party allows the IT department to focus more on other high value-adding activities that align with business goals to support the enterprise’s objectives.
Cloud based computing uses a one-to-many delivery model, whereby one provider supplies SaaS software to multiple users. Customers will pay for the service based on what service they require, similar to electricity utility service billing. However, since this platform is focused on delivering applications with the potential to reach larger target markets, smaller businesses with a smaller customer base may not be a profitable niche.
Flexibility and Considerations
Since customers are charged based on usage, they must consider the magnitude of the account monitoring tools that a SaaS provider avails to them for the services delivered.
SaaS is a method of delivering hosted software applications to customers in a cloud based computing environment. Typically, SaaS clients pay a subscription-based fee to continue using the services. Unlike the traditional on-premise applications that require a hefty investment in infrastructure, cloud-computing services are accessed online. Moreover, SaaS delivery model provides users with the flexibility and option to try the software or discontinue usage if it fails to meet the required software needs.
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