The more flexible the design of the SaaS application, the more it can be configured to deliver the specific needs of the various organizations running the exact same version of the application.
You have undoubtedly heard people speak about Software as a Service or SaaS and may even be running applications that are delivered in a SaaS model. There are many options of SaaS being offered in the marketplace, however not all include the same components or services.
We’ll help you determine whether SaaS might be right for your organization by explaining how it works, the pricing structure and other considerations.
What is SaaS?
The traditional SaaS model involves an application that is hosted at a datacenter, where end users access their data over the internet via a web-browser. This would be considered a cloud solution.
There are several of IT related benefits to a SaaS model when compared to a traditional software purchase where the application and database run on the purchasing organizations internal systems:
- No IT involvement with installation, upgrades or patches to the operating system, database or the applications running in the SaaS environment
- No need to purchase or allocate hardware for the applications
- No need to purchase database or operating system licenses for the end users of the applications
SaaS often uses a multi-tenant architecture where a single version of the application serves many of businesses and end-users, with each distinct dataset being portioned accordingly. In other words, everyone runs the same set of programs or executables, but only has access to their own database. This means that everyone gets up-graded at the same time to the current release of the applications.
Is SaaS right for you?
The more flexible the design of a SaaS application, the more it can be configured to deliver the specific needs of the various organizations running the exact same version of the application.
Let’s say for example you need to clean your house. Option A, you purchase your own cleaning supplies, tools and acquire methods to clean your house by yourself. Option B, you have someone clean it for you (SaaS). By hiring a cleaning service, you would tell them your preferences and any requirements you have (configuration), how big your home is (users and cost), and because they have cleaned many houses before, they have the right tools and people available (implementation). You’ll be assured your home is being cleaned and your needs met.
By sticking to our home cleaning example, what you cannot do is ask for a home renovation from your house cleaning service (heavily customized). They might do an excellent job, but there are limits on what they can do. If you need a home reno, then SaaS (cleaning service) is not for you.
There are some potential disadvantages to SaaS that need to be considered which include:
- Response time will be slower than a traditional in-house installation as the communication is taking place over the internet (you are at the mercy of the internet speed which may be problematic for applications that require millisecond response time)
- Your data is hosted outside of your organization and you are therefore depending on the hosting provider to have adequate protections in place
- Forced to be on the current release of the product everyone runs the same executables)
- Site specific customizations may not be possible or practical depending on the architecture/design of the application and the potential impact on all other users of the application
Pricing, payment and ownership
Apart from the benefits and potential disadvantages of the SaaS model, there are also differences in the pricing, payment and owner-ship terms when compared to a traditional software purchase.
In a traditional model the customer purchases a license to use the application in perpetuity. Software support and upgrades to the application are provided as long as the customer is on an active maintenance agreement. Services required to implement the software are typically paid for as delivered, with the full amount of the license and services paid for in full by the time they are using the software as their production system (live). Maintenance is typically paid for on an annual basis going forward. If the customer cancels maintenance, they still own the software and can continue to use it, but will not receive any upgrades and will not get any support for the application.
In the SaaS model, the customer does not actually purchase a license and therefore has no ownership or perpetual right to use the soft-ware. Instead they subscribe to the software as a service, and have a right to use the software and receive support for as long as they have an active subscription. Any services required to implement the solution are typically paid for as incurred. If the customer decides to cancel the subscription, they have no rights when it comes to the application software, but will have their data returned to them in a previously agreed upon format.
In addition to the basic differences between the SaaS and traditional delivery models, there are also differences in how they are typically funded within an organization. Traditional software purchases often see the software component flowing through as a capital item while the maintenance is typically treated as an operating item. In the SaaS model, because it is a service that is being subscribed to, it is typically considered to be an operating cost.
With the numerous benefits using the SaaS model, find out how Questica can help your organization move to better budgeting using our SaaS software delivery. Learn more about Questica Budget Suite or request a demo today!