Test No. 3: Community
Another trademark of SAAS applications is the ability to leverage its user community to deliver enhanced product capabilities such that the application gets "smarter" and more valuable as the user community grows. Since companies using conventional software products are essentially each on their own island, sharing any kind of assets or collective wisdom is extremely difficult. Contrasted with two companies using Salesforce, for example, where they can natively share sales pipeline data if they so choose (without compromising the overall security of their data).
SAAS applications have the ability to harvest the collective intelligence of its entire community of users and bring that insight to bear for the benefit of each user-think Amazon.com's "people who bought this book also enjoyed" feature. Ask the vendor in what ways does it leverage its user community to deliver enhanced functionality (beyond product steering groups and the annual user group meeting).
Test No. 4: Maintenance and enhancements
This is where SAAS really shines and where it gets hard to hide if you're deploying conventional software products. Because, if you are deploying conventional software products, every customer has their own instance-whether that's a physical on-premises instance or a virtualized instance in the cloud. As such, releasing even a simple bug fix can become a major effort, not to mention deploying maintenance releases or product enhancements. These maintenance and scaling challenges result in greater cost, more complexity and less time for innovation-all of which impact end customers.
In a true SAAS model, a fix, upgrade or enhancement is made once and all customers enjoy the benefits immediately. SAAS vendors can then focus their resources on building and releasing great new product capabilities versus maintaining multiple versions of their product and managing releases, etc. It's what some analysts recently called the "endless cycle of innovation."
Ask your vendor how many major new enhancements or features have been released in the past year and also ask what percentage of the vendor's customers are on the current release. With conventional software products, you'll find customers in "rev lock" situations where they've customized their instance of the application to the point where they can't keep up with the latest releases. With SAAS vendors, you'll generally find a very steady stream of enhancements and features and, because all customers are on the same code base, all will have access to the latest and greatest product capabilities.