Many small and midsize businesses (SMBs) don’t yet fully understand what software as a service (SAAS) is, how SAAS works and why SAAS makes business sense for them. In this article, I’ll discuss the evolution of software delivery models, why applications in the cloud make sense for SMBs, and the various benefits of SAAS for SMBs (including low financial risk, easy deployment and ease of access from anywhere). After reading this article, you’ll be able to assess whether or not cloud-based, SAAS applications are right for your SMB.
Traditional software delivery models
In the traditional software delivery model, you purchase software up-front under a perpetual use license agreement. You’ll also typically pay an annual maintenance fee to cover bug fixes and minor enhancements. The software is deployed in the company’s data center. This model is still employed by large enterprise application vendors, making these applications inaccessible to the SMB because of their cost and the scope of the implementation.
With the widespread adoption of the Internet, software vendors began to look at a different approach to delivering software solutions. You could license software from the vendor and then purchase additional services from an application service provider (ASP) to host it. You didn’t need to make infrastructure investments, yet still had your own (single-tenant) version of the application. However, hosting fees, up-front license costs and ongoing support contracts still contributed to a high TCO for this model.
The SAAS Delivery Model
The SAAS delivery model
Software providers quickly recognized a better way to deliver software from a data center and SAAS was born. The SAAS model uses multitenant architecture, which means SAAS customers share common parts of the application while their data and business process configurations are stored separately. A hallmark of SAAS is subscription pricing, which includes the use of the software, support and access to all upgrades, patches and service packs.
Cloud computing refers to the use of shared computing resources that provide storage, compute cycles and redundancy on an on-demand, pay-per-use basis. In the cloud, an application instance can be instantly provisioned and decommissioned as needed, allowing for rapid scaling and recovery from outages or failures.
Today, the term “SAAS” encompasses any application that is delivered as a service via a Web browser, whether from a vendor’s data center, a public cloud or even a private cloud. Now, let’s examine why SAAS is an attractive option for application delivery for the SMB.
Six Benefits of SAAS for SMBs
Six benefits of SAAS for SMBs
SAAS allows SMBs to gain access to the functionality that had previously been available only to larger enterprises with deep pockets. With the need for capital outlay and up-front costs eliminated, any organization can pay a subscription and receive enterprise-class applications as a service. SAAS provides additional benefits to SMBs, including the following six:
Benefit No. 1: Low financial risk
There is no up-front IT infrastructure or technology development investment and the recurring costs are predictable. There are no hidden costs for upgrades or maintenance; these are all included in the subscription. Also, there isn’t a huge sunk cost. After the subscription or contract period ends, the customer is free to terminate.
Benefit No. 2: Easy deployment
Today’s competitive organizations can’t afford lengthy and complex projects. Most SAAS instances can be provisioned in minutes and be quickly configured with branding, process flows, additional fields, reports and other settings.
Benefit No. 3: Comprehensive support
Many SAAS vendors provide tiered pricing for different levels of support and service agreements. This way, you can choose the best package without paying for more or receiving less than you need.
Benefit No. 4: Relief for IT staff
Because there is no technology infrastructure or application environment to support, SAAS does not place any additional demands on your IT team. For SMBs without dedicated IT resources, SAAS applications are even more attractive.
Benefit No. 5: High security
When you move important data off-site to a service provider, you need assurance that the system is secure. SAAS vendors house their applications in world-class data centers with state-of-the-art power, ventilation and security features. They also employ encryption and the latest in security protocols to ensure the safety and integrity of your data.
Benefit No. 6: Access from anywhere
A SAAS application makes it possible to gain access to data and documents from anywhere that has an Internet connection. Remote and mobile workers can collaborate effectively with colleagues and share information using any suitable mobile device.
Transitioning Your SMB to SAAS
Transitioning Your SMB to SAAS
Virtually any type of application can be delivered as SAAS. CRM, document management, accounting and financials, and human resources-all these mission-critical applications can be obtained from a SAAS provider. Are you ready to make the transition? Here are four key questions that can help you decide:
1. Has your business effectively outgrown the applications that are geared toward SMBs? Do you need more power and more functionality to help you grow?
2. Do you have an increasing number of remote and mobile workers who have difficulty connecting via a VPN? Are you worried about the security of those connections?
3. Is your technology infrastructure not up to the task of running today’s applications? Are you unable to make new capital investments in updated equipment?
4. Is your IT staff overwhelmed with user support and other system administration tasks? Or, do you not have a dedicated IT resource and have to outsource this work?
If you answered yes to more than two of these questions, then SAAS-based applications might be the solution for your SMB. Start with one application (such as document management) and try it out. Many SAAS providers offer 30 or 60-day trial periods so a small team can evaluate the application.
Once you’re satisfied about the reliability, security and ease of use of the application, you can bring more users on board and integrate the application with other front and back-office systems. You’ll likely find that SAAS has a lot of upsides and very few downsides. For the SMB that wants to grow and stay competitive, SAAS is a smart investment.
Daniel Chalef is founder and CEO at KnowledgeTree. Daniel is an entrepreneur, technologist and part-time guerrilla marketer whose career has included senior management, business analysis and engineering positions at software, Internet and telecommunications companies. As the CEO of KnowledgeTree, Daniel has led the company to its position as a recognized innovator. Daniel brings passion and enthusiasm to the KnowledgeTree team and is an avid commentator on industry trends. Previously, as CTO at Jam Warehouse and earlier in his career, Daniel headed up enterprise content management and workflow software implementation projects for premiere global retailers and consumer goods companies including Tesco PLC, Britvic PLC and Foschini Group.
Daniel holds an honors degree in Business Science and Information Systems from the University of Cape Town, South Africa. Read Daniel’s regular blog posts here and follow him on Twitter @danielchalef. He can also be reached at [email protected].