Demystifying Software as a Service – Part 1

Cloud computing is now an integral part of IT. But hype and multiple options continue to confuse many companies, especially when it comes to deploying critical business applications such as the CRM system.

As ever, there is no simple answer to the ‘Software as a Service versus On-Premise’ question – even the cost equation can be more complex than it originally appears! 

From data location and security to the flexibility of Service Level Agreements and customisation opportunities, organisations need to consider not only the value of the out-of-the-box solution today but in the future.

 How will the solution evolve? 

Will it support business growth or change in direction?  And how does it fit given the maturity of both the business and IT resources?

In part one of this blog series Toby Conibear, European Business Development Director, Bond International Software, explores the fundamentals of SaaS and the appeal it has to enterprise the world over.

Understanding SaaS

Over the last ten years the way technology has been deployed has changed radically. Cloud based services increasingly dominate, with a large proportion of companies now using web based email and administrative application services. For many companies the issue is whether now is the time to move core business applications, such as the CRM, into the cloud.

So what is the appeal? Under the Software as a Service (SaaS) software distribution model organisations have access to applications hosted by a vendor or service provider over a network – typically the Internet. In addition to the attractive operating expense and subscription based payment model, SaaS also offers easier administration and automatic product updates. An organisation can massively reduce its internal IT investment in both infrastructure and people. And, as long as Internet access is good, it provides global access.

There are two approaches to SaaS – Multi-tenant and Single-tenant. Under the Multi-tenant model, which some organisations insist on tagging ‘True SaaS’, the entire environment is shared: a single code base and a single database will serve thousands of customers. Every organisation is using exactly the same version of the software and operating on the same Service Level Agreement (SLA). In contrast, under the Single-tenant model, an organisation has its own implementation – hosted and subscription based – but with the option of customisation, managed upgrades and a specific SLA.

Generic versus Customised

The implications of this distinction can be huge. A Multi-tenant system by its nature has to be a standardised system accessed by multiple businesses. True configurability can only really happen under Single-tenancy or delivered via a traditional On-Premise solution.

Both models are valid but are focused on different areas of the market and support different organisational needs. For example, for smaller or start-up operations Multi-tenant SaaS is compelling. Costs are controlled and there is no need to invest in IT resources. In addition, the fact that the software is generic and most probably used by the competition is not a problem: the business is small enough to enable management to impose business specific processes and attitudes within the culture, along with minor changes in areas such as the data representation layer.

For a larger organisation, especially one that has not moved everything into the cloud, the financial model is more challenging. Under the SaaS rental approach, an organisation will typically take just two years to reach the equivalent On-Premise investment costs – it is the reduction in internal IT resource and infrastructure costs that delivers the long term financial value. If an organisation is not moving all applications to the SaaS model, such as Finance and HR, it will be important to understand the cost implications of a mixed On-Premise and SaaS strategy.

Furthermore, for a larger business that needs to exploit technology to embed key business values, the lack of customisation can be a problem. Most medium to large scale enterprises build the business value add into managed processes – and that means the ability to customise software to capture those unique differences is essential. Tinkering with data representation is not enough; these organisations require customisation in the workflow layer – and that means either traditional On-Premise deployment or Single-tenant SaaS.

You may download our full ‘Demystifying Software as a Service’ eBook here.