SaaS for SME's: Financial Value, New Technology, and Improved Operations
I recently came across a White Paper from Saugatuck Technology, Inc. entitled “SaaS Realities: Business Benefits for Small and Mid-sized Enterprises”. In the spirit of full disclosure, this research paper was sponsored by SAP so there is a one page blurb from SAP at the end of this White Paper which reemphasizes the benefits of SaaS for SME’s and then touts its own SaaS offering Business ByDesign. I chose to post this review of the White Paper since the research is very current, describes the benefits succinctly yet thoroughly, and is also presented in an unbiased format.
The paper is written with the SME in mind, as one can discern from the title, however it begins with a very brief background to the pre-SaaS days. As a bit of a history buff myself, I always appreciate it when an adequate foundation is laid so we can see how things have progressed over time. The paper points out the initial two choices available to us:
· Purchase of software suite from an ERP Vendor: The enterprise’s IT department is then saddled with all the tasks from selection, installation, maintenance, all hardware, and networking; or
· Engage a VAR or Systems Integrator (“SI”) to install new software and integrate it with its existing legacy systems: Here selection and installation are handed over to the VAR or SI, leaving maintenance to the Enterprise’s IT department or perhaps outsourcing it.
The authors address the question of when is the optimal time to contemplate a switch in technology from the old approaches mentioned above to the latest alternative, SaaS:
· Establishing a new location
· Serving new markets
· Sudden sustainable growth
· Preparing for a recession
· A new sales channel
· A new supply channel
· New governance or reporting standards
· New performance goals
· Aggressive competition
· Increased customer expectations
The authors then go into a deeper discussion of SaaS. They begin, as most SaaS discussions begin, with the pricing model, per user / per month, and variations of this model. This is followed by a discussion of what an enterprise is really purchasing with SaaS (i.e. a business service). This business service includes:
“… the entire range of data center infrastructure services: networks, storage, operating systems, databases, application servers, Web servers, and of course, disaster recovery and backup services. Moreover, a full range of data center operational services – authentication, availability, identity management, production monitoring, patch management, activity monitoring, software upgrades and customization …”
The research paper then gets into the heart of the issue, mainly the Advantages of SaaS. There is a very well-written discussion including:
· Financial Value
· Time to Value: Quicker installation, quicker integration, quicker pay-back period.
· Affordability: No large up-front costs
· New technology
· Continuous innovation: Multi-tenancy allows for a continuous stream of enhancements
· Improved Operations
· Customization: Easily adaptable for SME’s
· Integration: Service Oriented Architectures (“SOA”) are standard for SaaS providers. Also, three additional means of achieving seamless integration with other enterprise applications on premise include: Web-based SaaS integrators, SaaS integration appliances, and SaaS system integrators.
· Fewer technical resources needed: Less strain on your IT department and small firms can take advantage of the latest technologies
· Focus: Allows firm to focus on its core competencies
The research paper concludes by recognizing that SaaS may not be the answer for your particular firm. For example:
· The application differentiates your firm from the rest of the market (i.e. the application is tied to your core competency); or
· An existing large investment in your existing IT; or
· Regulations may require that you keep and manage your data behind a firewall and your SaaS provider cannot accommodate this requirement.
Saugatuck Technology, the author of this White Paper, is a strategic advisor to senior executives, information technology vendors and investors, providing strategy consulting, subscription research and thought-leadership programs focused on emerging technologies, key business / IT challenges, and effective management strategies.
For further readings on this topic, see the following posts in this Blog:
SaaS Customer: A Checklist of What You Need to Know Before Selecting the Vendor
SaaS Contracting: Tips Leading to the Decision and What to Include in the Agreement
Also on the left hand sidebar insert “SaaS” into Keyword search and hit “go”. You will find numerous articles relating to SaaS.
