- What is Software-as-a-Service (SaaS)?
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- In an era when competitive, customer and compliance
pressures are escalating, a growing number of enterprises are recognizing that SaaS represents a more economical and effective approach to obtaining and leveraging state-of-the-industry business applications.
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- SaaS is gaining widespread corporate acceptance and adoption because it overcomes many of the inadequacies of traditional, legacy, on-premise software products and “hosted” or “managed” applications.
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- SaaS shifts the burden of successful deployment and management from the customer to the vendor. It eliminates the need for additional hardware and staff. It accelerates the time to value and increases user productivity by increasing application reliability and security.
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- SaaS is a software deployment model in which an enterprise application is delivered and managed as a service by the vendor to meet the needs of multiple customers simultaneously. A widely used example is the service model used by ADP to provide payroll and other business services to multiple organizations.
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- SaaS solutions are delivered via a network, most often the Web. They are priced on a subscription service basis, often based on the number of users or seats.
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- This SaaS model shifts the burden of getting and keeping an enterprise application up and running from the customer to the vendor. It permits users to leverage the software functionality without the burden of deploying and managing the software themselves. It also eliminates the added costs and complexities of deploying additional hardware and software, or dedicating additional staff resources to support the enterprise application on an ongoing basis.
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- The SaaS model also enables every customer to benefit from the vendor’s latest technological features without the disruptions and costs associated with software updates and upgrades.
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- What business trends are
fueling the growth of SaaS?
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- A combination of macro-trends are driving companies of all sizes to consider SaaS alternatives to traditional, on-premise software applications to better achieve their corporate objectives. These market trends include:
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- Changing competitive forces
Changing workplace requirements
Changing economic and ecological conditions
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- Changing Competitive Forces
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- Globalization and eCommerce have fundamentally
changed the competitive landscape, leveling the playing
field while lowering the barriers to entry in nearly every
industry. While these trends have created new market
opportunities, they have also opened the door to more
competition and undercut customer loyalty.
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- Changing Workplace Requirements
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- Mobile technology and broadband networking have also
fundamentally changed the workplace, and created new
technical challenges for businesses. Not only are today’s
employees more comfortable leveraging technology to
do their work, but the next generation of employees who
have grown up in an on-demand culture will expect their
employers to offer an even wider array of web-based
services to enable them to perform their jobs effectively.
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- Changing Economic and Ecological Conditions
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- Deepening recession and escalating fuel costs are significantly affecting corporate operating budgets, forcing businesses to re-evaluate where they make their capital investments and how they can allocate their limited resources to have the greatest impact on their financial performance with the lowest environmental impact.
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- What is wrong with legacy, on-premise applications?
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- In many cases, legacy enterprise applications have proven to be too expensive to acquire, deploy, update and maintain. They also lack many of the features and functional capabilities which are essential in today’s rapidly changing business environment.
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- According to industry research, 31.1% of software projects are cancelled before they are completed. Of those software projects which have been completed, over half (52.7%) have taken twice as long or have cost twice as much as originally expected.
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- When on-premise software applications are fully deployed, the maintenance and management costs can be ten times the original license fee, according to AMR Research. AMR has also found that many organizations over-provision their software license in anticipation of future software usage that never materializes.
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- The SaaS model enables every customer to benefit from the vendor’s latest technological features without the disruptions and costs associated with software updates and upgrades.
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- SaaS solutions enable customers to quickly and easily acquire essential business applications without a significant up-front capital investment in perpetual software licenses and additional hardware systems. They also avoid extended deployment cycles and added consulting and support costs. SaaS solutions have also been specifically designed to be more flexible and accessible for a highly dispersed and variable workforce than legacy applications.
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- THINKstrategies’ survey research has found that over 90% of those organizations already using a SaaS solution are satisfied with the quality of the solution, plan to expand their use of SaaS and would recommend a SaaS solution to their peers.
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- In response to this track record of success, 76% of companies using SaaS applications plan to expand their use of SaaS, according to Burton Group and Ziff Davis Enterprise Research (Source: “Software as a Service”, Baseline, July 2008).
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- Despite common concerns about privacy issues, there are no documented cases of data encroachment within a SaaS environment even as the number of identity theft and other security infractions within traditional software operations continues to skyrocket.
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- Many businesses also view the off-site hosting of their data by SaaS vendors as an added disaster recovery/business continuity benefit.
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- Who owns my data?
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- Under standard SaaS agreements, the customer retains ownership of its corporate data in a SaaS solution and is able to recover this data when the service agreement comes to an end.
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- THINKstrategies’ research and consulting work has found that over 90% of SaaS customers have been satisfied with their SaaS solutions and have renewed and/or expanded their service agreements, and are willing to serve as reference accounts. These figures far exceed satisfaction, renewal and referral rates for traditional, on-premise software products.
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- In addition, legacy enterprise applications were designed
to sit within a highly centralized and static corporate environment. These applications were not structured to be easily accessed in a secure way by a highly dispersed and variable workforce.
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- How widely adopted are SaaS applications?
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- In many cases, on-premise applications often fail to produce the return on investment (ROI) that organizations expect, and they typically require a higher total cost of ownership (TCO) to keep them up and running. As a result, many companies are adopting SaaS applications as a way to avoid the up-front capital investments and risks, along with the ongoing costs and limited returns of legacy on-premise applications.
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- In an increasingly challenging competitive and economic environment, corporate end-users and executives are becoming more receptive to a widening array of SaaS
solutions to address their business needs.
A THINKstrategies’ survey of over 100 companies conducted
in November 2007, in conjunction with Cutter Consortium, found nearly a third (32%) of the companies had adopted a SaaS solution, and another 36% are considering SaaS solutions.
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- What are the most important benefits of SaaS?
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- The key benefits of SaaS are:
Accelerated software deployment with less risk.
Lower up-front costs.
No additional hardware and lower internal staffing requirements.
Greater reliability, security and privacy.
Higher productivity/ROI, at a lower total cost of ownership (TCO).
Greater agility to scale software to meet changing business requirements.
Quicker time to value.
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- As a result of these benefits, Gartner predicts the SaaS
market will grow at a compound annual growth rate
(CAGR) of 22.1% through 2011, twice the rate of the
overall enterprise software market1.
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- 1Gartner/Dataquest Insight: “SaaS Demand Set to Outpace Enterprise Application Software Market Growth”, 08/03/07.
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- In an increasingly challenging competitive and economic environment, corporate end-users and executives are becoming more receptive to a widening array of SaaS
solutions to address their business needs.
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- THINKstrategies’ White Paper CIO’s Guide to
Software-as-a-Service: A Primer for Understanding and Maximizing the Value of SaaS Solutions.
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For information contact
Cale Teeter
cell (713) 907-5887
office (713) 984-2900
email cale.teeter@e-viridis.com
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