Software as a Service

What is Software As A Service and Where is SAAS Going?

f you’ve heard of Salesforce.com or NetSuite then you’ve heard of startup companies whose business model is based on Software as a Service (SAAS). Universal high-speed internet access has enabled this business model where your business software is hosted by another company in another location. In old fashioned terms this was called leasing. In the modern world SAAS is much like paying for web hosting. Even more importantly your business depends on that live connection being 100% available.
Many companies are jumping on the SAAS bandwagon if only to stay competitive. Microsoft Dynamics, our own flagship product, now has SAAS pricing. If you search the web for information on SAAS you will find a wide range of opinions on this subject. So much so that one ERP expert went as far as to say that “on-premise versions of large-scale software systems are obsolete”. This is certainly an extreme statement as there are several major factors to consider in choosing an advanced Business Software system. These are the Hosting model, Customizations, Cost of Ownership, Security and Efficiency.

Hosting Models

To understand how SAAS works you need to know that there are two different models for hosting. The SAAS provided by companies like Salesforce.com is hosted to a large number of users by that company alone. Software provided as a service for full-featured ERP products like Microsoft Dynamics is hosted on a one-on-one basis by a Third Party Vendor. All are accessed in the same way, over a public or secure Internet connection, but there is a difference between web based software and web accessed software. Web based software is interfaced with through web forms. Web accessed software is interfaced with using a traditional ERP client in the same way it would be in-house (or “on-premise”) even though access is remote.

Customizations

Software is often upgraded. These days it seems like fixes are released weekly in some cases. If your SAAS is with a company like Netsuite you are not going to get individual attention to your database. When changes are implemented they are implemented for everyone. If these changes are radical enough they may require you to re-implement changes you have made and re-enter data that no longer fits in the changed feature. On the other hand, if your SAAS is with a 3rd party host, you can get the individual attention, personalized upgrade and tech support that goes with a one to one business relationship.

Cost of Ownership

It is no secret that with leasing you will never own that which you are paying for. In business it may be as practical to lease software as it is to lease an office because, in that line of logic, if you can’t pay the rent you may as well not be in business. Leasing does offer a lower immediate cost of ownership but, in reviewing the cost of SAAS, you will find that in the long run it is actually less expensive to go through a financing company than to lease for the same period of time. Further, financing an ERP acquisition can cover the cost of hardware and implementation services. If this seems like paying even more then don’t think that the cost of an SAAS lease does not take the cost of hardware and services into account.

Security

I first witnessed security flaws in computer networks when, in 1973, a friend of mine used a teletype to remotely log into a computer at a local university, sent the users a cryptic message, then issued a command that shut down the system. Since then such ingenious individuals have come up with more ways to secure unauthorized access. All I have to say is, it’s 10PM, do you know where your database is?

Efficiency

If you’ve ever filled out a form on-line, for shopping or registration or anything else, you know how slow a web page can be to respond. Web based SAAS may have some flashy features and may look good in the demo but surveys show that users of this model actually end up using fewer features and get less business value. This could be because response time is a key issue for busy employees and the web based model offers a slower response time than the web access model. (See Hosting section for the difference.) Also, many companies use multiple software applications that talk to each other. This may not be possible with SAAS, thus reducing efficiency even more. One answer to this would be not just leasing a web accessed application but the whole server with all of the required business applications loaded.

The Future

SAAS is one branch in the evolution of modern ERP systems. It suits the needs of companies that do not want to commit to an investment in business software whether through purchase or financing but comes with a higher cost of ownership in the long run. Accessing traditional applications through an SAAS web access hosting model, as is the case with Microsoft Dynamics, will give the same functionality as an in-house implementation and will come with personal service and support.
World Class ERP companies like Microsoft are also creating web based form access to their business software systems to complement, not replace, traditional in-house implementation. Within the next year or so these types of systems will be hosted and accessible under multiple models giving businesses the option(s) they desire. Sales and pricing models will also likely adapt.

Today

We at Dynamics West are available to answer your questions and ready to meet your needs.