Software as a service (SaaS); what exactly is it and how will it benefit my organization?

September 23, 2010

Frequently my clients and prospects ask me this question as they don’t fully understand SaaS or how it can fit their business needs. Let’s first start with the question what constitutes Software as a Service. Instead of investing significant funds in software, hardware and the installation of the software on the new hardware, an organization can enter into a contract with a service provider and typically pay a modest fee per user per month for the usage of the software solution which you will access over the internet. The service provider will maintain the system and keep in up and running so you will not need your own IT staff to maintain this system. The SaaS movement started initially in the Customer Relationship Management space with but in recent years other vendors have joined. Besides CRM solutions you can now also get your email system, document management, phone system, accounting, ERP and various other systems delivered in the SaaS model.

The answer to the question on how it will benefit your organization is less clear as it depends on the state of your IT organization, existing IT infrastructure and how comfortable you are with having your company data reside on the servers of your SaaS provider.


Cloud Computing

Let’s start with the storage of information at your SaaS provider. Many people are still apprehensive about putting their company data in the cloud as they feel it is less secure. My question to this is how many network security experts you have in your organization and how much time they can spend on continuous monitoring network traffic and firewalls to ensure no perpetrators get onto your network. Hardly any small or midsize company has such expert on staff while the good SaaS providers have many of them on staff and they are working around the clock to protect their customers’ data. Even in worst case scenario where a perpetrator would get onto the network of a service provider they’re looking to find a needle in a haystack as many SaaS providers store data for thousands of clients. My personal view on this is that in most scenarios your data is better protected in the data center of a good SaaS provider than on your own network.

If you already have invested heavily in your IT infrastructure and can install a new application without the need to invest in additional hardware, supporting software (server operating system, databases, etc.) or IT staff, then the case can be made that it will be more cost effective to install a new solution in house. If you however have to make significant investments to support an additional application you most likely are better off with a SaaS solution.

When you’re looking for a SaaS solution, ensure you have the required flexibility for your organization. Some solutions are only offered as a SaaS offering which deprives you from the option to move the software application in house when circumstances warrant such a move. In case you’re relatively small and have only a few users then paying $125/month is a good deal but when you grow and are paying for 15, 20 or even more people it might be more cost effective to move the solution in house. If your SaaS solution is not available for in house installation you’ll be forced to either keep on paying the monthly fee per user or will have to buy and implement a brand new solution which can be a costly investment. Selecting a solution this offered as either a SaaS or in house solution will allow you this flexibility. Creating a business case for both scenarios will show you which option will provide you the best ROI given your specific situation.

Topics: Sales, Technology, Management, Blog Posts, Accounting & Finance

Jos de Laat

DL Associates

Jos de Laat has throughout his career used the knowledge gained from his Master’s in Business Economics and his Master’s in Information Systems and Technology to help companies define and streamline business processes and automate them using state of the art technologies. With his extensive experience in finance, operations, sales, service and consulting he enjoys working with entrepreneurs and executive to focus on core business issues and in a collaborative approach design creative solutions that result in significant improvements in both top and bottom line. After many years in executive position in large, small and startup organizations Mr. de Laat has started his own consulting company, DL Associates. In this role he now provides business consultancy services with a focus on business process design and automation but when clients requests helps with other business related challenges like business planning, budgeting, system selection or interim management. In previous positions Mr. de Laat had the pleasure of working in over 40 different countries and as such he is also a great resource for organizations that are operating or want to operate outside of the US.
Read more articles from Jos de Laat

Guide to Business Borrowing

Learn what banks are looking for when they prepare to make loans. Our guide covers what business owners need to know when they prepare to borrow.


Download eBook