The Fourth of July is upon us! As a small business, we are so grateful to live and operate in a country where entrepreneurs are not only supported, but also celebrated. With that in mind, we are dedicating this post to a service that has evolved significantly over the last decade and has incredible potential to empower entrepreneurs and small- to medium-size businesses (SMBs): software-as-a-service (SaaS).
What is SaaS?
Saas is a cloud-based method of software delivery, meaning that it allows data to be accessed from any device with an Internet connection and web browser. It is one of the three major categories of cloud services (the other two are infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS)).
Organizations typically pay for SaaS through a subscription fee, on a monthly or annual basis, as opposed with the traditional model of paying for software through a perpetual license, with an upfront cost and optional ongoing support fees.
How can small businesses benefit from it?
SaaS is particularly powerful for small and medium businesses with fairly straightforward business processes that are looking to reduce upfront expenses. SaaS differs from on-premise software in its pricing model: on-premise software is typically purchased through a perpetual license, meaning that buyers own a license to the software. They also pay 15-20% per year in maintenance and support fees. SaaS, on the other hand, allows buyers to pay an annual or monthly subscription fee, which typically includes software license, support, and most other fees. This structure allows businesses to avoid expenses (such as that of in-house IT support required to maintain on-premise equipment) and spread whatever costs there are over time.
Because the applications delivered by SaaS are available over the Internet, users can typically access software from any device and location that has Internet connectivity. This provides a new level of flexibility and accessibility, which is particularly useful in this new age of remote work.
The third primary benefit of SaaS is the ability to use the service quickly, thus providing easy scalability. As with other cloud services, SaaS tools allow enterprises to ramp services and/or features up or down as needed – nothing more, and nothing less. This is particularly effective for small businesses that are growing quickly but are still typically operating on a tight budget.
Challenges of SaaS
There are some considerations to keep in mind when assessing SaaS and whether it is a good fit for your organization. Similar to other cloud services, users of SaaS rely on their service providers to be up and running at all times and up-to-date (new features, security patches, etc.) so that they can access their applications as needed. This means that in adopting SaaS, organizations accept loss of some control. That can be a hard pill for some leaders to swallow.
Data security is another, somewhat related, sticking point for companies considering SaaS. When we discuss both this and the “control” issue, we often come back to the fact that SaaS providers have far more resources to invest in security, backups and maintenance than any SMB. They also undergo stringent security procedures. For that reason, we often remind small businesses that while the switch might be a hard one to make, the benefits massively outweigh the risks.
Lastly, the cost-saving potential of an SaaS tool depends on the pricing model for the individual SaaS offering and the enterprise’s usage patterns. The pay-as-you-go model of payment enables enterprises shift costs to an ongoing operating expense which is easier to manage budget-wise. But in some situations, SaaS can cost more than traditional software licenses. It is critical for organizations to set a broad “cloud strategy” to accurately map out these costs when assessing SaaS tools and ensure that each tool adopted truly adds value and cuts costs.
Is it Right for My Organization?
SaaS is an ideal solution for SMB’s with straightforward business models that are looking for a way to reduce upfront costs. If there is one area that SaaS is still working to make up ground in terms of offerings, it’s delivering the same level of robust functionality that on-premise system, so if your business is large or has complex business processes, a traditional on-premises solution might be a better choice since it offers more functionality and allows for full customization.
Still unsure about whether SaaS is the right answer for your organization? Give us a call – our experts are more than happy to have a conversation to help set you in the right direction.