Globally, more and more companies are turning to the concept of software as a service (SaaS). This is based on the premise that users should regard software not as a product, but as a service, with the focus being on the value derived from the software service by the customer or end-user. But how do companies know if the business is ready to make the move to SaaS?
As much as companies worldwide - and in SA - are warming to the idea of SaaS, there are many that have not yet reached a point where they are looking for or are ready to implement new software solutions. But there is no time like the present, and these companies should at least be looking at what their evolving requirements will be, who in the market can supply the kind of solution they will need, and what the benefits offered by each type of solution or provider may be.
Rather than requesting tenders from suppliers of expensive ERP solutions, this would be a good time to identify SaaS suppliers who have specific industry knowledge, and who can offer service-based software solutions. For companies which do engage in this process, moving to SaaS will be a no-brainer: who would want to spend upwards of a million or two on software before they have seen any return on investment or derived any benefit from their solution, when they can rather move to a performance-linked, shared risk model of software provision?
Companies with legacy systems will most likely have invested heavily in the implementation of those systems and in the ongoing annual purchase of licences, and they will be hard pressed to ensure they derive return on the investment they have made. Obviously, any decision to change their software at this stage will be driven by need, and not pricing models.
The delivery of SaaS is based on a whole new metric: linking the cost of the software to the service that is provided.
Rick Parry, MD
Many companies last changed their systems in 1999, in response to the Y2K scare. Now, six years later, the time is coming for many of those systems to be reviewed and upgraded. Companies looking at traditional models of application provision will have to face up to the fact that they are going to have to make huge capital investments to replace their existing, and possibly outdated, systems.
SaaS provides them with an alternative: because SaaS is based on a subscription model, the customer does not have to make the massive up-front investment necessary for all the hardware, operating systems, databases, licences, IT staff, and ongoing overheads that a traditional system would require. This also removes the risk of investing in a solution that does not meet organisational needs. The delivery of SaaS is based on a whole new metric: linking the cost of the software to the service that is provided.
Not a silver bullet
However, companies must bear in mind that SaaS is not a silver bullet, and it is not going to alter or improve existing business process problems related to IT. All SaaS does is change the way you pay for your IT, making it far more cost-effective and user-focused. Nonetheless, what this model does allow for is changing business requirements, and those changes can be incorporated whenever the need arises. Traditional suppliers will make those changes only at great cost to their customers; with SaaS, costs for changes are merely incorporated into the customer`s monthly fee.
Because it is a "risk- and reward-based model", as the customer derives more value, so they pay more. SaaS therefore remains a cost to the business; but it is a cost that is spread out, manageable and predictable. It can be listed as an operating item on the company`s accounts, as opposed to a great big investment to be written off over a number of years into the future.
The larger the organisation, the more the potential benefits of implementing the SaaS model. However, there is also likely to be greater resistance to change. There will be significant IT infrastructure in place, including a large number of people who are running it, and who may be threatened by a change in paradigm. But when the business benefits associated with the model are realised, resistance barriers will most likely crumble. The important thing is for business today to be aware of this alternative paradigm, and to start evaluating which way they want to go with the implementation of their next-generation solution.
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