Understanding SaaS: Benefits and Challenges

saas

Gone are the days when people used to buy CDs/DVDs to load software onto their computers or had to download huge installation applications (almost). Thanks to high-speed internet, now we can send large volumes of data between local computers and external servers quickly.The tech industry has been steadily moving towards cloud computing, a computing environment in which you are not bound by a local machine or software. SaaS apps are essentially internet-delivered software applications accessible from anywhere, using almost any device. The service provider hosts the organization’s apps and delivers them to the end user through the internet.

Compared to traditional methods of accessing software such as purchasing and loading it onto a device, SaaS (Software as a Service) is a new and modern way of accessing information. It allows making software aka apps available to customers over the internet through 3rd-party service providers. Cloud computing is divided into three main categories i.e. SaaS (Software as a Service), IaaS (Infrastructure as a Service) and PaaS (Platform as a Service).

Some major SaaS providers include Microsoft, Salesforce, Adobe (Creative Cloud), Box, Amazon Web Services and Oracle. Popular SaaS solutions include Microsoft Office 365, Google G Suite, Slack, Dropbox, and Adobe Creative Cloud.

On-Premise vs. SaaS Software

Most traditional software is purchased as a license by paying an upfront cost of the whole package. This means you pay a hefty price once and keep using the software by installing it onto a computer. A typical software license is usually limited to one user or device, whether it is a standalone purchase or bundled with the hardware.

On the other hand, businesses or users can subscribe to SaaS software on a monthly/annual, etc. basis without having to pay large amounts of money as upfront cost aka license fee. Another advantage SaaS has over traditional software distribution methods is that users can end a subscription when they no longer need the services.

This saves them from endless contracts and licensing jargon. Since everything is cloud-based, apps are updated in the cloud, saving valuable businesses resources that otherwise would have been spent on updating individual computers.

Who uses SaaS?

SaaS applications run in the cloud and are essentially leased software hosted and maintained by the creator. Compared to on-premise software, SaaS applications are still fairly limited and mainly concentrated in HRM, CRM, sales, procurement and collaboration, and communication. However, cloud technology is rapidly gaining momentum and transforming IT. With a low cost of entry, many small and medium businesses have started reaping the benefits of cloud-based technology.

SaaS Delivery

SaaS applications are mostly delivered through a web browser or a thin client terminal. The subscribers pay for SaaS services (mostly on a monthly or annual basis), which are priced on different usage parameters such as the number of transactions or the number of users accessing the app.

The users can change app configuration settings and customize it according to their own requirements. However, the service providers usually do not allow customizing app code or core features, which makes locally-installed software a better option for enterprises that want complete control over their data and software.

Some of the most popular SaaS apps include Microsoft Office 365 and Google Apps, while the prominent providers include Oracle, Salesforce, Intuit, SAP and Microsoft. Enterprises can use SaaS for different purposes, including accounting and invoicing, sales tracking, performance monitoring, planning, communications and a lot more.

Why SaaS (Advantages)?

No Hardware and Maintenance

The biggest advantage SaaS software distribution has over traditional software delivery methods is that it saves organizations from having to heavily invest in hardware and install, configure and run apps locally. Other than the cost advantage, organizations also don’t have to worry about maintenance, support and licensing stuff.

The cloud provider delivers all the processing power needed so businesses can stay focused on delivering quality services instead of worrying about the technical stuff. The apps are ready to use as soon as a subscription is confirmed, which translates into quick deployment and rapid prototyping.

Cross-Platform

SaaS solutions can be accessed through a web browser on almost any device, which results in great cross-platform compatibility. This allows users to access information from anywhere even using their mobile devices, which boosts productivity and efficiency.

Flexible Payments and Scalability

Businesses can subscribe to a SaaS offering and pay-as-they-go, while in most cases they can handpick the features and only pay for the required features. Users can easily and quickly add storage or more services without having to invest in hardware or software. SaaS apps are highly scalable, allowing businesses to access more features and services as they grow.

Automatic Updates

Since everything is hosted in the cloud, there are no local updates and the service provider is responsible for automatic deployment of updates. This also saves businesses from the hassle of testing updates before deploying them. Another advantage SaaS has over traditional delivery methods is that an update is rolled out to all customers/clients at once instead of manually updating each machine, which can take a lot of time and resources.

White Labeling and Customization

Enterprises can also choose white label SaaS solutions and customize them according to their own or client’s unique requirements. While not all providers offer white labeling, many do, which allows budding tech companies to add value and deliver better services.

Ability to Switch Between Providers

In theory, it’s easy to switch SaaS providers, which means businesses can switch to a provider that offers better services and meets their requirements. An organization can terminate a SaaS subscription at any time if they are not satisfied with the provider or don’t want the services anymore. However, in the real world, things aren’t as smooth as on paper as SaaS providers can make it difficult to switch to another provider.

App Integration

SaaS applications can be integrated with other platforms and systems using APIs. This allows organizations to integrate their own systems with the SaaS provider using their APIs. There is no shortage of SaaS providers, which encourages businesses to choose offerings that have better integration with other systems and leverage their existing IT investment.

SAAS Challenges and Risks (Disadvantages)

Less Control

Like everything else, SaaS also has its own set of advantages and disadvantages. The most obvious drawback of the newer technology is that businesses have to heavily rely on 3rd-party vendors to deliver services and provide a secure environment. If a business didn’t consider the quality of services and the provider’s reputation, it might end up experiencing service disruptions or security breaches.

That’s why it’s highly recommended to understand the SLA (Service Level Agreement), which enables you to ensure that it’s enforced. In some cases, a provider might move on to a new version of an app, while businesses might not be ready for it or not willing to incur the costs related to upgrading and training. Moving very large files from a new provider can also be an issue for some businesses, but it can be dealt with fairly easily.

Service Disruption and Security Breach

Although SaaS service providers try their best to keep everything in top-notch shape, there might be instances when applications become unavailable. The uptime promises vary from provider to provider, while some offer security patches, new features, and other updates more regularly than others.

This means businesses don’t have complete control over everything and have to rely on providers for continuous uptime. Enterprise data safety and integrity can be compromised if the service provider experiences a security breach, which can translate into huge financial loss.

Latency and Performance Issues

It’s possible that SaaS users are located far from where the data centers are located, causing latency and performance issues. Enterprises that don’t have a broad cloud strategy and acquire SaaS apps without proper consultation might end up wasting money and managing data poorly, which means even more work and IT hours.

SaaS Wrap Up

  • The service provider hosts the application and makes it available to clients through the internet
  • Rapid deployment, easy to set up, low initial cost, ready-made apps
  • Stability because of large IT infrastructure and resources
  • Saves organizations from costly hardware purchases and software maintenance
  • SaaS subscriptions are available on monthly/annual/bi-annual etc. basis
  • The service provider is responsible for updates and troubleshooting
  • SaaS is available for a variety of business apps such as CRM, accounting, sales and more
  • Most SaaS solutions are multitenant architecture based i.e. a single version for all clients
  • Organizations can customize a SaaS offering to a certain extent, but in most cases not completely
  • Rapid prototyping and low time-to-deployment
  • Since the data is stored in the cloud, it remains safe if a disaster strikes a business premises
  • High adoption rates
  • Depending on the pricing model, SaaS offerings might cost more in the long run than an installable software
  • SaaS offers all the flexibility inherent with cloud-based services
  • SaaS solutions can make budgeting easier, help shift costs to opex (ongoing operating expense)
  • SaaS apps are multi-platform compatible and accessible from anywhere through the internet, using almost any device
  • High scalability allows organizations to easily upgrade SaaS offerings as they grow
  • Organizations with limited IT staff can rely on SaaS providers for regular updates and maintenance
  • Updates become available to all clients at once
  • Businesses have little control over the provider’s system
  • Limited control over software parameters, deployment, testing methodology, upgrades, etc.
  • SaaS offerings are still limited than an installable software
  • Integrating a SaaS offering with other systems can prove to be difficult
  • The service provider can access the data (unless a business is using cryptography)
  • Businesses can face compliance issues in certain counties that follow strict regulations e.g. where the data is stored

Conclusion

Lower costs, easy upgrades and better scalability are the top reasons many believe SaaS is the future for nearly all computing. Many small and medium businesses are now looking to ‘rent’ the software instead of heavily investing in hardware and ‘regular’ software licenses.

They also don’t have to worry about upgrades, security patches, and deployment across the board, while greater scalability and flexibility means they can scale as they grow. The future of cloud computing in general and SaaS, in particular, looks pretty bright and we are now well beyond early trial implementations. If done right, businesses can achieve increased and sustainable revenues and meet their requirements as they grow, without worrying about most of the technical stuff and IT investments.

Victor Maia

Victor Maia

CMO as a Service @Hack4Change, Head of Community @SaaSholic and Community Manager for Team GaryVee Brazil. Eventually writes on https://elemento.ag/blog/ and podcasts on https://growthdiaries.me/.

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