The following is provided by John Burton, President of AIV member NPI, a technology management company located in South Burlington. For more information, call (800) 639-6091, or go to www.npi.net.
Management Guide to Software as a Service (SaaS)
More great insights from Nick Hinge, Director of Client Technology.
Business owners and Managers often rely on their technical staff to take the lead on complex technology changes. It is important for financial decision makers to understand the costs and strategies associated with the bigger technology changes such as moving to the Cloud.
The Cloud has been growing at a rapid pace for several years now. Due to timing issues, many businesses have yet to implement their first application using this newer technology. Three popular applications that have garnered Cloud market share include Quickbooks, Salesforce and Netsuite. These applications are offered by software manufacturers in their “public” Cloud as opposed to on a local business server. This method of delivering the application is also referred to as “software as a service” or SaaS. The applications are hosted by the software manufacturer and sold through a monthly subscription rather than licensed to use on the local business server or in a private Cloud.
There are three application strategies to consider today:
- Licensing and installing the application on an internal server
- Licensing and installing the application in a private cloud
- Contracting with a software vendor to host it as a SaaS
When NPI consults with clients on Cloud strategies, we first inquire whether or not key software vendors are offering a SaaS option so that option can be considered in the application strategy decision.
Advantages of SaaS
There are a variety of reasons that SaaS is gaining in popularity. Think about what goes into hosting applications at your physical business space. The systems needed include HVAC to ensure proper cooling, Uninterruptable Power Supplies (UPS) for delivery of clean power, server hardware and an equipment rack to house it all. Next comes the cost and time of installation, configuration, testing and ongoing maintenance which includes regular patching and ongoing troubleshooting not to mention the cooling and electrical bills.
With SaaS, all of this is managed by the application vendor and the subscription allows you to pay as you go, adjusting the resources to reflect changes in the business such as a growing or shrinking workforce. Instead of the capital expenses of doing it yourself, SaaS becomes an operating expense.
Disadvantages of SaaS
For all the success of Cloud vendors some will fail and others will not be able to meet the promised level of service. If you have a laundry list of special needs like the ability to customize the screen layouts, SaaS may not offer enough flexibility for your business so ask detailed questions before jumping in.
Once you have identified a SaaS option, be sure to evaluate it thoroughly.
- How long has it been offered in the Cloud? Look for sites that discuss how well it works and the quality of the technical support.
- Has the SaaS version evolved offering new features? QuickBooks is an example of a SaaS application that took some time to mature as a cloud offering. Current versions offer significant improvements over older versions.
- What is the cost and the potential for price increases as you grow and need more seats, more disk space, and faster performance?
- What type of Service Level Agreement (SLA) is offered? A customer friendly SLA is extremely important because this is the contract that empowers you to hold the vendor accountable and–in a worst case scenario–to get your data back.
- The health and security of your data is in this vendor’s hands so review the SLA with your lawyer or, better yet, a lawyer who specializes in Cloud SLAs. This is a critical step in the business decision process–don’t skip it.
Consider whether or not an application requires integration with other software. For example, if you are moving to Salesforce, do you require integration with your email system? Make sure you understand how all of your applications will work together as a whole.
Keep the big picture in mind
The best Cloud migrations fit into the broader context of the long term business objectives. Like a good security policy guiding a company’s thinking on security-related decisions, Cloud computing choices should be guided by an overarching Cloud strategy for the business and technology environment.
Taking advantage of SaaS is an easy decision for startups and rapidly expanding businesses that have identified a new business need that requires a software solution. For established companies, not looking to abandon existing applications, the decision and preparation process is more complex.
Call an advisor if you need help
At NPI Technology Management, we are well versed in local and all flavors of Cloud computing. Our specialty is in managing technology regardless of where that technology lives. Even with an application hosted in the Cloud, there is still management required to ensure it performs well. There will be incompatibilities and things will “break” when the vendor runs an update. We help clients establish solid plans and then we manage these applications through migration and beyond. Let’s start a conversation about your SaaS plans!