Software as a Service, Demystified

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The content below is reposted with permission of Trenegy, Inc, a management consulting firm in Houston, TX.


Sunday evenings tend to creep up on those blissfully enjoying the weekend. All of a sudden, five o’clock rolls around and it’s time to think of dinner plans. Italian sounds good on this chilly winter evening. And now for all the yummy Italian options: drive up the street to Gaetano’s for a nice dinner out, call Tony P’s for take-out, or just heat up some store-bought sauce in a jar and throw it on top of some day-old pasta? Gaetano’s it is for a fancy, full-service dining experience.

The decision to dine at home or at a full-service restaurant is similar to the decisions companies make when evaluating whether they buy Software as a service (SaaS) or decide to manage the IT software and hardware inside the company. When dining at a restaurant, people are given food (software) on the restaurant’s table, with utensils and napkins (hardware). Servers take care of orders and bring everything to the table (service to ensure the software is available when needed). When dining at home, people must make their own food (build software in-house), use their own utensils and table (buy the hardware and install it), and clean up afterward (support the software and hardware inside the company). often, avoiding cleanup is the reason for choosing to dine out in the first place.

SaaS is a concept gaining serious traction throughout the business world. The idea is that technology companies can provide computing resources over the cloud and support a company’s IT environment as a service. The cloud, not to be confused with the white, nebulous blobs in the sky, is merely a catchy phrase to describe the process of delivering computing power over the internet. The “as a Service” component means a service is provided along with the software. The cloud would equate to going to Tony P’s for takeout—no service, just food. The cloud becomes SaaS when there is a service provided—dining out.

By handling all of the software, hardware, and support as a service, SaaS providers can package services for a simple fee. This includes procuring and maintaining massive servers, facilitating software updates, implementing security protocols, and troubleshooting issues. The traditional on-premise IT model requires a company to handle all of the services mentioned above inside the company. With the SaaS model, all a company needs is an internet connection and a browser to access resources otherwise requiring serious technical know-how. The SaaS model has helped companies take a large part of the IT burden off of the company’s shoulders. Years ago, the IT department would place a capital request for a multi-million dollar data center to handle growth. Today, this level of capital spending is no longer necessary. 

Let’s Get SaaS-y

SaaS technology allows end-users to access entire software applications over the internet with a smaller IT footprint. This reduces IT overhead, making SaaS solutions an attractive option for companies who have gone with the traditional (and expensive) on-premise model of software delivery in the past.

Before SaaS became one of the trendy, overused business buzzwords, Application Service Providers (ASPs) had a similar vision during the dotcom boom of the late 90s. Similar to SaaS solutions, the ASP companies handled all  IT needs, allowing customers to access the software applications through an internet browser. The ASP companies were slightly ahead of their time. Technology had not yet reached the level needed to make this concept effective and the ASPs were not as successful as hoped. As years went by and technological advancements were made, the ASP model was revisited, tweaked, and voila! SaaS was born.

The growing success of SaaS companies can be attributed to their incorporation of the cloud and the use of multi-tenant architecture. Salesforce, by far the most successful SaaS company to date, provides an excellent analogy for the multi-tenant concept. Think of multi-tenancy as renting an office in a high-rise building. You have your own space within the building where you can keep all of your information private, but day-to-day operations like repairs, maintenance, and security are handled by the building owner and included in the rent. The amenities are shared by everyone, reducing the costs at the individual level. This is more or less how SaaS solutions are able to operate and keep costs reasonable. Without getting too technical, this setup allows for greater scalability, faster performance, and simpler maintenance by using the same base code and database platform for all users as opposed to tailoring the software to the needs of each individual customer.

On-premise vs. SaaS

SaaS has strengths and weaknesses. SaaS is more economical and quicker to implement while on-premise solutions provide a company with more flexibility.

Massive enterprise software packages that have been customized to meet the unique needs of a large global organization may not be candidates for a SaaS solution. SaaS solutions shine when used to handle specific, individual business functions. This approach makes SaaS solutions particularly attractive for small and medium-sized businesses that don’t want to hire a large IT staff. A few of the most popular SaaS software solutions include:

  • Salesforce: Salesforce is the largest SaaS company in the world. Their customer relationship management (CRM) software allows businesses to manage everything related to sales and marketing. Their product is also a SaaS development platform.
  • Workday: This human capital and financial management solution can be used for a myriad of HR and administrative processes.
  • Dropbox: This cloud-based file sharing software allows users to update folders and documents in real time from multiple locations.
  • Anaplan: This planning and analytic platform is used for finance, sales, operations, and HR planning.

Companies all over the world, large and small, are utilizing SaaS solutions to help enable various parts of their business. A combination of both on-premise and cloud-based solutions is becoming increasingly popular, as the SaaS solution can often be integrated or bolted on to existing systems.

The Last Bite

Will SaaS be the magical end-all-be-all solution to all IT woes? Probably not. If a company’s on-premise software solutions are becoming a real pain, then making a company a little SaaS-ier can definitely help. Companies from all industries are adopting SaaS as a way to improve the bottom line.

This article has been adapted from a chapter from Trenegy’s book, Jar(gone).

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