April 25, 2011 11:15 AM

Here’s a challenge: Go to any enterprise software vendor’s Web site and try not to find a reference to the terms “Cloud” or “Software as a Service” (SaaS). These terms have become so pervasive that they are almost indistinguishable from the software itself.

A surprising number of applications are marketed and sold as Software as a Service, but in reality, they are hosted or “on-demand” versions of an application that may have been built many years ago. How can you decipher whether the product is truly SaaS? And, more importantly, why should you care?

Here are the TPI Top 5 ways to determine if you are buying authentic Software as a Service:

1.  New features are included and are delivered often: SaaS is designed and built on a “multi-tenant” architecture, which means you share the application software and hardware with other customers. Given that the vendor only has one code base to manage, they can enhance that code base often; think weeks and months rather than quarters and years. Why you should care: The vendor can focus its efforts on improving the product as opposed to planning and executing numerous custom implementations. This means you benefit from enhanced features and functionality delivered faster and more often. 

2.  Access it from anywhere, including your smartphone or tablet: Most SaaS applications were built recently; therefore, they were architected for the Web with mobility in mind. Why you should care: given the exponential growth in the mobile computing industry and rising expectations from a global, virtual workforce, SaaS applications are ready to take advantage of this explosive mega-trend.

3.  Pay for what you use: SaaS pricing is typically focused on unit-based pricing, e.g., users, bandwidth and storage — not software, hardware or maintenance costs. Why you should care: while a less capital-intensive approach to software is inviting to many CIOs and CFOs, it’s important to plan for the unexpected. If you acquire a company or triple your storage requirements, your price may increase substantially. On the other hand, if you divest or the business moves in a different direction, you may have the ability to rapidly scale down your costs.

4.  Configure, don’t customize: Generally speaking, when you change a SaaS application to meet your needs, you’ll do so through vendor-provided customization screens accessed via a Web browser rather than via code. This is because the underlying system is shared by all customers, so it cannot be changed unless the vendor changes it. Why you should care: Given the standardized nature of SaaS applications, it’s important to make sure your requirements can be met via available configuration options rather than deep customization. Otherwise, you may be saddled with an application that does not meet your specific needs.

5.  The price is flexible, but the service level agreements are not: Given that all customers share the same infrastructure, and that the vendor’s business is built on economies of scale, SaaS suppliers are usually hesitant to negotiate on “customizations,” which can include custom service levels. Why you should care: If highly specific and transparent service levels are important to you, you may have difficulty getting what you need from a SaaS vendor. However, remember that the vendor’s unit cost goes down with each new customer they add, so adding more users may allow you to negotiate a lower price.

TPI CIO Services experts can help you separate fact from fiction through objective advice, knowledge of your industry and experience with arrangements from simple to complex. Need help evaluating the myriad of IT options and their potential benefits or pitfalls?

Originally posted by Stanton Jones, Chief Information Officer, TPI; and Bobby Neil, Director, TPI  on Consider the Source

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TPI is the leader in guiding organizations through effective, lasting transformation of their business support operations. Around the globe we have helped hundreds of clients reduce operating risks, streamline complex operations, improve the cost of support functions, achieve sustainable improvements and make competitive gains. Decisions to change and successful transition of existing operations to new service delivery models is hard — and replete with risks. While the decisions are never formulaic, the hard-earned lessons of hundreds of prior evaluations are invaluable.

Posted by Sue Ansell at April 25, 2011 11:15 AM

Categories: Outsourcing Software as a Service (SaaS)

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