Debating SaaS – Some Important Questions

SaaS model has gradually begin to gain traction and we see more examples every day of their adoption worldwide. In some countries the model is more widespread than others, but overall, it is already on the agenda of business executives and IT.

A recent survey conducted by an IT industry analyst, with CIOs worldwide showed that in 2014, 53% will opt for the SaaS model when acquiring new software. The current model, on-premise is 47% of preferences.

Another practical example of the attention is the topic that has generated many questions and doubts I hear when debating about Cloud Computing. I collected some of these issues and I will share with you.

First of all it’s worth remembering that the SaaS model already has at least ten years and is a natural evolution from the old ASP (Application Service Provider). The news is the rear of SaaS technology, based on cloud computing, which promotes technological model multi-tenant, or a single copy of the code shared by many customers, contractors and accessed remotely via self-service portals, in a structured commercial business model pay-for-use or subscription, like a cellular line.

Generally, SaaS product has the following characteristics:

Based on services:

This means that the client software wants only to enjoy its features and wonders of the technical characteristics that are behind, as the hardware platform, database, etc.. The client wants to consume software as a service.

An analogy: he wants the laundry and not the washing machine.

Scalable:

SaaS provider has to have the computer capacity to allow growth in the number of users without affecting the performance of their current base. In practice, this is a significant issue to be considered when evaluating SaaS providers.

Economy of scale:

The SaaS model means sharing of excellence and service providers have to implement a multi-tenant architecture to achieve an adequate economy of scale. The more users can share resources, greater economies of scale obtained, and faster depreciation of investments will be the provider. With that, he can offer beneficial ownership costs compared to the traditional on-premise.

Commercial model pay-for-use or by subscription:

The customer of a SaaS product is not acquiring a software asset, to be installed on your servers, but hiring a signature to use for a specified period of time, paying for what they consume, such as an electric bill. And as a cell, if the service does not suit you, it can at least theoretically, replace it with another.

One question that I always hear is, if this model is pay-for-use is real or a sales pitch … There are business models where you pay monthly so consuming, and there are also models where you pay in the first year of subscription to use the software in advance. One example, in a contract for three years, you pay 1 / 3 in the first year upon signing the contract and the remaining 2 / 3 within two years. This model resembles the traditional on-premise where you pay in advance for the license to use the software and subsequent servicing. One difference is that there is software maintenance by the user. All this work is in the rear of the provider.

This model has been encouraged by the software industry because it facilitates the transition of software companies that make money with the current model of licensing for SaaS.

A question I hear and caught my attention is whether SaaS caters to corporate systems or works only at the periphery, i.e. in small departmental systems. I have no accurate data, but a study shows that, on average customers have somewhere around 50 users.

And this issue is linked to another interesting question. If business executives must recruit SaaS bypassing the IT field, would this create a bomb? Yes, because sooner or later these applications have to integrate with those who run the company’s servers or even with other clouds and integration that is still a challenge for the cloud host. At first, everything is wonderful, but as more and more SaaS applications are spreading uncontrollably, bypassing the IT field, the potential problem will be great. I would say that, IT departments should take control of the process and define the rules for selecting and hiring SaaS, ensuring the integration of applications.

Another question was “The SaaS model will end up with on-premise model?“.

In my personal opinion, at least in the next ten years we will see the two coexisting models. There is much legacy software that will take years to migrate to the cloud. But the SaaS model will be continuously spreading, and sometime in the future might not call it over SaaS, it will be the dominant model. But still there is room for on-premise.