Switching to SaaS? Consider Cost & Convenience

Kevin Beasley is chief information officer at Vormittag Associates, Inc., an ERP software provider. He oversees technology strategy in conjunction with product development and the internal information technology initiatives.

Kevin Beasley

There is a misconception that switching to SaaS or a cloud-based IT infrastructure is solely a cost-savings measure. The reality is, most companies today are looking to switch to SaaS for its convenience and simplicity – not cost savings alone.  Our clients often tell us that SaaS has eliminated the learning curve associated with the install of an on-premise solution. With no hardware to install and minimal disruptions to the existing infrastructure, the complexity is significantly reduced.

It is important to note the differences in cost between on-premise and SaaS solutions, as the delta may not be as great as most suspect. For example, a June report from Gartner questions the assumption that SaaS saves money over on-premise solutions. The upfront cost of an on-premise solution is higher due to the initial hardware investment. With SaaS, the upfront cost is much lower, but over time can add up because you continually incur a monthly or yearly service fee.  Neither option is necessarily less costly than the other – underscoring why the decision to use SaaS should not be based on cost alone. Customers should look for vendors that have the flexibility to provide solutions in whatever model suits their infrastructure.

Despite the hype, SaaS is not a one-size-fits-all solution. With that in mind, following are key criteria to consider when deciding between an on-premise solution and a SaaS solution.

Does your company require an all-or-nothing SaaS migration, or a hybrid model?

Not every company will require a complete replacement of its on-site infrastructure when switching to a cloud-based model.  In many cases, a hybrid model where a company subscribes to some cloud services and keeps other solutions in-house, may be easier in the near-term. As such, although SaaS can reduce capital expenditures, these costs shift to operating expenses. For example, there can be a communications gap between your in-office and mobile sales force. As such, we’ve found our sales force automation software greatly reduces this operations headache by providing a centralized, Web-based contact management solution.

Are you ready to reorganize?

Moving resources to a SaaS-based delivery model can be beneficial for many reasons – among these; companies no longer need to employ in-house IT staff to manage the servers. Moving to a SaaS model makes the maintenance of the IT infrastructure an outsourced commodity – enabling IT staff to focus on serving their own internal user. For example, we’re seeing manufacturing customers focusing on the business intelligence output of our software to make more-informed supply chain decisions rather than constantly monitoring utilization rates and worrying about the uptime of internal servers.

Is your company’s IT use consistent, or does it fluctuate?

SaaS solutions facilitate shared resource capabilities that can greatly lower costs and energy use. Moreover, because it’s flexible, SaaS can be scaled to support periods of high use and avoid long intervals of underused IT capacity. This is especially pertinent to retail or e-commerce companies, where spikes in usage around certain holidays or sale cycles must be taken into account. By leveraging resource-sharing technology, utilization rates become more efficient. However, for a company with a very consistent, steady consumption of IT resources, this benefit may not be as pronounced.

Will you need to educate or “champion” the move to SaaS?

It’s no secret in our industry that major concerns over SaaS come down to lack of knowledge about its capabilities and loosely-founded security concerns, and myths surrounding cloud adoption continue to crop up. It may sound fluffy, but part of choosing whether to employ an on-premise solution or a cloud-based solution will include educating key decision-makers on the benefits and setting expectations – i.e. reorganization operations, streamlining IT resources, decreasing the environmental footprint, etc. It will also require explaining that there will be a monthly or yearly service fee not expected with an on-premise solution, even though the long-term ROI is more than worth it, through streamlined operations and better utilization of resources.

The demand for SaaS will continue to grow, and companies will have to ask themselves these questions before moving forward. The good news is this also means there will be more education around the differences and needs from an organizational perspective to support either solution, ensuring that companies choose wisely.

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