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Updated: December 23, 2010 21:21 IST

Exorcising eight SaaS myths

D. Murali
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The first of the eight myths about SaaS (software-as-a-service) is that it is new, unproven, and hyped, writes Sahil Parikh in ‘The SaaS Edge’ (www.tatamcgrawhill.com). Google Apps, a suite of web-based office applications, which started in 2006, has over 3 million businesses and more than 30 million active users, he mentions. “Workday, a SaaS provider of human capital management software, won one of the largest SaaS deals in 2008 to provide its software to 200,000 people at Flextronics, a large electronics company. Salesforce.com, the granddaddy of all SaaS companies, was founded in 1999, and by late 2009 supported more than 2 million subscribers worldwide.”

To those who ask if SaaS could fail, the way ASP failed, the author’s response is that the ASP (Application Service Providers) failure of the late 1990s was because the model was ahead of its time. Back then, bandwidth, servers, and data storage were expensive, and web technology was nascent, he reminisces. “ASPs were not true SaaS providers. They were like hosting companies. They hosted customer applications in data centres, which customers did not want to host in-house.”

For every new customer, there would be a new server provisioned with the application; and as customers grew, this became very capital-intensive and exorbitantly expensive to maintain and ultimately led to the demise of the ASPs, Parikh narrates.

Control delusion

The second myth is ‘loss of control,’ the author lists. Acknowledging the common fear of techies who are used to managing their own servers pretty smoothly, and who therefore wonder how to trust the SaaS vendor to run the system as efficiently as they do in-house, he observes that sometimes losing control is good because you really do not need that delusionary control.

If you are not a technology company, then it really does not make sense to own IT and the overheads that come with it, reasons Parikh. What is important is to focus on your core competency and outsource the rest to a specialist, he suggests. “In mid-2009 Serena Software selected Google Apps Premier Edition for its messaging and collaboration needs, saving more than $750,000 and countless IT hours. One of the main reasons they shifted to a SaaS model was because managing their in-house servers was getting expensive and time-consuming.”

New role for techies

The next myth reads, ‘Threat to the techies.’ Meaning that the IT staff in charge of managing the systems within the office is afraid that his job would become redundant if his company began using web-based software. Earlier, we witnessed a sense of protectionism from the West as jobs were outsourced to India and China, but today, we are witnessing insecurities within companies as they prepare to increase efficiency by harnessing web-based applications, frets the author.

He notes, however, that you might still need the techie to evaluate different SaaS offerings, build relationships, ascertain if they are technologically sound, and have the correct security policies in place. “In some cases, the web-based offerings can be integrated with existing systems in-house. The technology team can work on strategic business objectives that are closely linked to the company’s bottom line instead of setting up servers and worrying about software upgrades.”

To small companies and start-ups that find it expensive to hire a full-time IT professional, SaaS is a boon, feels Parikh. He cites the case of Sudha Iyer – CEO of Metamorph, a staff training and placement company – who chose SaaS over licensed software for accounting needs such as billing, invoicing, cash flow, and profit and loss records. Another example is of Mane USA Inc., a fragrance and flavourings maker in Wayne, NJ, which adopted a SaaS version of Automatic Data Processing Inc.’s payroll and benefits software. “Employees now have self-service capabilities for making benefits changes, freeing up Mane’s human resources staff to do other work.”

Accountant’s analysis

Myth number 4 is that SaaS is expensive. The author presents the typical accountant’s analysis, thus: ‘Cost of packaged software licence $1200; cost of the same software with SaaS $50/ month; SaaS software will become expensive after 2 years.”

Wonders Parikh why the accountant fails to take into account the cost of managing the servers on which the packaged software would run including the cost of bandwidth, security, encryption, personnel to manage the servers/ computer, upgrades, backup/ restore, downtime and so on.

He cautions that within two years, assuming the packaged software does not get updated, it would become outdated and become ‘shelf-ware,’ and that hardware upgrades can be expensive and time-consuming. “With SaaS, this responsibility is shifted to the vendor. Updates and backups to the software are free (you wake up one morning and see new features in your app), you pay a monthly or yearly subscription, and the software remains fresh and up-to-date from month to month.”

Customisation baggage

Next in the list is the myth that SaaS is difficult to customise and integrate with other apps and systems. The author reminds how in the past it was popular to customise applications so much that they have now become bloated and unmanageable even by the original vendor who developed the same.

Instead, why not choose an online application that is closest to what you want to accomplish and start using it, he asks. “Over time, the application will evolve – all good SaaS applications evolve on a month-to-month basis and even provide an application programming interface (API) that you can build on.”

Demanding to know how much customisation you need – for managing your emails, providing a help desk support channel, tracking your project, sending email marketing newsletters, backing up your computers, writing a document, or making a presentation online – Parikh adds, “The answer is none.”

Under the hood

Sixth in the list is the hurdle that SaaS is not feature-rich. To this, the author’s reply is that Google Apps or Gmail look simple in the beginning, but under the hood they are packed with powerful features that one can uncover when starting to use the application. “Google Labs showcases new Google projects ‘that aren’t quite ready for prime time.’ It serves as a testing ground for new services being developed. This is a way for Google to gain feedback on the products before releasing the final versions.”

Informs Parikh, that just like Google Labs, almost all SaaS vendors listen to their customers every month, and add features that are relevant to their audience. “Being web-based, updates can be easily rolled out for customers to enjoy without downloading or installing the software on the local systems. FreshBooks, a popular accounting software, updates the application almost twice a month with new features and enhancements.”

Help is closer than you think

The seventh myth is that SaaS requires a steep learning curve, what with signing up on one’s own, with no one coming to the office for a demo. The author assures that just like Web 2.0 tools, SaaS applications are built on the assumption that the end users will be non-technical people.

SaaS applications are built to give the user a near hassle-free experience since they are judged every month, he states. “If a service I use fails to provide my team and me a positive experience, I will stop using it and move to the next best competitor. It’s as simple as that.”

As self-service tools SaaS apps are crafted with simplicity in mind, and they come built with video tutorials, help FAQs, forums, and a thriving community of other users who also use the application, Parikh cheers.

Help is closer than you think, he foresees. “In the next few years your local computer guy (who is possibly familiar with your needs) will not only fix your computer, upgrade software, and manage your website/ hosting, but will also help you get up and running on various SaaS applications.”

The security concern

The final myth is what is often posed as the first – that SaaS is not secure. Dispelling the notion, the author explains that when you pay a SaaS vendor, you not only pay for using the application, but also for security, backup, and the infrastructure. He cites Springboard Research’s observation that SaaS players give high priority to addressing security and privacy issues as their business model depends on these fundamentals.

Since SaaS security does not differentiate between large and small customers, small companies stand to benefit from the same rigorous security standards that large companies enjoy with the same SaaS vendor, highlights Parikh.

Elaborating that securing involves data privacy, encryption, intrusion detection, password policies, and disaster recovery, he urges businesses to consider if they are prepared to monitor their servers 24/7 and take the responsibility of making sure they have the right intrusion detection tools. “Is your business ready to dabble with setting up firewalls, replacing server parts if something were to go wrong, or provisioning a daily data backup plan? Do you currently have sufficient expertise to take this up or would you rather spend your cash flow on customer acquisition and growing your business?”

Recommended read for those edgily waiting for long at the edge of the SaaS pool.

**

Tailpiece

“He is not on the bahu’s side!”

“How do you know?”

“Heard him talking so much about SaaS!”

**

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