6 Things to Consider when Choosing Software as a Service

The Good, the Bad and the Ugly about SaaS

Nowadays, it is more frequent to hear terms like “SaaS” (Software as a Service) or “Cloud

Solution”. These services are transforming information technology today. SaaS is an alternative to

the standard software installation on customer premises. It is now possible to have a data

warehouse in the cloud that you can access with business intelligence software running as a service,

and connect to a cloud-based ERP (Enterprise Resource Planning) system such as Microsoft

Dynamics NAV or any other industry-specific software solution, such as Soft4RealEstate –

software solution for commercial property management companies.

Although the term SaaS is not strictly equivalent to the term “Cloud Solution” since an on-premises

software license can also be hosted in the cloud, in this article we use both terms.

In small and medium-sized companies, SaaS has shifted the approach to IT departments and

created a considerable dilemma. “To cloud or not to cloud?” – that is the question that arises for

every manager when it comes to choosing software. Particularly in the case of small and medium-

sized businesses (SMBs), there are many topics like pricing, functionality, support packages,

simplicity, etc., to consider. This leads to one of the most common dilemmas when choosing

software, whether to choose an on-premises or SaaS solution. Which is better? Which is faster to

deploy? What about pricing? Is our business ready for cloud? And many more... We are all familiar

with on-premises software as this used to be a standard software deployment model for decades;

still, very few of us really know how business software works in the cloud.

There are several issues to consider when comparing SaaS and on-premises software models

before deciding whether to choose one or the other option.

The Costs

The Good: SaaS is a Pay As You Go model (pay for what you use), no additional investments for

IT resources or system maintenance, no significant upfront licensing fees, no in-house IT staff

needed.

The Bad: It may be not beneficial as a long-term investment, especially for larger companies with

IT infrastructure and staff already in place.

The Ugly: The need to remember to pay every month unless you are on a yearly plan; the need to

learn to use the system using only manuals or visual training information, without direct human

contact, otherwise costs increase. Learning more complex software systems by yourself might get

complicated.

Costs are probably the most important factor when choosing software. SaaS and on-premises

solutions use different pricing models. The SaaS solution is based on a “subscription” model,

where clients pay for what they use; it is like rent that should be paid every month, in order to be

able to continue to use the services. There is no need to buy software and hardware in order to start

using a new application. In addition, licensing and upgrading costs are kept to a minimum. As a

result, total cost of ownership is reduced and is lower than for an on-premises solution. It also

saves the administration money and time, since the client receives everything ready to use and the

system is upgraded on a constant basis. The company saves on licensing costs, avoids recruiting

IT staff, and can focus fully on core tasks.

When considering on-premises solutions, some up-front costs are required to purchase the software

system. The client has to pay for the infrastructure, that is for hardware, software, deployment and

maintenance; briefly – everything needed in order to use the solution efficiently. One also needs

to take into account that software versions change – a new software version may not work on the

old infrastructure, which will therefore need to be upgraded constantly. In addition, IT staff are

required in order to maintain and develop the systems. However, seen in a long-term perspective,

an on-premises model could be more beneficial, especially if you consider operational rather than

capital expenses: the investment is up-front, and after that the company has to pay only yearly

maintenance and support fees, which can be easily planned. An on-premises model is usually too

expensive for start-ups or small companies if they are not financed by any funds; a subscription

model could get more expensive over time, as the business grows.

Set-up Time and Risk

The Good: SaaS dramatically saves deployment time; usually there is a trial version, therefore the

risk of choosing the wrong system decreases; even if the system appears not to fit the business

needs, it is possible to escape with minimum losses.

The Bad: It is not possible to negotiate specific features that you need; even if the negotiation is

successful, it will be a long time before the requested features are developed.

The Ugly: in most cases there is only one provider of a particular cloud software solution. If they

go out of business, you need to look for a new system, and there is a risk of losing your data.

In the SaaS model, the application is already set up and ready to use; only a new customer account

needs to be created. For more sophisticated cloud solutions, some additional set-up time might be

needed, especially in situations where Single-Tenant cloud architecture is used (single-tenancy

SaaS architecture is where each customer uses a separate instance of a software application and

supporting infrastructure). Cloud-based solutions can be up and running in days or even hours.

With a cloud-based application, the client needs only to open a browser, log in, customize the

application if necessary, and start using it. Even more importantly, it reduces the risk of failing

when choosing the right solution for the company. Cloud solutions usually offer a free Trial

Option, and at that point clients can ensure that the solution fits their needs and applies to their

business model. In addition, by using SaaS, companies manage their business risk - they can add

or remove system users on the go. Typically, the customer cannot return purchased on-premises

licenses.

On-premises software solution implementation depends on the size and scope of the project, but

usually it takes months to go live. In addition, the companies take all financial risk upon themselves

if the system appears not to fit their business needs completely, or if something goes wrong in the

business processes. It follows that, on the one hand, a software demo will never replace a free trial

where you can test the software yourself; on the other hand, a specific customer’s needs cannot be

reflected in any standard system demo. Customers should ask for specific demo scenarios

reflecting their critical business processes to be shown in the system; in addition, referencing the

expertise of customers and suppliers in the field you work in always helps.

Customization & Integration

The Good: There is a choice among different software packages and modules, and you pay only

for the features that you need and use at the current stage of your business.

The Bad: The low level of customization; a standard solution cannot always fit the individual

needs of each company as the processes and the way companies work usually differ.

The Ugly: The need to evaluate workloads carefully, otherwise either the costs for system

development increase or development is not possible at all; you may not find a software solution

that fits all your company needs.

Cloud-based systems are prepared as a standard solution and generally the software supplier is not

interested in making changes, or you may have to wait for months for them to be implemented in

the standard system. A customer can choose only from different packages, which offer different

features. If the customer is using some 3rd party systems – CRM, payroll and similar, integration

with such systems could be an issue. On the other hand, there are many cloud systems that fit most

of a main company’s requirements; therefore there is no need to spend extra money for features

that may never be used.

Contrary to cloud-based systems, on-premises software solution providers can offer a high-degree

of customization or extensive custom programming services for companies that need in-depth

customization and integration capabilities. On-premises solutions are a good choice for larger

companies that constantly need some specific development and adjustments.

Security and Control

The Good: Additional security controls; in most cases, databanks have a much more secure and

well-protected environment than might be found in your office.

The Bad: There is no direct control over the level of security of the databases as this depends on

the cloud provider.

The Ugly: As the infrastructure is shared with others, the level of system performance can be

inconsistent; in some countries or for some industries, e.g. the financial sector, cloud and SaaS

solutions are restricted.

Security is one of the main issues companies must face when considering cloud-based solutions.

Nobody wants to share private data and company details with others. Before deciding to choose a

cloud solution, a company should ensure that the provider of the cloud software system can

guarantee no data loss or data leakage. Seeing valuable data disappear or even become visible for

third parties, and especially for the company’s competitors, is the biggest threat for all concerned.

Cloud solutions cannot offer full control over data and processes. In addition, companies cannot

be sure of who has access to their data in the Cloud. Usually, cloud-based systems have additional

security controls that enable secure authentication, provide advanced logging of user activity, and

allow administrators to control who has access to highly sensitive documents. Multiple firewall

layers ensure the highest levels of protection against intrusion and security vulnerabilities.

Using an on-premises solution, a company has direct control over its database, details and

processes, rather than giving power and access rights to a third-party vendor. Only the company’s

specialists can access data storages and servers, and in this way data is secured. Of course, nobody

can be safe from hackers, but it would be a difficult task for them to hack data on an internal server.

The Infrastructure

The Good: No infrastructure is needed in-house; there is no need for internal IT resources.

The Bad: An acceptable Internet speed is necessary

The Ugly: There are countries with no or very poor connection to the Internet.

Connection to the Internet is the only thing that cloud software systems require. No internal IT

resources are required, and therefore there is no need to invest or support any additional IT

infrastructure. The cloud software provider takes care of everything – hardware, software, servers,

and the entire infrastructure.

For on-premises solution installment, a company needs to take care of traditional IT components,

such as a server, hardware and software, data storage, disaster recovery, remote access, data

backups and network connectivity.

Web Access

The Good: Data can be accessed anywhere and anytime; SaaS allows you to expand global

presence quickly.

The Bad: Acceptable Internet access is necessary.

The Ugly: There are countries with no or very poor Internet connection.

The latest innovations in cloud computing allow cloud applications to be even more mobile, similar

to Facebook or Instagram. All that consumers need to keep up with information at any time, using

any device, from any place in the world, is access to the Internet. Cloud computing allows

consumers to manage, store and process relevant data via the web, rather than on a personal

computer from the local server. Many people carry portable devices when not at their desk, and a

cloud solution easily allows them to access their documents and data in cloud storage via the

Internet.

In this regard, cloud-based systems have significant advantages compared with on-premises

solutions. On the other hand, more sophisticated systems such as Microsoft Dynamics NAV have

both – Windows and Web Client. Windows client provides richer system functionality while Web

Client allows the ERP system to be used on portable devices.

Today, technology gives organizations the possibility to choose. Companies choose the best model

to grow with. The choice depends on the opportunities a company sees in the market, its internal

expenditure model, growth strategy, IT policies etc. Some innovative and fast-growing companies

are not afraid to benefit from new opportunities and choose SaaS and cloud options; others enjoy

older reliable on-premises solutions. Still others use a hybrid model by purchasing the software

licenses and hosting them in the cloud, thus rejecting internal IT departments and all the headaches

related to infrastructure.

The choice also greatly depends on whether your company chooses to deploy a capital expense

(CAPEX) or operating expense (OPEX) approach.

Before deciding which model is better for your company, consider all 6 components described

earlier in this article: costs, risks, deployment time, security, web access, also customization and

future development. It is always good to find a vendor who offers the full set of options: cloud

option, on-premises software solution or a combination of both.

If you are a commercial property manager looking for the best business management software,

you might want to consider Soft4RealEstate – a software system for commercial property

management companies. You can use software as a service, install the solution on your premises,

use Web Client on your mobile or tablet, or enjoy the richer capabilities of Windows Client. A

Free Trial for 21 days is available. There are no set-up costs for a limited time!

Also, check other Soft4 software solutions for asset finance/leasing companies (Soft4Leasing),

microfinance institutions (Soft4Microfinance) or distribution companies (Soft4Inventory)!