SaaS – Diagram

A discussion of SaaS, at the moment, still needs to start with a definition.  What is SaaS? In really simple terms, it is Internet-hosted software.  Most of the major SaaS packages allow users to build in their own custom modifications whilst benefiting from regular updates to the core software.

Why use it? There are lots of reasons but the main ones are:

• short to mid-term, it is cheaper to run because the updates and management of the software is done at the hosting end. You no longer have to install client software on your computer and keep it updated.
• you can access it anywhere where you can get Internet access and with major SaaS offerings, from different devices (eg. PC, Mac, iPad, etc.).

For small to medium businesses particularly, this makes SaaS very attractive and with Internet access delivering reasonable speeds these days, SaaS is a very viable option.

By its very nature, SaaS is ‘global’ because it uses the ‘cloud’ to deliver it. Senior Market Analyst – IT Services for IDC, Raj Mudaliar, said of the Australian market (back in 2011) that it is “…evolving in new ways, most notably with the rapid emergence of cloud-enabled, and cloud-amplifying technologies such as the ever-expanding “species” of new mobile devices, the explosion of mobile apps, growing availability of wireless broadband, and explosion of big data tools. Cloud services comprise many different market segments, some representing activity that is being reclassified as cloud services, and some consisting of new products and services. Eventually, all sectors of the IT market will be affected by cloud computing”¹. Fast forward to the end of 2012 and he said, “Cloud service future ubiquity will mean that they will permeate the sourcing strategies of CIOs and business unit managers alike. IDC expects that the use of externally sourced businesses and IT services from ‘the cloud’ will form the basis of an Outsourcing 3.0 period, and will provide an extensive portfolio of services from which innovative solutions will be constructed from”².

To cut a long story short, cloud-computing is a huge trend and SaaS (which uses the ‘cloud’) is driving it but are there any downsides?  Bigger businesses or more established businesses who have already invested in their software architecture have found that in the longer term, it is difficult to justify the subscription costs. (With SaaS you generally pay an annual subscription to use it.) Telsyte enterprise IT industry analyst Rodney Gedda says, “I’ve spoken to a number of CIOs and the problem with the SaaS delivery model being by subscription is it looks really good in years one, two and three, but it starts to look bad in years four, five and six”. Furthermore, Gedda said, “The big bugbear is integration … Companies are a lot more confident that they can integrate on-premise applications between each other more readily than they can with a SaaS product.”³

Other big factors with using any ‘cloud’ service is the fear of losing control and concern about security. And there is also a fundamental issue if you don’t have any Internet access.

We suspect that the cost issue will disappear as subscription costs reduce. The integration issue will disappear as businesses move more of their applications to the ‘cloud’ and SaaS vendors meet the market with easier and better integration with complimentary SaaS vendor offerings. The control issue is more a mindset and this will also change over time and the security issue simply requires the SaaS vendors to maintain good track records in that area and continually educate the market as to how they manage security – broadly speaking.  In terms of the Internet access issue, there’s not much we can say with that except  that where Internet access becomes mission critical, businesses need to make sure they have multiple ‘pipes’ to the Internet to give them some redundancy. In an SME office situation, this might be as simple as plugging a 3G pre-paid Internet access card into a suitable Internet modem.

So what are some of the SaaS applicatons being used here in Australia by small to medium businesses?  Examples include:

• MYOB LiveAccounts – This is effectively a ‘cut-down version’ of MYOB’s main desktop client software AccountRight and it works solely in the ‘cloud’.   Just recently, MYOB also launched their AccountRight Live which looks to be a hybrid offering where you can choose to run your accounts on your desktop, in the ‘cloud’ or in both places.
• Salesforce.com is possibly the most well-known SaaS providers whose products deal with customer relationship management (CRM). Given that many sales people find themselves ‘on-the-road’, a SaaS solution offers them the ability to use it wherever they are knowing that they are only a click away from the rest of their team.
• Google Apps is where the market is a little blurred as to whether it is a true SaaS but because of our simple definition of SaaS, we are going to keep it here.  In its most basic form, Google Apps allows your business to run its email, calendar, storage and document sharing all from the ‘cloud’. Because it is an ‘app’ based service, its functionality is expandable.

In order to be competitive, businesses must find smarter ways to operate. We believe the ‘cloud’ is fundamental to the way businesses will work in the future as we become a more mobile workforce. No longer do we work a 9:00 to 5:00 time slot and SaaS (which operates in the ‘cloud’) means we can access our business data wherever we are and from whatever device is at hand. 

Acknowledgements:

• ¹. Raj Mudaliar, (2011, September), “Australia Cloud Services 2011–2015 Forecast and Analysis“
• ². Raj Mudaliar, (2012, December), “Australia Cloud Services 2011–2016 Forecast and Analysis“
• ³. Brad Howarth, (2012, November), “Platform services loom over existing Software-as-a-service offerings“, The Australian
• Computer Networks, (n.d.), “The Future of SaaS in Australia“