I have received several questions from clients and readers lately, mainly around the theme of when Software as a Service (SaaS) applications are cost effective and a good idea for an organization, and when they are not.  If you are wondering what SaaS is, in the simplest form it involves paying a monthly or yearly fee to rent an application from a vendor. Usually the vendor is company that developed the application. Major benefits include faster adoption time, no upfront infrastructure or high software costs, and often times dedicated support personnel.

But just becuase SaaS has many benefits, it is not always the appropriate or best choice. So here are 4 Easy Questions that can (hopefully) help you determine if a SaaS application will work for your company.

1) What kind of application are you considering for SaaS?

There are many SaaS vendors in all kinds of spaces, including retail, sales, pharmaceuticals, health care, office productivity, collaboration, etc. In each market, the maturity of the vendors differs dramatically. Before you can answer the other questions, you should take a good look at various vendors in your market place to determine if there is a good option. If there are only a few SaaS vendors in your space, and you work in a large or mid size company that is risk adverse, regardless of the amazing solutions offered by the latest SaaS vendors, the market may simply not be mature enough for your company to take the risk.

On the other hand, if you work for a small company, the competitive advantage of using a SaaS program may propel you to the next level of growth.

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2) Do you have a robust IT organization available in your company?

Just because the answer is yes, doesn’t mean that SaaS isn’t for you. Overhead costs in most IT departments are often overlooked, and the true total cost of ownership (TCO) is often hidden when an organization considers deploying a new application. On the other hand, Gartner’s research indicates that TCO for SaaS is usually only definitively lower during the first two years.

If you don’t have access to experienced IT folk, and especially if you have only a limited IT resource, then you should consider a SaaS based application, since you will not need to purchase servers, hosting, bandwidth, or spend countless hours installing, maintaining, upgrading, applying security patches to, or otherwise messing around with your servers on Saturday night at 8pm or other unfortunate times.

3) Do you have “flexible” business practices?

This question makes me laugh a bit, but is much more serious then you might imagine. I don’t mean flexible as in morally flexible, but flexible as in governed by any ordinance, law, or statue. For instance, when working with state or federal guidelines, many business practices are not “flexible”. How government business is run may be a matter of law, and will be different state to state, town to town, etc. Therefore, a vanilla application, aka one that comes off the shelf and works for most situations most of the time, will not work in these environments. Many, many, modifications and new features will be required. And when it comes to SaaS, modifications are generally a no-no.

(Quick sidenote: many clients often confuse configuration with modifications. Most SaaS applications can be configured and customized to meet your specific needs, but the actual functionality deployed cannot usually be modified. If they don’t have a feature you need, most times you are out of luck.)

On the other hand, many of the business processes in your company or organization may be more flexible then you imagine. Just because you always file triplicate backup copies of TPS reports every week, doesn’t mean you always have to continue to do so. Choosing to deploy a new application is a great time to evaluate your current business process, and make improvements. Some of these improvements may be enabled by the new SaaS application, and some may just be process changes away from the “way things have always been done before”.  In my experience, business process changes, not necessarily technology changes, enabled by deploying a new application often make the biggest impact on company efficiency.

4) Does your potential SaaS application require integration with other applications?

With the recent push of many organizations to deploy common infrastructure components, such as LDAP, or require that data from one application is transferred immediately or nightly into another application, integration continues to be one of the most important things on client’s wish lists. However, integration is also incredibly expensive, and when many of my clients realize just how much it is going to cost to build a custom interface between two applications, they simply cannot justify the expense. So when you think integration is a set-in-stone requirement, you might be surprised how quickly you change your mind when confronted with a 7 digit price tag. On the other hand,  the benefits of creating custom interfaces within applications can be tremendous, and often times, is worth it.

So if you are considering an application where integration is high on the priority list, does that mean SaaS is automatically off the the table? The answer is no. Many SaaS applications have the ability to interface with other applications, be it other SaaS applications or in-house hosted apps. Interfaces can also be manual batch uploads, or created via web services. Most SaaS applications will not support custom interfaces however, so a middleware layer may be required and lead to increased costs.

Hope that helps you decide is SaaS can work for you or not. Have some specific questions or looking for advice, send me an email.