Try Before You Buy – A Winning Strategy
SaaS and cloud-computing in general are the hot topic in technology now – and why not? They promise to lower costs and improve productivity during one of the worst downturns in memory. But, along with the promises to buyers, has come some products led primarily by “gold rush fever” and little else. What is different this time around? Most SaaS and cloud-computing products have a ‘try-before-you-buy” strategy or at least price points that allow individual business units, SMBs, and proof of concept tests with low to no implementation costs and no capital expenditure (CAPEX). It is a critical difference in this economy.
In his article “‘Cloud-Rush’ Attracts Shady Characters,” Jeff Kaplin explores a few of the scandals and problems that have cropped up with SaaS and cloud-based services. The problems he and others have discussed recently are certainly issues buyers have to consider strongly before they bring in an Internet-based service. Companies using SaaS applications have to consider the security and reliability of the offering, the cost versus benefit, data portability, and the long term viability of the company behind the offering. But – let’s not get too carried away. How different is that from licensed, on-premise software?
SaaS:
- Operating expense for the units used but little to no infrastructure costs internally.
- Training and realignment of internal processes (potentially).
- Initial implementation can be small and scales effectively – with a relatively flat price structure.
- Security is a risk but is part of contractual agreement with vendor.
- Data portability is a risk but should be part of contractual agreement and offsite data backup should be part of the contract.
- Reliability of the provider and the network connection between the buyer and vendor are a risk.
- If a vendor fails or you decide to leave, can you port your data to another (doubtful)?
- Will the vendor continue to innovate or allow the product to languish and collect income without significant updates and growth?
- Can you customize or integrate to some degree to achieve higher productivity and improve processes?
Licensed:
- Up front, capital expenditure for the license, servers, underlying services (OS, Database, etc). License may be by seat, but is often in broad increments that make low count initial deployments impractical.
- On-going costs for internal IT resources, infrastructure and maintenance as long as software is deployed.
- Training and realignment of internal processes.
- Security and reliability is a risk, but is internal. While this may sound like it is “more under control” because of budget priorities, in practice IT maintenance budgets tend to be cost cutting targets. Internal security risks may actually be higher than in a vendor situation.
- Companies with many offices or remote workers will have to come through the firewall to access systems.
- If vendor fails you may be left with a white elephant that is no longer being updated, has no support guarantees, and continues to impact IT costs and resources. Data may be extractable, but it may not be useful in a replacement application and extraction and transformation can be costly.
- If another product enters the market that is a better match, capitol expenditures and on-going maintenance costs may limit return on investment for new solution.
- Integration and customization may be possible, but at a cost – which can be considerable.
- A premise-based solution may not be practical for companies with many remote workers and the need to collaborate with customers and/or suppliers.
So for all the worriers who say, “What if my SaaS vendor fails – what will happen to my business? – I say ask yourself the same question when you sink a large sum into a premise-based solution. What will happen to the license expense, server costs, training, and on-going maintenance costs if the software doesn’t work out for you? For the ones who say, “What about their security? What is my guarantee they are looking after things properly? Will they be online when I need them? – I would ask the same questions internally. When the budget crunch hits, will the server maintenance updates be delayed? Will there be a security audit this year? Can we avoid losing one more IT person in the downturn?
And then, ask yourself one more set of questions: Can I try the product with a relatively low expenditure on a limited number of users in my organization? Can I drop the experiment if it doesn’t work well without significant cost? For most SaaS and cloud-computing options, the answer is yes. In fact, many offer a trial evaluation period up front for no cost. For the vendors, it should be a relatively easy thing to include if their platform is truly scalable. For buyers, it is a significant advantage.
In the end, every question that is asked of SaaS and cloud-computing vendors can and should be turned on its head. Ask the same question in the premise-based context and see what the results are. The results will be different for existing licenses versus new, for enterprise versus SMBs, but significant advantages remain for a well-planned SaaS application. This is borne out in recent studies by the Cutter Consortium, “SaaS User Satisfaction Skyrockets to a Whopping 97%” and the Gartner Group – both of which show increasing adoption of and satisfaction with SaaS solutions.
But just like everything else, it remains a buyer-beware situation no matter what you decide. Whether in your back room or the cloud, there are costs and risks you have to consider. And for SaaS vendors offering competitive services, increasingly the choice is going to them.
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