How is "Software as a Service" (SaaS) changing the way people approach business software decisions?

By Steve Hammet

Account Executive

BroadPoint Technologies

The technology world has been abuzz over the last year about the impact of SaaS on businesses. Salesforce.com, ADP, NetSuite and others tout the positive aspects of SaaS, and there are good business reasons for going with a SaaS model. I recommend and sell business systems, let me share what I have learned over the last two years in discussing business software and different licensing approaches with clients.

 

For pilot projects, prototyping and small user groups, SaaS can be a huge benefit. Especially when the business processes are not established (a sales force just beginning to develop standards, collective workflow and processes) the group/company can just use the "out of the box" functionality with little or no configuration. If a company has very vanilla processes (a snow cone stand comes to mind), then SaaS can assist with making the company more efficient with little upfront money and get up and running quickly. Make the business rules follow the software functionality.

 

However, most companies today have complex relationships with clients that require their software to mimic their business. For these companies, this is a differentiation that makes their company unique. Of course, these companies can "configure and/or customize" SaaS software, but I have found the implementation costs are as high or higher than traditional purchased software. Once a company needs to include these implementation costs, the landscape changes from "we'll just use out of the box" to "we need the system to work the way we work". At this point, the software purchase vs. lease discussion gets down to an ROI evaluation. I have found around 20 – 28 months to be the equalization ROI factor in lease vs. purchase; most owners and managers find that purchasing is more economical "overall" in the end.