SaaS vs Premised-Based Solutions - A Shootout

The big debate - SaaS vs premise-based solutions. As the wave of SaaS increases with the recent announcement in Information Week of the largest SaaS order ever of 200,000 seats of Workday Human Capital Management Solution and in the wake of the stellar performances of such pioneers as Salesforce.com and Webex and upcoming applications like Adaptive Planning for business planning it seems SaaS is not only here to stay but it is making inroads on the likes of the giants of software like Oracle.

From a sales perspective, I have lived the dream having been the European end of PlaceWare (now Microsoft LiveMeeting). I saw at first hand the benefits of SaaS and how to sell against traditional premise-based solutions. More recently, a very prestigious headhunting firm claimed to me that SaaS salespeople are lesser mortals than premise-based ones as they command the massive, high ticket sales. Firstly, he had never sold either so it was a speculative comment and secondly I think he's wrong. The reason why SaaS is doing so well is that the salespeople are having to sell very differently and based on commercial values such as bottom line impact or long term, sustainable impact to the business rather than the technological, FUD-led selling of traditional software.

Here's a quick insight into the PRO's and CONs of SaaS - it isn't exhaustive:

PROs

* Cost of Trialing

It is easy and cheap to trial SaaS based solutions. You don't need to wait to have access to expensive quarantined networks, you can just get a few licences, choose some users and you can be up and running in a few hours at most.

* Cost of Deployment

Once trialed, the cost of deployment is relatively low for SaaS. No extra infrastructure is required, no mass software downloads from the IT department, no Helpdesk guys going around each desktop to make changes - SaaS is downloaded at login. There may be some firewall issues to solve and possibly some browser compliance annoyances but in the main, thousands of users can be switched on to the new application overnight.

* Cost of Maintenance & Upgrades

SaaS is served from the application source and delivered refreshed each time you login. This means routine bug fixes and even major upgrades can be made available to all users, simultaneously and as fast as they are made available. It means new features can be delivered faster and easier. For the application vendor, it means that, in general, most users will be on the same version and so legacy support is kept to a minimum. This helps keep costs down.

* Ubiquitous Availability

In the modern,geographically disparate world of global businesses, the idea that everyone will have the same image on their computer at the same time is increasingly unlikely and certainly much harder to maintain. SaaS means that as long as you can log into the web, your application is served to you refreshed at each login. It means you have access to the latest information while on the go and not have to wait for long downloads of new data if you are working remote.

CONs

* Ubiquitous Access

This means just that - you have to have the ability to log onto the web prior to having access to the application. While mobile computing is pretty much a reality it is not entirely ubiquitous as yet.

* Stability

One of the age old issues with SaaS is not just the stability of the application itself but the constant availability of internet access. Bandwidth fluctuations or even lack of availability of connectivity can have a direct impact on performance - still.

* Security

SaaS is hosted outside Corporate firewalls at highly secure and many times redundant hosting centres with the highest levels of security both physically and IT wise. However, this does not get over the fact that your sensitive Company date is stored on servers beyond your sphere of security and control. It is an act of trust.

* Single Points of Failure

We can argue that such points of failure are potentially ubiquitous in business today, such as a router getting into an illogical loop and needing to be reset. However, that router may reside within your network, on your premises and within your direct sphere of control. SaaS may have the same issues, but then it comes down to the performance of the SaaS provider and possibly other third parties to rectify problems and most certainly you are less in control. Further, such a single point of failure may affect multiple customers simultaneously.

* Integration and Compliance

SaaS brings huge benefits of being able to react quicker to market changes and build in new features and integrate with more applications faster. However, there may, at times, be drawbacks. Such new features may require updates to the operating system, a new release of something like messaging applications, a certain level of Office Software. Such things can, in the extreme, render the benefits not applicable or worse, even cause conflicts.

There are so many variables that it is difficult for SaaS Vendors to accommodate all, but therein lies a certain rub. In the race to overwhelm premise-based solutions, the real world can be awfully complex.

The Case on ROI

This is where the SaaS salesperson comes into their own. The cost of SaaS is an annual licence fee per user or concurrent user at best. It means that upfront costs may be cheaper than the equivalent premise-based solution but that fee is an annuity and repeats each year.

BUT, within that annual fee is all the maintenance and costs of upgrades. Premise-based solutions will have maintenance costs at typically around 20% of the seat cost per annum plus the cost of upgrades. THEN, comes the cost of infrastructure and deployment and this is where SaaS starts to move ahead. Typically, the speed and ease of deployment and lack of impact on the infrastructure will make SaaS easier on the bottom line.

One other aspect to consider - the cost of application support. Typically, the cost of support and training of users will not only be built in but actually the responsibility of the SaaS Vendor. But premise-based solutions will also have Helpdesk support and possibly even people assigned to application support; an overhead often missed off in calculations.

Each application fares differently, but the SaaS ROI and impact on the bottom line is developing a very strong case over premise-based solutions. What has happened at companies like Workday and salesforce.com is that chasm has long since been crossed and the impetus is there.

Ride the wave! I would love to hear views and actual experiences - let's challenge these views on SaaS v premise-based and ROIs from real users. Please post your comments.