SaaS: Rent Software or Own?


Software as a Service (SaaS) vendors offer common software over the internet for use in your own office. Web-based applications such as Hotmail are a good example. Each person uses their own browser to find the application, write their email and send it or store it with Hotmail. The application and data are both stored on the Hotmail servers. A Data Centre offering SaaS will charge by-the-use or on a subscription-based fee schedule. They offer a variety of configurations from cloud computing to dedicated servers, depending on the needs of the client. The client does nothing more than use the applications and save the data. The vendor supplies storage space, installs updates, pays for licensing, handles the security, makes the data available for individual use or for conferencing, backs up the data and hires the talented people required to do the job.

It isn’t a universal fix for all business situations. There are a number of advantages and disadvantages.

Low predictable cost – An IT department with IT professionals, servers, software and architecture can cost several hundred thousand dollars. A Data Centre can keep the cost down to several thousand dollars a month.

Efficiency – A Data Centre that has been in business for a number of years will have people with the appropriate talent and education to do the job already in place. There’s no learning curve.

Security – The Data Centre has more resources, experience and better connections in the field of security than most companies.

Disaster Recovery – It’s far more likely that a Data Centre will store backups in a location away from the Centre of a disaster than will a local company.

Scalability – When the company needs more computing power or storage room, they can simply buy more at the Data Centre for a cheaper price than buying the hardware themselves. No need to go through the procurement and installation process in-house.

Reliability – Dependable Data Centres are down only four minutes a month.

Competitiveness – The company can focus its resources on gaining a competitive edge rather than fixing the IT department.

Data Sharing – Since just one application is used company wide and the data from the application is stored in one place in one format, sharing throughout the company is easier.

It isn’t Down the Hall – The people who control the servers aren’t inside the building. Executives in the client company can’t walk over to the IT department and ask them a question.

No Flexibility – Since many companies use the same applications, the Data Centre may be unable or unwilling to change it to fit the needs of just one company. Also, any changes will benefit all the companies that use the software and some may be competitors.

If the Only Tool in Your Kit is a Hammer, Every Problem Looks Like a Nail – Each company uses only certain specific applications provided by the Data Centre. The employees of just one company might try to fit their business situation into the software rather than find software better suited to their unique situation.

The Human Factor – It’s hard to get someone to answer a question about important company data when they’re all in Acapulco avoiding creditors.

SaaS can be a real lifesaver for a new startup. The Data Centre can supply basic business capabilities with a low fixed cost immediately, freeing the startup from the necessity of hiring expensive IT experts. It can also cripple them with excessive down time and loss of data due to bankruptcy or mismanagement. Mid-size companies will use SaaS judiciously. As with any other business tool, the cost, advantages, disadvantages and reliability of the Data Centre must be known before the deal is made. Big businesses can use SaaS for basic business procedures and processes because the cost of appropriate operations within the company will be large enough for predictable savings. A large company will have enough resources to use its own in-house IT department to tailor its own software for everything else.

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