What is SaaS?

Software as a service (SaaS) is a software distribution model where software is licensed under subscription by service providers hosting applications for client organizations over a private network or the internet. Typically, users will access this software with nothing more than an internet browser or, in some cases, a mobile application. Today you will find that most all of the larger enterprise software companies have pushed hard into the SaaS market highlighting the potential for reduced IT costs by leveraging the cloud along with their SaaS offerings.

Some of you may recall that in the 1990’s new business service offerings were introduced by hosting companies called Application Service Providers (ASP). SaaS is simply an extension of this concept. The difference is that APSs were hosting the software of third-party vendors configured to meet the needs of the client but requiring that proprietary software be installed on the client’s in-house computers. SaaS vendors on the other hand, develop and manage their own web based software designed to support multiple and varied clients employing different business models relying only on a browser and internet connection to operate.

Austin, TX SaaS and ASP Payment Models

Clearly we have seen a difference in payment models between standard software, ASP and SaaS providers. Most Austin based businesses with which I have gained a clear understanding of their history, have become accustomed to the traditional model of purchasing perpetual software licenses, paying on-going support fees and purchasing upgrades. The times they are a-changing! The ASP would oftentimes charge for a fixed period or purchase of a one-time license agreement. SaaS providers typically employ a subscription model where clients pay as they go based on usage either monthly or annually. The initial set-up cost and ongoing maintenance for a SaaS implementation is lower than that of equivalent enterprise software making most SaaS offerings a sound economic alternative. In a SaaS environment; fixes, patches, upgrades and enhancements are ongoing with little or no impact to the client. So why is it so hard for users to make the switch?

In my opinion it is perception.  In the past we were accustomed to purchasing software that came in a box with media (Diskette, CD/DVD, etc.) and a book. Soon the books were eliminated and we were OK with getting the media and understanding that the book was included in there somewhere. We paid for it, we got it and we could use it forever…or until the OS (Operating System) was upgraded, our hardware changed drastically or maybe the year went from 1999 to 2000–Ugh!  The ultimate question in every business owner’s mind is what does it really cost me?  I can assure you that if you were able to add up the original software costs, upgrade costs, installation time, support and maintenance, it would be strikingly high. The fact of the matter is that you didn’t actually get that product for the $199 price stamped on the box. It was more likely $1299 (again, probably a low estimate) when all was said and done for the short life of the product.

Have questions about SaaS for your Austin, TX business? Contact Magnet Solutions Group today (512) 298-2101

The opportunity presented by SaaS vendors operating in a vastly improving cloud cannot be ignored or discounted simply because you will be paying monthly “forever”.  Every month and on an annual basis, you will know exactly what you are spending if you choose the SaaS route. Clients can scale up easily with their growth while maintaining the option to scale back if the needs arises. Some of you will express concern that the monthly subscription fees will increase, and they might over time. However, the cost of operating for most SaaS providers continues to be driven down as their environments become more efficient. And the cloud space is a competitive arena as well.  It has been my experience that over the past several years pricing has remained relatively constant.

My advice; reevaluate your software needs semi-annually and seek out opportunities available in the cloud. You will likely find ways to make your business life easier…and less costly.