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SaaS ... the heartbeat of future businesses

01 Aug 2006

Last month we compared Software-as-a-Service (SaaS) to the monolithic ASP model.  This month we will review SaaS from a perspective of adoption, potential benefits and the alignment between business and IT.

Business in New Zealand is beginning to embrace SaaS and it’s intriguing to observe the method of adoption.

Synergy is running its business on leading professional services SaaS platforms, and, which seamlessly integrate together.  Contrastingly, a business unit within Fairfax has adopted a SaaS solution independent of IT, although the IT department has been supportive of the process.

As Liz Herbert from Forrester research group notes, “SaaS empowers business units by enabling them to buy, deploy and run software without IT involvement.  But many business-led SaaS deployments require IT resources in phase two of the rollout when users need to integrate with other systems or do advanced customisations.  In fact users now have a software option that allows them to control the buying cycle in contrast to pre-SaaS application purchases that required IT involvement to short list, demo and approve solutions.”

In a 2005 survey asked respondents how they expected to be paying for software in 2015:  almost 50 per cent projected they would be requiring an on-demand service, 40 per cent didn’t know and less than 10 percent believed there would be no change.

In recent conversations with senior executives it has become clear to me that the business model propagated by SaaS delivery is generating keen interest and excitement through the universal pressure to reduce cost and increase profit.  The benefits that are being openly considered are:

•   Low/minimal capital investment

•   ROI – the model is very cost effective

•   Reduced time to market – the sooner an application can be delivered the sooner business starts to derive value

•   Minimise the demands on scarce and expensive IT resource (no upgrades, no product configuration and deployment, no server infrastructure or maintenance)

•   Best of breed – the right business process as you need it

•   Simplified integration

It is important to be mindful of the following aspects when considering SaaS: what guaranteed uptime levels do you require?  How much control do you require over application availability? What integration connectors are available? What levels of data security and privacy does your organisation require (or is obliged to legally provide)?  What is the cost of retrieving the full data?

The SaaS approach may appear to diminish the role of IT but rather it redefines how the two groups engage with one another. The SaaS business application may need to access other in-house applications but, unlike the old ASP constrained model, the open nature of the SaaS environment simplifies the integration efforts involved;  IT can focus on the integration aspect as opposed to getting caught up in the functionality feature set for which business is responsible .  However adopting SaaS does not remove the need to nail the business process. In fact the focus on new software solutions is likely to be centred around the business processes that a company employs. These processes almost always include data that moves between businesses and the ability to quickly incorporate external services (banking, trade, legal) into an application will ensure a quick delivery of these new business processes.

According to the OECD Main Economic Indicators report, April 2006, the standardised unemployment rate in New Zealand is the lowest in the OECD.  This fact combined with New Zealand’s Labour productivity rate, pegged at a disconcerting 22 out of 30 OECD countries, certainly begs the question: What productive models will enable New Zealand businesses to remain competitive?  SaaS just may be one of those models.

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