Press release from Business Wire India
Source: Cisco WebEx
Saturday, October 31, 2009 11:50 AM IST (06:20 AM GMT)
Editors: General: Consumer interest; Business: Advertising, PR & marketing, Business services, Information technology, Telecommunications; Technology
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Cisco WebEx Showcases the Business Benefits of Deploying SaaS Applications in all Spheres
Bangalore, Karnataka, India, Saturday, October 31, 2009 -- (Business Wire India) -- SaaS - Software-as-a-Service, is the delivery and remote access of software applications via a web browser. It is known as "on-demand software" or "hosted software", SaaS allows one to rent web-based software from the service provider's site. It is a modern delivery model where organizations pay for software applications by actual usage rather than purchasing specific licenses for each user. Over the years it has matured to a high level of acceptance and usability for a growing customer base.
Amongst the numerous arguments that are in favour of SaaS applications, the key ones that reinstate the reason for deploying SaaS applications are-cost allocations, no underestimation of people services, SaaS allows better scalability and accountability of the SaaS vendor.
Cost Allocations
In a typical organization, the IT budget is spent in three broad areas:
-- Software: The actual programs and data that the organization uses for computing and information processing
-- Hardware: The desktop computers, servers, networking components and mobile devices that provide users with access to the software
-- People Services: The people and institutions that ensure the continued operation and availability of the system, including internal support staff, professional services consultants and vendor representatives
Of these three, it is the software that is most directly involved in information management, which is the ultimate goal of any IT organization. Hardware and people services, though vital and important components of the IT environment, are properly considered means to an end, in that they make it possible for the software to produce the desired end result of effective information management. (To put it another way, any organization would gladly add software functionality without extra hardware if it could do so effectively, but no organization would simply add hardware without an anticipated need to add software as well.)
In an IT environment based around on-premise software, the majority of the budget is typically spent on hardware and people services, leaving a minority of the budget available for software.
In the on premise model, the software budget is spent primarily on licensed copies of "shrinkwrapped" business software and customized line-of-business software. The hardware budget goes toward desktop and mobile computers for end-users, servers to host data and applications, and components to network them together. The professional services budget pays for a support staff to deploy and support software and hardware, as well as consultants and development resources to help design and build custom systems.
In an organization relying chiefly on SaaS, the IT budget allocation looks much different. In this model, the SaaS vendor hosts applications and associated data on central servers at the vendor's location, and it supports the hardware and software with a dedicated support staff. This relieves the customer organization from the responsibility for supporting the hosted software, and for purchasing and maintaining server hardware for it. Moreover, applications delivered over the Web or through smart clients place significantly less demand on a desktop computer than traditional locally-installed applications, which enables the customer to extend the desktop technology lifecycle significantly. The end result is that a much larger percentage of the IT budget is available to spend on business critical requirements and not on upgrades to the existing software or in training end users.
Leveraging SaaS Economies of Scale
But isn't this result just an illusion? After all, a percentage of the subscription fees paid to SaaS vendors for "software" have to pay for hardware and professional services for the vendor. The answer lies in the multi-tenant architecture and the economies of scale this architecture model offers.
A SaaS vendor with x number of customers subscribing to a single, centrally-hosted software service enables the vendor to serve all of its customers in a consolidated environment. For example, a line-of-business SaaS application installed in a load balanced farm of five servers may be able to support 50 medium-sized customers. This means that each customer would only be responsible for a tenth of the cost of a server. A similar application installed locally might require each customer to dedicate an entire server to the application-perhaps more than one, if load balancing and high availability are concerns.
This represents a substantial potential savings over the traditional model. As this is happening, the provider will develop multi-tenancy as a core competency, leading to higher-quality offerings at a lower cost. Therefore, even accounting for the hardware and professional services costs incurred by SaaS vendors, customers can still obtain significantly greater pure software functionality for the same IT budget.
SaaS Allows Better Growth Management
The third argument is that SaaS applications grow with you as your business grows. Companies do not have to make decisions on the type of application they need restricted by their own size, but instead they can make decisions based solely on their business needs. Because of the economies of scale offered by the multi-tenant architecture, SaaS vendors can provide enterprise grade applications in any number of user levels. For arguments sake, let's use the "named host" licensing model to explain this. A named host license model means that a specific end-user has the right to use the application. For example; if a company has 100 employees that need access to a specific application; they would buy 100 named user licenses. The company does not have a need to roll out the application to all 100 employees at the same time. With a traditional software model, the company would need to deploy hardware infrastructure to support the application and train its IT staff to install, maintain and troubleshoot the application. In most cases it does not make sense to do this to support only 5 or 10 employees. As a result, the company may buy all 100 licenses up front.
In the case of the SaaS application, there is no hardware infrastructure to acquire or IT staff to train. This means that the company can start by purchasing just 5 or 10 licenses, and buy additional licenses as the need grows. This is especially important when budgets and resources are tight. As a result, the SaaS application is much friendlier to the company's growth model when compared to the traditional software application. There is another important use-case for this flexibility and scalability. Companies that are going through mergers and acquisitions many times have a very hard time aligning their back-end IT infrastructure. It can take many months for hardware to be deployed and networks to be built before users in a new location can have access to all the services used in all other locations. This problem is much smaller for SaaS applications, since all that is necessary is an Internet connection, browser and a username and password to start using the application.
Accountability of the SaaS Vendor
The fourth argument is that SaaS vendors have greater accountability because of the subscription based pricing model. SaaS customers can actually exert more control over their vendors than traditional software customers. SaaS customers pay a recurring subscription fee for the duration of the contract term. SaaS vendors are typically held to monthly service level agreements (SLA) and are financially motivated to maintain adequate support and operational requirements on a recurring basis. Traditional software vendors are paid a big upfront license fee in exchange for a perpetual license. They have few obligations after the software has been deployed.
As a result, there is much more accountability from a SaaS vendor than from a traditional software vendor. If the SaaS service does not function properly, customers, by the simple act of withholding their payment and enforcing their SLAs, can exert much greater pressure on the SaaS vendor to provide a fix for the application than on a traditional software vendor.
CONTACT DETAILS
Karthy Prasanna, brand-comm, +91 9686260350, Karthy@brand-comm.com
KEYWORDS
CONSUMER, MARKETING, BUSINESS SERVICES, IT, TELECOMMUNICATIONS, TECHNOLOGY
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