SaaS: A Viable Alternative For IT

If your IT group isn't evaluating SAAS (software as a service) options for your next application project, you can bet line-of-business managers are. SaaS is a viable alternative to licensed software for businesses of all sizes.

IT departments that resist SaaS may find themselves overruled or undercut by other business units that need an application today, not six or 16 months from now. With their low deployment costs and Web delivery mechanism, SaaS applications can be in place with or without IT's help.

So rather than fight it, IT execs should embrace SaaS to demonstrate their ability to facilitate and support business initiatives. And line-of-business types need IT's technical expertise and guidance in every stage of a SaaS deployment. That includes evaluating whether on-demand options will be a good deal three to five years down the line, grilling providers on details (such as uptime and application enhancement), and helping customize the application and integrate it with other business processes.

Although there are some sticking points to watch out for, SaaS offers several benefits, such as more flexible payment terms and tiered feature sets, over the conventional model of licensed software. In addition, SaaS can reduce deployment burdens and time to deployment.

The State Of SaaS

SaaS is no longer a revolutionary idea. It has been embraced by established software vendors, including Microsoft and Oracle, which are trying to reconcile the typical license model with the service model. SaaS is also sometimes called "hosted" or "on demand" software, but these terms are also used to describe a variety of delivery mechanisms.

Strictly speaking, users interact with SaaS apps through a Web browser over the Internet. A service provider operates and manages all the requisite hardware and software and rolls out new features and upgrades. Rather than pay for the entire license up front, customers make monthly or quarterly payments (though the provider will likely require an annual contract). In addition, pricing may be tiered according to features and amount of data storage required.

Impact Assessment Click to enlarge in another window

The best-known example of a pure-play SaaS provider is Salesforce.com. But the market is alive with a variety of players offering everything from CRM (customer relationship management) to network-management services.

Hosted solutions are similar to SaaS in that the hardware and software may be provisioned and managed by a third party (the software vendor or a reseller), but a customer pays the full license fee at the outset, and the application may require a full desktop client. In a hosted environment each customer has its own dedicated server and database hardware. In contrast, a SaaS provider usually shares hardware among multiple customers.

Oracle offers several hosted software packages, for example, including Oracle Database and Fusion Middleware, in which Oracle will host the hardware in its own data center or manage the hardware and software (it will patch and upgrade the systems, for instance) in the customer's data center.