Software as a Service: rising star in tough times

Software as a Service (SaaS) is regarded as one of the key IT growth areas that is bucking the trend of the recession. Research released by Gartner at the end of last year predicted that nine out of ten companies hoped to increase their use of SaaS during 2009. And more recently market analysts at the IDC said they expect SaaS growth to exceed 40 percent in 2009.

Software as a Service allows users to access applications over the internet directly from their web browser, instead of installing purchased software onto their systems. The most common SaaS products that most people are familiar with are online email offerings like Google’s Gmail. There are a range of business SaaS applications available for the likes of word processing, human resource management, customer relationship management and accounting.

However, even though SaaS has been around for over ten years, providers have only really started to push products onto the Irish market over the last few months. “The old model for software was ‘acquire a licence to use the software and pay capital up front, buy a server, and install it on that server’. With SaaS you pay for the software as you use it so it is obviously changing from a capital expenditure to operational expenditure,” says Tony Connolly, chief executive of SaaS accountancy software provider AccountsIQ.

Software as a Service: Serving the bottom line

In light of the current economic downturn, the standout benefit of SaaS is the amount of money it initially saves firms. SaaS providers charge companies a per-user, per-month fee, and this is normally cheaper than the cost of buying a software package up front and installing it on all the internal systems.

“The key advantages are the businesses don’t have to install any software, they don’t have to carry out back-ups. It is really bringing the use of an application like an accounting application into the realms of a utility. You would use it like you would use electricity,” says Connolly.

While SaaS often works out more expensive in the long run, it can provide cash-strapped firms easy access to a range of applications and processes within one product. Microsoft Dynamics NAV, for example, is an enterprise resource planning package which covers manufacturing, finance, customer relationship management, analytics, supply chains and electronic commerce for SMEs.

“What you are doing is giving people access for a very reasonable price to this type of functionality. Companies right now have cash flow issues. What [SaaS] ought to do is to help them to run their business more efficiently,” says Gerry Power, consultant with Irish SaaS provider Sysco. He goes on to point out that businesses can purchase applications to install on their systems, further down the road, with the money they’ve saved thanks to SaaS.

Software as a Service: Access denied

In May the OECD revealed that Ireland dropped one place last year in a league table for broadband penetration among 30 industrialised nations, coming in 21st. In other words, some Irish businesses in rural areas that would like to use SaaS products simply won’t be able to, for now.

“Certainly availability of broadband in Ireland has been a weakness. In the major business areas we don’t find it a problem but certain rural areas are weaker than others,” says Connolly. “Hopefully it will be strengthened over the next while and it is something the Government keep talking about improving.”

That SaaS depends on broadband has one big advantage, however. It allows users access to their applications from almost any PC with an internet connection, no matter where they are in the world. “So if you are an SME and you are travelling to China or wherever you can just go into any internet cafe and log on to your application. That is huge – particularly for a business where [employees] are travelling a lot,” says Power.

Last month a number of Google’s servers went off-line for a few hours on account of a technical glitch. The problem reportedly prevented millions of people from accessing Google’s email, news and other services for a few hours. The case highlighted that IT outages can happen to any company – SaaS provider or otherwise – no matter how big. “There is always a risk that the system will go down but that is the same with an in-house system as well. While Google’s outage got a lot of publicity, very few businesses don’t have some sort of outage during the year,” says Connolly.

The Google outage may have been a mild inconvenience for consumers, but these cases are more serious for businesses who depend on SaaS software to operate. This is where a software service agreement comes in: SaaS providers will typically guarantee a certain level of service, support and uptime during the year. If the provider fails to meet the terms they can be found in breach of contract.

Software as a Service: Make it secure

Being able to access company information anywhere is all very well, but some managers may be concerned about the security implications. However, employees can only gain access to a SaaS session (which is encrypted) via a secure user name and password.

“You have to have typical precautions,” says Power. “There are defaults where the system will log out after a certain period. Obviously if you leave yourself logged into your financial management application there isn’t very much the technology can do to [keep you secure].”

SaaS providers can work with businesses to determine how much access to give to employees. For example, the software can be set up so that staff can only view a client’s contact details, rather than edit them. These kind of measures are worth discussing with a SaaS provider before signing up for a service.

“Like all things, you need to do a bit of looking at the system and whether it suits your particular needs [before you commit]. Certain businesses have particular requirements that may or may not be addressed by specific offerings,” says Connolly.

Similarly, providers should be able to explain to SMEs how the various functions of an application operate and what fail-safes are in place. For example, how can users transfer their data to a hard copy and download the back-ups the provider keeps? “Other than that the beauty of it is the user doesn’t need to worry about the software. They just need to open up the browser and get access to it,” says Connolly.

SMEs can use SaaS to access lots of handy applications, at a reduced price, and avoid time-consuming technical headaches. However, like a customer in restaurant that serves bad food, firms should feel comfortable complaining if they’re unhappy.

This article originally appeared in the eBusiness Live newsletter from Enterprise Ireland’s eMarketing Unit and was written by ENNclick.

 

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