Software-as-a-Service, or SaaS, is a term frequently used but what does it mean for businesses and what are the financial implications resulting from utilising this software? SaaS is a software which is deployed over the internet and can be run behind a firewall on either a local area network (LAN) or personal computer. The software is licensed and a provider will offer an application to customers. This can be provided in two ways:
Firstly, as a service on demand where a subscription is paid using a ‘pay-as-you-go’ format.
Secondly, as a free of charge service. This may be offered to users where the providers believe they can generate revenue from supplementary services such as user list sales or advertising.
Short Term and Long Term Benefits of SaaS
The early concept was that SaaS offered primarily short term benefits. SaaS could:
Fill temporary IT gaps whilst bigger projects were developed both internally and externally.
SaaS could offer companies the opportunity to continue working but without having to carry out large administrative tasks such as due diligence. (For example, if new systems were to be introduced, then checks needed to be carried out on existing hardware and what could be altered/introduced to improve efficency, potential solutions needed to be analysed, cost implications of introducing different systems needed to be assessed, associated hardware and labour costs needed to be calculated. These could all be time consuming and costly. )
Consequently, by introducing SaaS, IT costs and overheard for companies were significantly reduced. There were no associated hardware costs, maintenance costs or employment costs. The main outlay was paying for the actual software and its usage.
As the popularity of SaaS has increased, so too has understanding of the longer term benefits associated with it and companies now view the SaaS model as a positive, longer term investment.
SaaS’ short term benefits now extend into longer term ROI. For example:
Quick adoption and faster route to market means companies can have minimal interruption to their working practices and gain early competitive advantage.
SaaS systems also exhibit more convenient and flexible scalability and the providers often offer reduced licensing fees as the number of users’ increases. This is turn can have a knock-on effect with reduced training and support costs. Incremental increases in capacity are much smoother than the in-house-option, also minimising funding requirements.
Investing in SaaS offers easier administration and significantly reduced on-site costs; existing maintenance costs can be eliminated as no server installation is required and staff do not need to be on hand to provide help and server support. As a result, these staff members can be transferred to higher value and/or more proactive roles.
Companies are increasingly aware of the impact they have on the environment and reducing their carbon footprint plays a major part in this. SaaS can help significantly reduce a company's carbon footprint in a number of ways.