SaaS 101: What Managers Need to Know: Page 3

Posted February 15, 2007
By

Frank Guerino


(Page 3 of 3)

Understanding the Downside of SaaS

However, just like any decision that has an upside, you also have to be aware of the associated downside. It’s important to understand that the SaaS implementations you undertake, within your enterprise, will most likely not solve all of your business problems. After all, what you typically get with a SaaS solution is nothing more than the software platform. You will still have to worry about things like…

• Your internal processes.
• How your handling audit and compliance issues.
• Internal training of how to best use the tool(s) to solve your internal business problems.
• Making your payments regularly.
• Integrating external SaaS solutions with internal business solutions, as well as other external SaaS solutions.

It is important to understand that SaaS is not a “cure all.” Like any service that you get from an external provider, it’s important to ensure that you can rely on the service provider for constant, stable, and cost effective delivery of that service.

However, you may find that even with some of the built-in bumps and bruises that come with new SaaS providers (that are in the process of establishing themselves), it still might be worth the investment to buy in, especially if it means avoiding going through those growing pains, yourself.

SaaS: A Modern and Effective Form of Outsourcing

Given that SaaS is a relatively new concept in the grand scheme of the information age, it seems to be finding its niche.

Apparently, SaaS represents the next step in the chain of evolution for IT Outsourcing. Where outsourcing IT labor has been common in the last five to seven years, SaaS represents the outsourcing of complete IT services, including the associated infrastructure and labor.

SaaS allows pieces of IT to now be acquired through a controlled and repeatable service model, where the provider acts as a center of excellence that the consumer can easily tap into to leverage significant economies of scale. If this sounds like a “Utility Company” model, it essentially is. The end result is that enterprises can now acquire such IT related services the same way they do their benefits, payroll, accounting, and legal services, which is in the form of a utility.

However, since SaaS is still a relatively new concept, most enterprises are cautious about diving in. If you look around the industry, you’ll typically find three leadership scenarios that will welcome SaaS solutions:

1) Visionary leaders that are always looking to be at the head of the technology adoption lifecycle and who use SaaS as a way to accomplish this.

2) Leaders that understand that the areas covered by many SaaS providers are not, in fact, their own core competencies, so they look for external solutions providers to help supplement their own internal solution base.

3) Leaders that are under pressure to cut costs and create operational efficiencies as quickly as possible.

In any event, SaaS adoption is picking up and gaining momentum. It’s being heralded as a new outsourcing “flattener” (referring to Thomas L. Friedman’s book, “The World is Flat”), due to its ability to take labor costs out of the equation and make it so that higher wage western IT workers can now compete with lower cost foreign labor markets.

Still, while SaaS becomes more of an accepted form of outsourcing, it will not solve all problems. There will always be pieces of your value chain that your IT resources add direct value to. Deciding which pieces to handle in-house or outsource is simply the practice of properly managing your business and understanding what your core competencies are or are not. There is no solution you can purchase that will substitute for good old common sense.

Frank Guerino is the founder and CEO of TraverseIT, a SaaS-based provider of IT Operations and Information Management Solutions designed to help IT organizations manage themselves more effectively.


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