Cut Costs and Grow Your Business

The markets stink, the global economic mood is depressed, and people aren't spending money. Every day the papers and Web news sites have new, bad news.

Strange as it may seem, I am excited. This is the ideal time for Software-as-a-Service.

I think all the questions about SaaS; is it ready for the enterprise, how large an organization can be supported, how small an organization be supported, can I really run my business via the web, is it really more cost effective, is it more versatile, more easily customizable, etc. Well these questions are going to be answered more quickly and more broadly in this economic environment.

From a customer perspective, SaaS eliminates the huge costs associated with implementation, hardware purchases, networks, upgrades and maintenance; it moves the risks and costs of IT from the user of the application to the provider; the economies of scale associated with a centrally managed application are not available with on-premise applications. When you consider that most ERP implementations have multiple instances, integrations and add-ons the costs and complexity only multiply exponentially.

Based on our experiences and customer data, we estimate cost savings of as much as 50% or more that SaaS can bring compared to traditional on-premise enterprise applications. We have seen clients remove expensive on premise solutions and reduce their IT budgets from 3 percent of revenue to 0.1 percent. In these times that is a saving any company, no matter how large or small would be proud to report. These savings, by the way, started right after go-live, even include the new implementation costs!

From a vendor perspective, the economics of SaaS mean the providers can invest much more in real R&D - meaning innovation - rather than maintaining a plethora of versions and patches.

Firstly, when a vendor announces that a preceding update no longer exists. Its gone. It no longer exists (except in their archive). There is not a single customer using it, which means that the vendor is not spending one cent of R&D and maintenance on an older version. This efficiency of "shared" ownership is something that every one of the customers benefits from: No traditional maintenance is needed to keep old things alive.

Secondly, when an update is full of new features; what does it cost customers to take advantage of new features? Nothing - not a cent! It is included in their subscription.

If a customer had some specific code to make operations personal, they are not impacted in anyway. The system runs, with new features as soon as it's opened! Customers can choose when to accept an update by a click of the mouse. From there, the only 'cost' is deciding how they'll use it internally. Did they have to roll out a new version of the software to their various geographic facilities? Implement it? Buy new servers? Of course not! Does it work for all their employees at the same instant in time? Of course. Can they configure it the way they want to today, or next week, or next month? Absolutely. Will it require custom code? Never.

Software, like all other services that we need to drive our businesses, such as power and communications, is best delivered through a shared ownership model. Private ownership of complex software is no longer a mainstream, business viable option. Think about it in the current economic conditions...a new software license, new servers, a consulting project, etc. vs... mouse clicks.

I think the current economic environment is going to bring the debate about TCO (Total Cost of Ownership) of on-premise vs. SaaS software into clear focus.

And that's exciting.

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