Can Software as a Service (SaaS) provide better RoI compared to on-premise solutions?

Transcription

1 Can Software as a Service (SaaS) provide better RoI compared to on-premise solutions? Page 1

2 Table of Contents Introduction What is SaaS? What are the challenges and advantages of SaaS? New-Age Solutions The Hybrid Model What are the pitfalls while adopting hybrid solutions? Tips for the discerning CIO Global Trends in SaaS SaaS ERP trends in India Insights and Conclusions Terminology and Abbreviations Bibliography Page 2

3 Introduction Software solutions have always been capex intensive for enterprises. Regular updating & hardware compatibility factors have to be looked at periodically, and there are always the ongoing energy costs of deploying dedicated servers & maintaining them. Large enterprises face frequently technology challenges in a very fast developing market. Penetration in the SME space has been limited on account of inhibitive infrastructure and human resource costs. Cost aspects, as well as compliance and transparency issues that this implementation automatically entails, have been the primary inhibitors. However, the advent of cloud computing mechanisms and tools is creating new options in the domain, allowing newer users to explore this platform with viable and attractive ROIs from within their operating costs. SaaS (Software as a Service) is increasingly finding favour with enterprises of all sizes small, medium and large. This white paper attempts to look at the parameters and paradigms to explore the value proposition that this platform offers for enterprises. SaaS has become a widely used delivery model for many business applications, including Human Resource Management (HRM), Management Information Systems (MIS), Customer Relationship Management (CRM), office & messaging software, payroll processing software, DBMS software, accounting, invoicing etc. Enterprises that spread out over a host of locations can access the latest in software technologies and use them for their various applications. In effect, this serves as a software infrastructure while remaining maintenance free as a business solution for enterprises. The vendor provides all these services at his end with little or no impact on the enterprises functionality or uptime. Thus, an enterprise can access the very latest developments in the global domain in the context of technologies it uses, with very low or no capex invests. While an enterprise can totally adapt a cloud model, there is a transitionary hybrid solution design possibility where there is some in house technology installs working simultaneously with technologies accessed from cloud platforms. Service What is SaaS? Software as a service (SaaS) is a software licensing and delivery model in which software is licensed on a subscription basis and centrally hosted. It is colloquially also referred to as "on-demand software". SaaS is typically accessed by users via the internet using a regular web browser. Internet Service Software SaaS Page 3

4 What are the challenges and advantages with SaaS? It is generally observed that the large corporations still prefer the comfort and reliability of traditional software systems especially in deployments such as enterprise resource planning. For small and medium businesses however SaaS is enabling a respectable option. The obvious advantages are encouraging more and more mega corporations to explore this opportunity in full or hybrid models of implementation. Some general observations: Simplicity: SaaS is generally much simpler to deploy from a technical perspective as there is no need to purchase additional servers or physically install the software in one s own systems. Deploying software is made much easier and quicker. Flexibility: Traditional software modules are installed on the enterprises servers and enterprises actually own the software, so one can actually do as one pleases. One may decide to customise it and integrate it with other software. While SaaS solutions are increasingly coming with this capacity, they are generally seen to be less flexible than traditional solutions in that the software cannot be completely customised or rewritten to address one s needs. On the other hand, since SaaS has limitations to being customised, it also reduces some or most of the technical difficulties associated with software at the workplace. Page 4 Control: Many enterprises find that they don't have the desired control over SaaS software as opposed to traditional solutions. This is especially true of large corporations with well-defined business processes that are not easily able to adapt to fit the software. So they adopt hybrid solutions, a mix of the traditional deployment and the SaaS platform. Accessibility: Since SaaS is entirely accessed through the web; the vulnerability to internet connections and speeds is very high. Business processes come to a halt if the internet is down. This also has been suitably addressed by great advancements in technology. Cost: This is the single greatest and most significant advantage of deploying software solutions through SaaS. Primarily, there is a shift from capital expenditure to operational expenditure, which is a highly preferred solution for most enterprises, whether large, mid-sized or small. There is greater control over expenses in a pay-as-you-go model and deployments can be more effectively prioritised. Entry level costs are very much lower in the SaaS deployment which can be very attractive to small and mid-sized businesses. Saas

5 Updates: This is an automatic benefit of the SaaS model as it is a dynamic process at the service provider s level. Clearly, there are trade-offs between the two options but the gaps are getting ever smaller as technology is evolving rapidly. It is an observed trend that ROI and cost benefits for each enterprise serve as the decisive factor when decisions are being made. New-Age Solutions-The Hybrid Model: More often than not, IT decisions and choices seem to lead into unmanageable storage and infrastructure burdens. SaaS can effectively free enterprises from limitations that they typically experience in terms of infrastructure and expenditure. Strategic thinking demands that one takes a bird s eye view from the top, exploring lateral ways to blend the two seemingly diverse worlds. Domains like CRMs and ERP often work with a centralised hub today supported by many functional satellites hovering around it. Such an approach is preferable in most situations. Cloud computing makes this possible by allowing for solutions on the go, no matter where the user is based. The only factor that plays a role here is the stability and speed of an internet connection. In most cities across the world, stable internet connections are available, making this a viable solution for organisations. For an enterprise with issues of scalability, functional configuration, steep on the job learning curves, Total Cost of Ownership TCO priorities and human acceptance; a cloud-based solution might just be the need of the hour. Page 5 Additionally, the cloud s multi-tiered structure can seamlessly dovetail into a bigger solution dimension with all the seamless integration, harmonic tweak-ins, contextual re-aligning and wiring, optimisation of bandwidth deployment and extensive process standardisation that such a connect would demand. Imagine the various pieces of IT that enterprises have invested in so far and how they stand in the enterprises premises. A few of them may already be in cash cow mode, where enterprises are called upon to maintain them at a great cost in order to squeeze out the best returns possible. It would make even thinking of new evolutionary concepts passé as one is firefighting. In such cases, it makes sense to have a solution which takes care of various co-existence needs across cloud-on-the-move satellites while keeping the enterprise grounded with the traditional systems on their premises. Cloud Computing

6 Improvement of human resource skills and training are also a significant cost for enterprises. The SaaS approach reduces these costs significantly as all software updates/hardware updates and maintenance are generally done at the vendor s end. The greening of enterprises through less energy consumption through large servers at their end is also a marked advantage. Gartner has indicated that while SMEs definitely prefer the SaaS model, hybrid solutions are increasingly becoming the norm even for large enterprises. What are the pitfalls while adopting hybrid solutions? While it could be a while before the majority of organisations decide to totally replace onsite software deployments to the cloud, it can be observed there are some industry segments, like service-centric industries, primarily, professional services, business services and digital media, are areas where this seems to be happening much sooner. Many businesses seem to be making a mistake in a mad rush to stay up-to-speed with the latest technology advancements. With large-scale IT investments, enterprises keep making their IT foundations stronger but are negligent towards their peripheries which bear the brunt in most situations. To bring about real change organisations must ensure that all the channels, partners and chain-players work together in harmony. It is imperative to ensure that the adoption of hybrid solutions does not fail to improve cost-benefit outcomes for the enterprise. While there is often no clear indicator or milestone of reduction in the total cost of ownership (TCO), it is prudent to keep such expectations conservative and well anchored. Tips for the discerning CIO It would help if CIOs can be pro-active and plan the total lifetime costs of their software solutions, including all models: on-premises, cloud or hybrid. An elaborate cost benefit analysis must be carried out and choices made between hosted, managed service and any of the AAS models SaaS, PaaS ( Platform as a service) and IaaS ( Infrastructure as a Service). It is important to have a clear picture of CAPEX licensing working in tandem with OPEX multi-tenancy subscriptions. This sync is a very great challenge in balancing commercial and functional requirements. Ensure that upgrades and transitions and even deployments do not inject any latency. Page 6

7 Connectivity, control and stability of the service provider is critical. Service providers with seamless integration capabilities and access to hybrid ecosystem technologies such as Network Enabled Cloud deployment through MPLS VPN are preferable. Brand equity of the service provider in the technology and telecom space is a key criterion as multitier integrations are involved. SaaS Based ERP solutions ERP adaption on SaaS platforms can be taken as a case study to understand the trend better. Global Trends in SaaS There seems to be no doubt about the fact that SaaS is gaining increasing trust as a solid alternative for global deployments across enterprises. While there has been increasing thrust in areas such as manufacturing and financial services, CRM is a huge potential deployment area. The seamless ease of interface with mobile based solutions is also a very encouraging trend. Deployment levels are very high in Australia, Europe and the U.S.A. A key reason for this shift is the bottom-line impact on cross-country and global sales efforts. A better tracking of global business opportunities, the pitches therein and the subsequent sales and delivery modules has been a game-changer in business environments. Consolidation of efforts over a distributed geography has reached a new level of efficiency and the results are there for everyone to see. What enterprises seemingly lost in complexity is being compensated by the development in global sales modes. Page 7 Enterprise Resource Planning (ERP) is an integrated suite of solutions that help a company plan and manage its core business processes like production, marketing and sales, inventory management, as well as other administrative operations like HR and accounting. It is a must for the large enterprise and a very attractive option for the small and medium enterprise. Adoption of SaaS in this domain of application can be a useful indicator on overall SaaS adoption parameters as it is generally seen to have a greater resistance from large enterprises. The complexities and need for customisation are challenges, as are the investments already made on extensive software deployment in the past. SaaS based ERP is steadily growing at a rate of adoption of over 10% with every passing year since 2012 across the globe. Leading researcher Forrester however has been consistently projecting a 13% growth per annum which will reach 16% by 2016.

8 The adoption of the hybrid model is taking increasing precedence here as there is phased entry and adoption are possible. China is expected to grow at a rate of 30 to 35% by various researchers in the SaaS ERP adoption space within the next few years. However, SaaS ERP deployments in India still constitute at less than 5% of the overall ERP deployment numbers. India is estimated to have about user organisations mainly in the SME and middle level range. There is still some industry resistance to the adoption of SaaS based ERP solutions though. Some of the reasons put forth by enterprises include an uncertainty and conflict on its deployment, a kind of inertial satisfaction with existing applications and constraints of contractual lock-ins with their current solution providers. While this is true of integrated solutions, specific domain solutions are hugely popular in India. The CRM domain in particular has found great acceptance. There is an increasing trend of enterprises in India, especially on the small and medium level to look at adopting ERP solutions on the software as a services (SaaS) model for quicker deployment and significantly enhanced cost optimisation. Sa as Various technological research agencies including the widely accepted Gartner project SaaS ERP adoption in India to grow at a Compound Annual Growth Rate (CAGR) of 28%. Small/ Medium Business Many organisations are looking for solutions that can be scaled up in a phased manner and SaaS ERP is emerging as a very viable option. Page 8 Insights and Conclusions It seems quite obvious that SaaS is a viable and cost effective option for enterprises, whether they are large, small or medium sized. Connectivity, trustworthiness and security aspects are the major issues which will drive more adoption. Greater cloud deployment and increased quality of service provisions added with more adaptive security will add to the offering s value. Seamless integration ability of the service provider and their brand integrity in the market place are key indicators while choosing a vendor. The phased level pay-as-you-go model as well as flexibility such solutions offer are also going to be great game-changers, and deciding factors in adoption of the service. SaaS is a platform with great possibilities in terms of the enhancement of business ecosystems and is available at an effective cost.

9 Terminology and Abbreviations TCO: Total Cost of Ownership Beachhead: The term is seen to come from military strategy, meaning that as one invades enemy territory, there is a need to focus one s strength and concentrate on winning a small border area (the beachhead) that becomes the stronghold from which one advances. Latency: Latency is the delay from input into a system to desired outcome; the term is understood slightly differently in various contexts and latency issues also vary from one system to another. ETL: Extract, Transform and Load ETL (Extract, Transform and Load) is a process in data warehousing responsible for pulling data out of the source systems and placing it into a data warehouse. MPLS: Multi-Protocol Level Switching VPN: Virtual Private Network Page 9

10 Bibliography The author humbly acknowledges the vast bank of net and other resources that contribute towards creating a better world through better innovations and solutions. Specifically, for this project, the author acknowledges the following web references: whatis.techtarget.com webopedia.com Wikipedia.com se/ rtner _1.html Call : dobig@tatadocomo.com Page 10