SaaS-Based Budget Planning Advantages over Traditional Models Author: Tom Olson Tom Olson is President and CEO of MyBudgetFile Inc. and former Associate Superintendent of Business and Finance for the Parkland School, Division No. 70, Stony Plain, Alberta, Canada. TM
SaaS-Based Budget Planning -Advantages over Traditional Models MyBudgetFile Inc. has been a pioneer in SaaS. Since 2001, it s been our primary delivery model, long before the SaaS acronym even existed. Large companies have always reaped the benefits of purpose-built budgeting, planning and reporting applications; while mid-sized organizations have had to rely on readily-available, inexpensive and easy-to-use applications like the spreadsheet. While spreadsheets are good desktop personal productivity tools, they are not collaborative planning applications. The good news is that there is an excellent alternative available to both models today. Software as a Service (SaaS) is the most powerful and exciting development in enterprise software in over a decade. SaaS solutions solve many of the problems that have long plagued traditional enterprise software offerings, such as large upfront license fees, long implementation periods, complicated upgrades, and poor support. Fundamentally, the SaaS model simply provides better value to customers. Understanding SaaS SaaS is a software delivery model in which software and its associated data are hosted centrally (typically in the Internet cloud) and are accessed by users using a thin client, normally a web browser over the Internet. SaaS eliminates the need for school districts to buy, deploy, and maintain IT infrastructure or application software. In its simplest form, SaaS is web-based software delivered on demand and paid for on a subscription basis. The end-user need not maintain specific hardware or load software to run the application; all that is necessary is access to the Internet. SaaS eliminates the need for individual organizations to buy, deploy, and maintain IT infrastructure or application software. SaaS solutions are often based on multi-tenancy architectures, meaning a single instance of the software runs on a server and can serve multiple client organizations (tenants). In a SaaS implementation, the vendor takes care of the support, training, infrastructure and security risks in exchange for recurring subscription fees. Therefore, total cost of ownership (TCO) is reduced, access is available to any user who has been granted a log in and software updates are available immediately to all users without the need to install upgrades on the user s computer.
SaaS can offer economies of scale and skill that are not possible in traditional, on-premise deployments SaaS has become a common delivery model for most business applications, including accounting, budgeting, collaboration, customer relationship management (CRM), management information systems (MIS), enterprise resource planning (ERP), invoicing, human resource management (HRM), content management (CM) and service desk management. IT Models for Budgeting, Planning, and Reporting Organizations are increasingly shifting over from the traditional budgeting software models to SaaS in order to reduce TCO, accelerate the time-to-market and minimize the overall implementation risks. The three IT models available for budgeting, planning and reporting are: Traditional Model- Enterprises own the software application and the assoicated infrastructure (hardware, network, staff, etc) Hosting Model- Enterprises own the software application and outsource the application to be hosted by a third party on their infrastructure SaaS Model- Enterprises do not own either the software or the infrastructure and they only pay a subscription fee to the SaaS provider to user the application Benefits of SaaS Based Budget Planning over Other Models In recent years, the SaaS model has flourished at an astounding pace because of the benefits it offers to all types and all sizes of business. In addition to the cost advantage, the SaaS model offers numerous benefits over traditional licensed software approaches including: Reduced Technology Risks. SaaS effectively eliminates technology investment risk and leaves no scope for additional hidden costs that usually arise over traditional application life-cycles i.e. ongoing support, maintenance costs or risks related to user acceptance. Software upgrades are usually cumbersome, starting from re-implementing and testing the compatibility, functionality and performance of the new configuration. With SaaS, this costly and risky process is eliminated. Reduced Infrastructure Costs. SaaS applications are hosted by the service providers, so customers are not required to invest in expensive infrastructure. SaaS vendors typically host the application in their own data centers providing all the maintenance, backups, upgrades and support activities-with no customer IT or application management hassle. By reducing the burden of internal IT staff, SaaS helps school districts to direct limited in-house IT resources towards more business-orientated ventures. SaaS can offer economies of scale and skill that are not possible in traditional, on-premise deployments. Thus, organizations are increasingly turning to SaaS as a faster, less expensive and less resource-intensive way to deploy many types of business solutions.
In the SaaS model, the application is up and running in a very short timescale. No Capital Outlay. Another reason for school districts to move to a SaaS model is the switch from IT capital expenditures (CapEx) to IT operational expenses (OpEx). SaaS requires no capital outlay for enterprise-class software purchases or upfront licensing costs. With SaaS, you replace costly upfront licensing fees with smaller, subscription-based pricing which are fixed, predictable and easy-to-understand. This results in considerable saving through precise financial planning savings. All the burden of capital expenditures is also shifted to the SaaS provider and it would be their responsibility to deal with purchasing server equipment, maintaining data centres, networking equipment and Internet hosting fees. The main advantage of using OpEx to fundthe SaaS service is that it represents a real cost of doing business and the customers only pay for what they use through subscription fees. Faster Deployments. In the SaaS model, the application is up and running in a very short timescale. Since the solution is delivered via the Internet; SaaS completely eliminates installation and set-up at the customer's end. This quick start experience and low upfront costs makes it a very appealing model to a wide range of organizations. Single Instance, Multi-Tenant Efficiency. SaaS vendors architect their solutions for a one-to-many, or multi-tenant mode, instead of building their solutions to run as separate, individual instances for each customer as done in the case of on-premise or dedicated hosted solutions. This means that the cost of all software, infrastructure and expertise is shared by a large number of customers. This drastically improves implementation speed and cost effectiveness over a standard model. Streamlines Use and Management. SaaS vendors take responsibility for running and managing everything: servers, operating system software, databases, installation of updates, ongoing backups, power and cooling, network access, data center space, and more. This shifts the IT burden from the customer to the solution vendor. There is no software to maintain and upgrade. Automated upgrades to new versions of applications and functionality mean that in-house IT can focus on other projects and initiatives. Improves Reliability, Performance and Efficiency. Being web based, budgets implemented with SaaS are available anytime and anywhere that there is an Internet connection. Multiple users can simultaneously budget from multiple locations into one budget file, seeing only the areas of the budget for which they are responsible. Standards assigned at both an organizational and project level, including the use of budget templates, assure that there is consistency in the finished product and best practices are enforced throughout a portfolio. How SaaS Affects TCO Total Cost of Ownership (TCO) is used to calculate the total cost of purchasing (or in the case of SaaS, subscribing to) and operating a technology solution over its useful life. TCO provides a construct to evaluate technology costs that may not be reflected in the initial pricing. In the SaaS model, the vendor takes responsibility for deploying and managing the infrastructure (servers, operating system software, databases, data center space, network access, power and cooling, etc.) and processes (infrastructure patches/upgrades, application patches/upgrades, backups, etc.) required to run and manage the full solution. The SaaS provider manages the access to the application, including security, availability and performance; freeing customers from software and hardware management. Since SaaS vendors manage all of their customers on a single instance of the software, they can amortize infrastructure-related costs for thousands of customers. This yields substantial economies of scale and skill, and lowers the TCO for customers seeking to deploy a corporate performance management (CPM) solution.
The software literally evolves with you, keeping pace with your organization, size and costs. How SaaS Improves ROI While TCO helps you to determine hidden costs of a new technology solution, return on investment (ROI) analysis helps to surface benefits that may not be readily apparent, such as improved employee productivity or increased customer satisfaction. ROI assessments tend to be more subjective in nature than TCO, because these indirect benefits are usually harder to measure than direct costs. Direct costs associated with SaaS are lower than other models: Implementation costs. SaaS implementation costs are typically, significantly lower than those for on-premise implementations. Recurring costs. The basic recurring cost is the SaaS subscription cost. Upgrade costs. SaaS solutions typically offer seamless, automatic, frequent upgrades as part of the ongoing subscription charge. Since these upgrades happen more frequently and therefore, incrementally than on-premise solutions, they typically have significantly reduced testing and end user acceptance and training costs. Forrester Research has identified several key considerations in determining the ROI of SaaS. They created its Total Economic Impact (TEI) model to help companies consider three fundamental aspects of SaaS ROI 2. These are: how your company will benefit from SaaS, how your company will pay, both in hard costs and resources, for SaaS; and lastly, how risks and uncertainties can change the total impact of SaaS on your business. Firms that Forrester interviewed have identified long-term benefits from SaaS using five-year cost/benefit analyses. Forrester Research gives SaaS a significant advantage in benefits 3. Greater risks can be found in on-premise implementations that originate from deployment complexities, training needs, and support issues, according to the research company report. When considering your own ROI analysis, be sure to include all the cost, benefit, flexibility and risk elements associated with implementation, deployment, staff, resources, and upgrades. And don t forget that TCO must be part of the overall ROI calculation! Some Areas of Concern for SaaS While SaaS can be implemented rapidly and eliminates the infrastructure and ongoing costs that traditional applications require, there are some areas of concern that businesses must be aware of: Safety of Data. Security and privacy are concerns when you subscribe to SaaS. A business has no idea how their SaaS service provider will secure their data and what backup procedures their service provider will have in place. To ensure that your data is well looked after, your business must ensure that your service provider writes down exactly how your data will be secured, in the Service Level Agreement contract. Selecting a well known SaaS vendor or a software service provider with a good reputation, will also give you peace of mind. Reliability. Reliable SaaS vendors put safeguards in place to ensure near constant availability of their applications. In addition, you should ask the vendor for full hardware redundancy to avoid consequences from equipment failure, redundant power supplies in the data center, scalable server farm to quickly meet a sudden increase in demand and a highly qualified operations team that monitors the site 24x7. Loss of Control. In-house software applications give business owners a high degree of control. When you use a SaaS solution, you turn much of that control over to a third party provider. A SaaS provider has to be chosen wisely as there is an inherent risk of losing valuable data if the vendor goes out of business. Ensure that your vendor has a data backup process in place, and that this data can be exported in a format that is easily re-used. Internet Connectivity. One of the biggest drawbacks of SaaS is the fact that employees can no longer work offline when SaaS software services are used. Most organizations are trying to solve this problem by allowing their applications to continue to work in a disconnected fashion for a period of time, but at some point you will need to sync back up to the server. When considering a SaaS subscription, ask for a service level agreement that guarantees a specific percentage of uptime. 2 Forrester Research Paper titled Comparing The ROI Of SaaS Versus On-Premise Using Forrester s TEI Approach, by Ray Wang. 3 Forrester Research Paper titled The ROI Of Software-As-A-Service by Liz Herbert and Jon Erickson
Make the Right Choice for Your Organization To find out how MyBudgetFile.com can help your organization improve its budget planning process, visit us at www.mybudgetfile.com or call 1-855-MBF-TALK A growing number of organizations are adopting SaaS IT models, and all the market research available indicates that this trend will continue. The benefits are many. Maintenance, management and support requirements become the responsibility of the SaaS provider. Costs associated with those requirements are either reduced or eliminated. IT personnel needs are eased up and growth can be more effectively planned and managed. Vendor accountability (and ultimately performance) is increased. These benefits and more, add up to an attractive model for organizations who need optimised software solutions for their budgeting, planning and reporting needs. TM MyBudgetFile Inc. Toll Free: 1-855-MBF-TALK www.mybudgetfile.com info@mybudgetfile.com MyBudgetFile, Inc. is the leading provider of web-based budgeting for K-12 education. Today, thousands of school business and educational leaders in over 70 school districts across North America count on MyBudgetFile.com to create meaningful financial plans that support educational goals using 21 st century web-based technology, designed by people who know school business.