The idea of providing software to customers for a fee without the need for investments in IT infrastructure or staff has been around for decades. In the 1970s it was called Timesharing. Back then, companies utilized Timesharing services as their primary source of IT applications or as an extension of in-house IT applications, thereby avoiding additional infrastructure investments. Today, companies are considering what’s known as Software as a Service, or SaaS, for the same reasons. However today’s SaaS technology is very different from the Timesharing technology of decades ago. For one thing, Timesharing providers would dictate to their clients what communications protocols and user devices could be utilized. SaaS providers today utilize standard Internet communications protocols and permit connection from virtually any device with a web browser.
Whether looking to a SaaS solution to provide a primary computing environment or extend an existing one, the potential SaaS customer will need to select two suppliers. The first is the provider of the infrastructure in which the application software and databases will be hosted; the second is the provider of the application software to be hosted and used.
In selecting both vendors, the potential customer should ask each three important questions.
Question #1: What are the vendors’ underlying technologies?
There are two basic underlying technology architectures utilized by providers of SaaS services. One is a “multi-tenant” configuration, in which a single copy of the application and database software is installed on a server and used by multiple customers; the other is a “virtualization” model, in which a separate copy of the operating system, application software and database software is installed for each customer on a “virtual” server that may physically be on a single server or array of servers.
One configuration/architecture is not better than the other. They’re just different, with different advantages and risks. Since multitenant SaaS services are “sharing” software with multiple customers, generally only one copy (and thus one license) of the software components (Operating system, application software, database software, etc.) needs to be acquired. On the other hand because multiple customers are utilizing the same software and database, the proper configuration of security software is critically important and yet more difficult to accomplish. Under a Virtualization SaaS model, each customer’s “virtual” server has the necessary software components installed. This arrangement can simplify security set up, but increases costs since generally multiple software licenses must be acquired for each customer.
In terms of software maintenance, a multitenant configuration requires that new software or updates only be applied once in order to be used by all customers. However, the process of maintaining customer specific software customizations or configuration parameters can be very complicated, time consuming, and difficult to control, while in a Virtualization SaaS model software upgrades will need to be applied to each virtual server environment. Yet because each customer has their own, separate copy of software, customizations, and customer specific parameters are easier to control and maintain.
Question #2: What are the pricing options and terms?
Most SaaS services are priced on a subscription basis, in which the customer pays a fee annually or monthly. The basis for that fee varies widely from one provider to another. Some pricing schemes are based on total number of users, others on users per software module, while still others are more complex with categories of users and groupings of modules.
Question #3: What are the vendors’ capabilities and long-term direction?
Both the SaaS service provider and the software provider should have a track record of growth and financial stability. SaaS usage is expected to grow significantly. Service Providers must have the financial strength and technical resources to maintain and grow their infrastructure in response to increased demand. Likewise, SaaS software providers need to add new functionality to their products to keep pace with changing business conditions.
Even when these questions are asked and answered, a choice will need to be made. One way to simplify that decision may seem counter intuitive: Select the software vendor first. Some software vendor solutions may only support a multi-tenant or virtualization configuration, which limits the choice of potential providers. It would be better to look for, and select, a software vendor that can support either architecture, thereby allowing the choice of SaaS provider to be made solely on the merits of the vendor’s capabilities and sustainability. Finally, while pricing should not be the sole selection criteria, it is an important one. Select a vendor with a straightforward, all-inclusive pricing arrangement, one that allows any user access to any module and allows users to be added easily.
Obviously, you hope, and in fact plan, for your business to grow. The right SaaS provider can help support that growth with robust IT capabilities at a reasonable cost. The right cloud accounting software in a SaaS environment can support and automate your business processes now and as your business grows. The right vendor will have the software features you need today and the financial strength and technology vision to provide the solutions you will need tomorrow.
By Jon Roskill
