Thursday, October 29, 2009

The Return on Investment of SaaS

#saas #cloudcomputing

Want to know if software as a service (SaaS) really has a long term economic benefit? Well, Forrester Research issued a nice report in July 2009 covering this very topic. Click here to go to the report (subscription required).

Firms almost always consider SaaS as a cost-advantage over on-premise software in the short run due to its quick implementation times and pay-as-you-go pricing. But many firms question the long-term value of SaaS, wondering if the rent-versus-own model necessarily has a cost crossover point and if so, when? As SaaS continues to move into a broader range of applications and into larger, more strategic deployments, Forrester examined client decisions across a range of SaaS solution areas and found that firms obtain long-term value with SaaS solutions.

In the report Forrester considered three key questions:

  1. Benefits. How will your company benefit from SaaS?
  2. Costs. How will your company pay, both in hard costs and resources, for SaaS?
  3. Risks. How do uncertainties change the total impact of SaaS on your business?
If you get the opportunity you should read this report, especially if you are considering investing in SaaS or even if you are skeptical about the whole concept.

Here's what Forrester says are the key benefits of SaaS:

  • Reduced cost of adoption: SaaS helps by reducing the licensing, training, and support costs of adding additional users.
  • Quicker adoption: SaaS helps by decreasing the time to ramp up new users, maximizing their productivity from using the application.
  • Improved adoption: SaaS helps by enabling more users to use the application.
  • On-premise cost avoidance: SaaS helps by eliminating maintenance costs; reducing full-time help desk and server support, and transferring staff to higher value, proactive roles.
  • Improved flexibility: SaaS helps by reducing spend on excess capacity.

There is one extract from the report I particularly like:

"...Many of the firms that Forrester interviewed talked about the significant effect that user adoption has on the usefulness of analytics and reporting on data contained in solutions and therefore the ability to drive useful business decisions from solution information."

The power of Analytics to drive your product and company strategy cannot be underestimated. I wrote about this previously. For end user companies the ability to utilise analytics should be a major factor in the move to SaaS models because this type of analytics is much harder (not impossible) in the on-premise world. For software companies they need to seriously consider the design of the user interface of their Services because it has been proven over and over again that high user adoption rates correlate to a well designed user interface and if you want to really exploit analytics to understand your customers more, you need to achieve higher adoption rates.

ZeroTouch IT Ltd