Today’s session on Calculating TCO in a SaaS World was led by Geni Whitehouse.

Geni Whitehouse is a former software company executive, she has implemented solutions from Peachtree to Peoplesoft, and was instrumental in getting XBRL implemented in Navision Software. Geni is the author of “How to Make a Boring Subject Interesting: 52 Ways Even a Nerd Can Be Heard.”

The agenda for this session was simple, and yet to the point!

  • The Promise of SaaS
  • Cost Components
  • Application continuum
  • Reality check
  • Options

Let’s start with the promise of SaaS:

My definition – SaaS (Software as a Service)is a web-based, on-demand distribution model where the software is hosted and updated at a central site and does not reside on client computers/servers. SaaS services could be FREE or billed through subscriptions or usage licenses.

SaaS applications are hosted and run by service providers, saving the end user the upfront investment in software purchases and the ongoing upkeep and maintenance.

Businesses use a pay-as-you-go method (typically monthly) for SaaS applications allowing them to save their capital for core business functions.

OK, so SaaS eliminates hassles, in theory it should always be available, it is location independent, and it should reduce the cost of IT administration. Be aware that when weighing SaaS against traditional application you need to take ALL costs – direct and indirect into account.

Cost components:

The traditional application cost are mainly associated with licenses, customization, implementation, IT support, training for custom applications, network infrastructure, servers, data storage, backup, and application support & maintenance.

On the other hand we have SaaS applications which usually have subscription fees, configuration fees, internet access, end-user support usage fees, and training fees.

When companies look into SaaS applications they should also consider some other costs that may not be so obvious: monthly fees over time, incremental users, storage fees, integrations, business process re-engineering, termination and cancellation fees.

Application continuum:

Geni had a slide that showed the different type of SaaS applications directly related to CPA firms. The type of applications she listed were:

– CRM – Working Paper – Office Productivity Tools – Project Management – Accounting – Sales Tax – Time & Billing

Her next slide showed a quotation from Forrester and a little table that showed the best and the worst SaaS-able applications.

“The most SaaS-able…are blogs, email, and Web conferencing, while the least SaaS-able are business process management and master data management.” – Forrester

According to Geni smaller firms see immediate benefit and larger firms have a harder time realizing cost savings after switching to saaS based apps.

Reality check: Due to the nature of SaaS services and applications, SLA (Service Level Agreements) are very important and should not be overlooked. Serious SaaS vendors will most likely strive to prove their customers with 99.9% uptime, where in reality 90% is fine, says Geni.

Again, SLA are very important and no customer should sign up for a SaaS product or service before reading through the SLA agreements and feel satisfied with it! Here are the things to look at when reading through SLAs: Availability & uptime, Guarantees for system performance, Security, Data ownership, and Error resolution.

Options: Today the 4 different Cloud / SaaS integration options according to Geni are:

– All SaaS where all applications and services reside in the Cloud

– Hosted applications where just the application layer resides in the Cloud

– Hybrid scenario is what most companies are using today and where only certain applications reside in the Cloud.

– On-premise or as I define it – Private Cloud

To conclude I would like to say that SaaS and Cloud services have gone a long way and they offer great benefits. Many people like the concept and would like to at least test it, but the reality is that IT decision makers and business owners fear the Cloud.

Here is nice quotation from the presentation earlier today:

“My biggest fear is loss of client data if the SaaS provider goes out of business. If every software vendor goes out of business tomorrow, I can continue to function with the software I have loaded on my server for another 10 years. (Tax software would be the one exception.)” – Dave Brotemarkle