By 2015, experts predict half of all software providers will deliver their applications as Software-as-a-Service (SaaS).
In fact, SaaS is expected to represent three-fourths of all spending on public cloud services in 2015, making the idea of SaaS delivery models top of mind for software providers. Those not yet embracing a SaaS delivery model may already be feeling significant competitive pressure knowing that customers want choices in the way they consume their software. For software providers wondering whether a SaaS model is right for them, here are seven of the most important reasons that adopting a SaaS delivery strategy makes good business and financial sense for software providers.
7 Reasons SaaS Makes Good Business Sense
Most software providers find themselves somewhere in the middle of the spectrum today, but as they naturally move toward the right they will need to leverage and embrace the cloud and a SaaS strategy to get to a true SaaS business model. Here are seven reasons this makes sense for software providers according to Logicalis US experts:
- Shortened Implementation Times: By standardizing the implementation of a software solution, SaaS reduces the solution’s implementation time. When implementing a software program on-premise, the technical environment varies with each customer, causing the software provider to inherit and resolve the unique implementation problems of each customer. With a cloud deployment, the environment is standardized; implementation is the same time after time. Automation and orchestration technologies can also be leveraged to further streamline implementations, driving down time to consumption, and increasing customer satisfaction. By shortening implementation times, products can also be brought to market faster and more cost-effectively than they can with more traditional go-to-market strategies.
- Marketing to New Customers: In a traditional software delivery model, the customer buys the hardware, implements it on premise, then deploys the software. Someone has to be responsible for that environment which adds cost and complexity that many customers would prefer to avoid. Consuming software as a service is simpler and offers a different financial model; instead of a large capital expenditure to buy dedicated hardware, the consumer can package its purchase as a monthly fee that fits into its operational budget. Therefore, as software providers adopt a SaaS delivery model, they’re able to reach a wider base of customers, particularly those who want to trade IT CAPEX for OPEX.
- Capturing New Revenue Streams: In more traditional software delivery models, providers sell software and maintenance as a package, charging a large one-time payment. With a SaaS model, the larger single payment may be divided into a monthly annuity stream that continues at a steady, ongoing rate. By also including infrastructure services in the initial sale, software providers are able to make money on a larger piece of the overall IT landscape. The customer has to run the software they purchase on something; why not sell them cloud access on a recurring monthly basis and earn that additional revenue long term?
- Reducing Risk: Risk mitigation is one of the most important factors in a business’ success. By selecting an experienced cloud partner with a proven track record in SaaS delivery rather than trying to build a hosting infrastructure in house, the software provider can avoid a lengthy, multi-year learning curve where mistakes in hosting the software will inevitably be made. Finding and partnering with the right cloud provider can mean avoiding these costly mistakes and greatly lessening risk for the business as a whole while still allowing the provider to capitalize on the annuity stream and market to customers who don’t want to buy on-premise hardware themselves.
- Being Flexible: Offer Hosted, Managed Appliance and SaaS Solutions: Customers want options, but providing all the options customers want is a costly endeavor. Trying to do this all alone will inevitably lead software providers to push customers toward the model they are best able to provide, a strategy which may not be in the client’s best interest and could result in loss of business. Instead, create a go-to-market plan that includes hosted, managed appliance and SaaS strategies, then rely on experienced partners to seamlessly provide the pieces you aren’t able to cost-effectively deliver to your clients.
- Partnering for ITSM, Change Management and Monitoring: A lot of Infrastructure as a Service (IaaS) companies provide just the cloud infrastructure and nothing more. But delivering a true solution means more than just building the environment the software runs on; it also means managing and scaling that environment, supporting the customers and managing their SLAs. It takes a long time to build a successful service organization, so in many cases, savvy software providers outsource key managed services they want to provide to their customers – from the infrastructure itself to backup and disaster recovery, automation and orchestration, and even managing a help desk for the software provider itself. An experienced customer service partner, for example, will determine what the issue is when a service ticket comes in – i.e., whether it’s the operating system, a database backup/restore issue, or an outage that needs to fail over. If it’s software-related, they’ll send the customer back to the software provider. Anything else, they’ll solve it on the spot on the provider’s behalf.
- Selling Security – SSAE-16, HIPAA, PCI: Customers want assurances that the solution they deploy is secure. Choosing SaaS deployment partners who can help meet the end customers’ security and compliance requirements by providing a secure, audited environment and signing Business Associate Agreements (BAAs) for HIPAA, for example, will be a definite door opener with customers concerned about regulatory requirements.