Should You Buy Software as a Service?
It's hard to be a savvy software buyer. There are dozens of solutions available, each with a different mix of tools, a different price tag, license agreement and support package. There's another way to go beside the traditional licensing model: software as a service (SaaS). Instead of buying software to run on the company's own computers, SaaS customers just pay to use software over the internet. A recent Supply & Demand Chain Executive article by Liz Herbert goes over the pros and cons of SaaS solutions:
With SaaS, line-of-business heads, ranging from the vice president of sales to the director of human resources (HR), can single-handedly own the purchase decision by taking advantage of free trial offers on Web sites to evaluate solutions and paying a monthly or quarterly rate low enough to stay off the corporate radar screen for requiring approvals. Additionally, the easier-to-use and easier-to-administer nature of most SaaS solutions means non-IT users can rely on point-and-click tools and wizards to set up and configure solutions.In many cases, SaaS is an easy solution that shouldn't be overlooked. Ultimately, however, the decision to go with SaaS applications has to be on a case-by-case basis with analysis of the trade-offs outlined above.
SaaS is taking off most quickly in [...] HR, recruiting, customer relationship management (CRM), security and IT help desk. However, gaps in customization and integration capabilities make SaaS less appealing where deeper specialization or complex, real-time integration is required, such as certain components of supply chain management (SCM) software.
Cost components remain a core basis for making SaaS versus on-premise decisions [...] Implementation and administration costs for SaaS are typically lower than those for on-premise solutions. On the downside, the recurring cost [of subscriptions] compared with a higher upfront license fee followed by lower maintenance fees means that SaaS is often more expensive in the long run [...]