Does Software as a Service Make Sense for SMBs?

By George Symons

January 3, 2008

Software as a service (SaaS) providers are aiming their marketing efforts directly at the SMB market. This is because the value proposition of getting a sophisticated solution without all of the headaches of complex deployments and management is very attractive to organizations that have limited IT resources.

It also makes a lot of sense when you can not amortize that cost across a large population of users. Given that the value proposition is so good, what is important when looking at a SaaS solution? Which types of solutions make sense and what should you look out for?

Some SaaS solutions have been wildly successful in the small, medium and even large organizations. SalesForce.com is a great example of this. CRM (customer relationship management) is an ideal SaaS solution. The reason for this is because CRM solutions tend to be expensive to license, and even more expensive and time consuming to install and configure.

If you want to get up and running quickly, yet still be able to configure a solution specific to your organization, these CRM SaaS solutions are the way to go. Not only that, they already have all of the necessary connections to other products such as accounting, contract systems and market analysis. All of this would be very expensive to implement in house, and a clear return on investment (ROI) can be calculated, especially when you consider the costs of upgrading when new versions of the CRM product or operating system become available.

From the above example, you can see that the benefits make sense any time the solution you are looking for has a large up front cost for the software, the software has a significant cost for installation and configuration, and the software needs to interface to other products or environments, which may or may not be under your control. Of course, when determining the ROI you must look at the maintenance/support fees as well as the cost to upgrade. In particular, customization work that was done will not necessarily upgrade smoothly and may have to be reimplemented.

Another good example of an application that lends itself well to SaaS is e-mail. For a small company, the cost of building and maintaining an e-mail server can be significant. Many people use SaaS for e-mail, either for an individual account or for the entire company.

What to Watch For

The accessibility of your data is an area to review carefully when evaluating SaaS. You need to be sure that you have clear access to your data when you want it and in the form that you want it. For example, if you want to move off of one CRM system to another, you need to be able to download all of your customer data into some interchangeable format (even comma delimited form for spreadsheets normally works) and across all of your users.

This is more difficult when you look at services such as data protection. Clearly, backup/recovery services are becoming readily available. They protect your data and give you access to it. The concern here is the speed of access. For CRM, obtaining a record is fast. For backup/recovery, if you need to recover a many gigabyte disk, it can take hours, if not days, to download all of that information over the Internet. Here you need some other method of getting your data back. The options are two fold. If the service provider has a service that creates a CD or tape that they can send you, then it is just a 24 hour recovery issue. Or, even better, if you have a hybrid approach where you have local data protection on disks, but use the service provider only as your disaster site, then you can do most recoveries off of a local disk. Again, you can get up and running quickly with backup as a service, but you need to ensure that you can recover.

With respect to access controls, if the data is to be shared among users, then it will be important to have levels of access control beyond just "administrator" and "user". Granularity of access control is one of the areas where online services differ from each other so up front investigation is important.

As for security, it’s generally not an issue but always a question to ask. The data, at a minimum, needs to be encrypted both in transit and at the service provider site. There also has to be security so that other organizations do not have any way of accessing your data. Again, this is generally taken care of, but it is always important to ask and be comfortable with the answer.

Many of the services available offer encryption. Fewer offer integrated authentication, or single sign-on (SSO). Simplifying authentication is important for any high utilization service. Otherwise, the login complexity can cause help desk calls and poor adoption of the service.

Finally, a discussion on SaaS would not be complete without mentioning Web 2.0. Most Web 2.0 sites are a form of SaaS. The key here is collaboration. A great example of this is a Wiki, a website that can be quickly edited by its visitors with simple formatting rules. Someone can create a Wiki for a purpose (such as writing this article) and others can comment, make changes or provide background information. Everyone has access to this information anytime and from any location.

The beauty of using a Wiki from a service provider is that it can be up and running for a new project in minutes and no special access or VPNs (virtual private network) need to be created. SaaS will move from being a more efficient way for SMBs to run complex software to being a more efficient way to collaborate as Web 2.0 solutions take shape.

So does SaaS make sense for SMBs? The answer is yes—at least for certain types of applications. Applications that are expensive to configure, manage and keep up to date are ideal candidates for SaaS offerings. However, for applications that have high data transfer requirements, such as backup where you may need to get a large amount of data back quickly, SaaS solutions are not always a good fit, unless you have local and guaranteed access to the data. SaaS will continue to grow and should be evaluated carefully for each application.

George Symons currently serves as CEO of Yosemite Technologies. Mr. Symons joined Yosemite from EMC, where he served as chief technology officer for Information Management, responsible for defining EMC's product and technical strategy. He also played key roles in the integration of Legato enterprise backup and recovery products and Documentum content management software into EMC.