Where does Software as a Service (SaaS) fit in today’s IT market?

Rick Maltby

The business world has largely accepted the shift from exclusively on-premises IT to cloud computing. Analysts predict most enterprise workloads will be running in the cloud by 2020. Cloud is convenient, cheaper than on-premises IT in many ways, and adds all kinds of business value. Plus, it has a catchy, visual kind of name that makes it easy for people to understand.

Although it may not have a catchy name, Software as a Service (SaaS) is an important variety of cloud computing services. It’s an extremely useful model for small businesses, because of the savings and flexibility it offers (more on that later). So it’s not surprising that the enterprise SaaS market is growing by 32% per year and generating US$20 billion in quarterly revenues.

In this post we’re helping you market SaaS products effectively by:

  • Narrowing down what SaaS is
  • Identifying key end-user benefits of SaaS
  • Comparing SaaS with on-premises IT

What is SaaS?

SaaS is a strand of cloud computing. It can be useful for marketers to remember that, because many of the general benefits of cloud – reduced costs, more capability, simpler management – apply to SaaS too.

From the end-user’s point of view, SaaS is a way of licensing and accessing software “in the cloud” instead of from their own computers.

The software is usually paid for monthly, just like utility “services” such as electricity and water. Hence, “software as a service”.

And since the applications are delivered over the internet, they run in a web browser. Sometimes they offer lightweight desktop and mobile apps too.

SaaS isn’t a new concept, but it needed the right conditions to take off – namely, fast internet connections, capable and standardised web browsers, plus business demand for working remotely and on mobile devices. Now all those things are in place, SaaS is viable for most businesses and growing fast.

Example: Office v Office 365

A great way to understand SaaS is to compare traditional Microsoft Office with its SaaS equivalent Office 365:

Feature

Office (on-prem)

Office 365 (SaaS)

Up-front purchase cost

~£250 per user

£0

Monthly cost

£0

~£9 per user

Version updates

Biennial, charged, manual

Free, frequent, automatic

Native apps

Yes

Yes

Apps usable

Where installed

Anywhere via cloud

Data available

On local IT system

Anywhere via cloud

What are the benefits of SaaS solutions?

So, what makes cloud-based applications appealing to businesses? There’s a long list of advantages vendors can talk about when marketing SaaS solutions.

They don’t require a big up-front investment

      With SaaS, businesses don’t buy the application. They pay monthly for a subscription. This means no large up-front acquisition costs.

      SaaS apps also tend not to require high-powered PCs and servers. This is because only the interface runs locally, in the browser. The application itself runs on the vendor’s server (“in the cloud”). This reduces capital expenditure even further.

      Both of these advantages make SaaS ideal for smaller businesses, which often run on tighter budgets than enterprises.

      They enable flexible working

      You don’t need to be on “your” PC, laptop or mobile to use a SaaS application. You just need to be on a device with a good Internet connection and a modern browser. Today, that is most devices.

      This means businesses and employees can use their applications and their data anywhere. They can work from home, work when travelling, work across different devices, work somewhere else when their PC is broken. In theory, everyone should be a lot more productive.

      Small businesses win here again, because they can save on office space and give employees flexibility by allowing remote working.

      They make IT simpler and cheaper to run

      Setting up a SaaS application is often just a matter of signing up and buying licenses. Some businesses and applications will need to migrate data, but it’s a one-time thing.

      There’s nothing to install, updates are automatic, and many solutions promise excellent service level agreements (SLAs) for extreme reliability; so businesses benefit from reduced management costs – especially businesses with small IT teams.

      They’re updated often, for no extra cost

      SaaS customers don’t usually subscribe to a specific version of an application – they subscribe to a service that includes the latest version. This means businesses always have the latest application version, with the newest features and most modern data security.

      There’s no need to periodically upgrade applications at high cost to the business.

      How does SaaS compare to on-premises software?

      SaaS has compelling benefits, but not every business is rushing to take every application off-premises.

      Traditional software still has a few advantages, like:

      • Not requiring an internet connection
        No Internet, no SaaS application. But which is really more reliable: the Internet, or small business IT systems?
      • Having a potentially lower total cost of ownership (TCO)
        SaaS subscription costs add up over time, potentially costing more than the cost of an on-premises alternative. However, TCO calculations should include hardware, maintenance, power and upgrade costs.
      • Keeping sensitive data in-house
        Using SaaS means trusting a third-party with data and transmitting it frequently over the Internet, compared to keeping it behind a firewall. On the other hand, leading SaaS providers like Microsoft provide highly-trusted cloud security.

      Understanding where SaaS adds value to businesses, and how it can overcome objections from businesses still stuck on traditional IT, is key to positioning and marketing solutions effectively.

      At TBT we create and run campaigns for many of the world’s leading SaaS vendors. If you’d like to learn more about marketing your SaaS and other areas we can help, please get in touch on Twitter @tbt_marketing, email [email protected], or phone +44 (0)1373 469270.

      Want to start a conversation?

      Get in touch

      We use cookies to ensure you get the best experience on our website. Learn more