How True Software-as-a-service Delivers More Value

Understanding the next generation of enterprise software






Maximizing Benefits from Software-as-a-Service



  • Choose SaaS especially for newly-automated, generic business processes: SaaS is ideal for a fast-moving, fluid business process, since SaaS requires low investment to get going, delivers fast benefits, and offers highly configurable solutions. New approaches can be tested, results can be validated before deploying widely, and best-practices can be learned and shared, all fulfilling the need for a flexible, highly adaptable solution.

    SaaS solutions are most suited for business processes that are important but fairly generic across companies a "core business task, but not a key competitive differentiator."

    In addition, true SaaS solutions can simultaneously provide global consistency and visibility where needed, and local autonomy and process configurability where it makes sense, enabling organizations to gain both compliance and flexibility where desired in the newly- automated process. For security reasons, SaaS is also ideal for "extended enterprise" solutions, where vendors or partners are also participants in the business process.


  • Align solution cost with business results: With SaaS, customers can align their IT investment on the SaaS solution with achieved business results. Some customers will want to "variable-ize" their cost structure, in which case transaction-based pricing is typically most appropriate. Some want a predictable payment each month; the SaaS provider should be able to accommodate all of these options. "Gainshare" pricing has been attempted in some cases, but due to difficulty measuring the baseline process performance and budgeting for costs, this approach has been largely discredited.

    The key with SaaS is shared risk if the software does not gain adoption and deliver the desired business result, the SaaS vendor shouldn't gain revenue this is a central tenet of SaaS. [Note that this is also the fatal flaw with up-front licensing of legacy enterprise applications the software vendor's revenue isn't at risk if the desired business benefits aren't achieved or the software isn't even used, as all the risk falls on the customer.]

    In addition to pricing that shares risk, follow-on software implementations should be tied to achieving business results in the first implementation.


  • Negotiate Service Level Agreements (SLAs) carefully: Since the application is hosted offsite by the SaaS software vendor, the customer relies on the software vendor to provide all the needed infrastructure, security and software support. Fortunately, the SaaS vendor is already highly motivated to provide a very good ownership experience, since the performance of the service will impact end-user adoption of the software and follow-on rollouts, which determine the SaaS vendor's revenue.

    In addition, Service Level Agreements (SLAs) in the contract can be used to help manage key areas of risk by specifying how the SaaS vendor's service will be measured. The SLAs will require negotiation to match the customer's goal with the factors that the SaaS vendor has control over for example, response times are a result of the SaaS server response time, Internet traffic, customer network performance, and end-user PC browser performance.

    Since the key goal is improving the business process, often the best answer is to monitor and regularly report on the overall desired metrics for periodic joint discussions about how to continually improve performance, since with SaaS, the customer and vendor are aligned in achieving and improving business results.


  • Be a willing partner with the SaaS software vendor: With a legacy software company, the customer's relationship with the software vendor is cursory at best the software vendor sends the box of software CDs to the customer, and the customer must work with implementation consultants to figure out how to install it, how to link it with other software applications and infrastructure, and how to configure and customize it to make it work best for their needs. At the end of the process, the customer ends up with all the knowledge of how the software was configured for them and how it benefits their enterprise; the software vendor has no idea how the customer is using the software in the field.

    With a true SaaS offering, however, the software vendor provides implementation services and best-practices process design to quickly and completely deliver an improved business process. After implementation, the SaaS software vendor intimately understands the customer's business needs, how the software is configured to improve the customer's business results, and how the customer uses the software for what benefits. Every day the SaaS vendor gets real-time customer feedback about how its software is performing and delivering business benefits.

    This allows the SaaS software vendor to provide much better software support, not just providing software features but, more importantly, supporting the business process and results the customer wants to achieve. Combined with frequent releases and automatic upgrades from true SaaS, this gives customers a new opportunity to provide timely and frequent input on how to improve the software to achieve their desired business results.


  • Leverage the software vendor's expertise: Because they provide complete services and they know how their software is being best utilized, true SaaS software vendors are experts in the business processes they automate, and how to gain the most business benefits from their software solution. Customers should leverage this knowledge during the implementation process design, in order to gain benefits that the customer may not even be aware of. In addition, the SaaS vendor also should provide ongoing assistance in using new software capabilities, process innovations, and best-practices to continually improve business results from the automated processes.


  • Take advantage of the new flexibility: SaaS allows customers to focus on their core competencies and their business processes rather than becoming experts on software internals, technology infrastructure maintenance, or deployment methodologies.

    In particular, SaaS is aligned with many enterprises' desire to decrease IT infrastructure and maintenance costs, reducing the large and somewhat uncontrollable expenses for system administration, software maintenance, patch management and data center operations.

    Where possible, take advantage of the greatly reduced software operations effort to redeploy resources to higher-value business functions, apply innovation to the business process to improve its performance, and focus on growing and augmenting the company's core competencies for competitive advantage in the market.
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