Software as a Service
(SaaS)
Does it make Cents?
by
Brian Moore
Contents
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Brief Background information
SaaS Architecture
Financial Consideration
Case Study
Conclusion
Q&A
Intro to SaaS - Definition
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Software as a service (SaaS) is a
model of software delivery where the
software company provides maintenance,
daily technical operation, and support for
the software provided to their client.
It assumes the software is delivered over
the internet.
Software delivered to home consumers,
small business, medium and large
business
Intro to SaaS
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The web as a platform is the center point
Web-browser acting as a thin-client for
accessing the software remotely across the
internet.
Network-based access to, and management of,
commercially available (i.e., not custom)
software
application delivery that typically is closer to a
one-to-many model (single instance, multitenant architecture) than to a one-to-one model,
including architecture, pricing, partnering, and
management characteristics
SaaS - Pros
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Stay focused on business processes
Change software to an Operating Expense instead of a
Capital Purchase, making better accounting and budgeting
sense.
Create a consistent application environment for all users
No concerns for cross platform support
Easy Access
Reduced piracy of your software
Lower Cost
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For an affordable monthly subscription
Implementation fees are significantly lower
Continuous Technology Enhancements
SaaS - Cons
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Initial time needed for licensing and
agreements
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Trust, or the lack thereof, is the number one
factor blocking the adoption of software as a
service (SaaS).
Centralized control
Possible erosion of customer privacy
Absence of disconnected use
SaaS Architecture
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Fueled by
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Bandwidth technologies
The cost of a PC has been reduced
significantly with more powerful computing
but the cost of application software has not
followed
Timely and expensive setup and maintenance
costs
Licensing issues for business are contributing
significantly to the use of illegal software and
piracy.
High-Level Architecture
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There are three key differentiators that separate
a well-designed SaaS application from a poorly
designed one
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scalable
multi-tenant-efficient
configurable
Scaling the application - maximizing
concurrency, and using application
resources more efficiently
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i.e. optimizing locking duration, statelessness,
sharing pooled resources such as threads and
network connections, caching reference data,
and partitioning large databases.
High-Level Architecture (con’t)
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Multi-tenancy – important architectural
shift from designing isolated, singletenant applications
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One application instance must be able to
accommodate users from multiple other companies at
the same time
All transparent to any of the users.
This requires an architecture that maximizes the
sharing of resources across tenants
is still able to differentiate data belonging to different
customers.
High-Level Architecture (con’t)
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Configurable - a single application instance on
a single server has to accommodate users from
several different companies at once
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To customize the application for one customer will
change the application for other customers as well.
Traditionally customizing an application would
mean code changes
Each customer uses metadata to configure the
way the application appears and behaves for its
users.
Customers configuring applications must be
simple and easy without incurring extra
development or operation costs
Saas Financials
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4 ways software companies are pricing their products
 Open Source – free basic products but charge a fee
for the upgrade to the premium product (i.e. Apache,
Linux, etc)
 License software – main way its being done.
Customer like this way because they own the
software as an asset
 Leased Software – deployed at customer site but
leased for a time period. Used in the days of the
mainframe
 SaaS – subscription pricing. Like leasing is considered
and expense but upgrades and maintenance is free
and seamless
Saas Financials (con’t)
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Legal should be involved in the acquisition of missioncritical SaaS software
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Need to setup contractual relationship with the SaaS
provider
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Companies are losing control of their data in the SaaS model
Depending on the service provider for security and data access.
Setup escrow account
With conditions of being able to run application in house
Ability to move data from current provider to new location
Also Service Level Agreements (SLAs) for
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Availability, response times, notifications of outages
Data integrity, data privacy, frequency of backup, support and
disaster recovery
Saas Financials (con’t)
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CIO decides if SaaS software will benefit
IT while CFO decides if it is economical for
the whole firm
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Leasing vs Buying
Similar to decision of leasing or buying a car
 Need to compare costs that effect cash flows such
as depreciation, interest on financing, tax and
opportunity cost
 Use an experience Accountant
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Case Study - Software4Rent.biz
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Software4Rent.biz provides casual or long term software application
rental, enterprise wide software deployment and management
Offerings
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No contracts to sign - rent for as long as you want
Manage, deploy and track leased software resources more effectively in
real-time.
No cost software upgrades
Can 'Top up' at minimal cost in times of peak software use
Systems administrators can allocate application software to users in real
time
Change the allocation of licenses as required and reduce the number of
licenses that the company needs to buy.
Save work to local hard drives, or on their servers if you are a pay bythe-month user.
Allow users to rent software on an hourly, daily, weekly or monthly
basis
Software offering & Pricing
Vendor
Application
Hourly
Daily
Weekly
Monthly
Category
Microsoft
Office 2003 Professional
1.65
6.60
19.80
49.50
Office Suite
Microsoft
Project Professional 2003
3.95
15.80
44.50
97.90
Management
Microsoft
Visio Professional 2003
1.95
7.80
23.40
58.50
Drawing
Microsoft
Word 2003
0.75
3.00
9.00
22.50
Document
Microsoft
Excel 2003
0.75
3.00
9.00
22.50
Accounting
Microsoft
PowerPoint 2003
0.75
3.00
9.00
22.50
Presentation
Microsoft
Access 2003
0.95
3.80
11.40
28.50
Database
Microsoft
Publisher 2003
0.95
3.80
11.40
28.50
Drawing
Microsoft
Outlook 2003
0.95
3.80
11.10
28.50
Email
Microsoft
InfoPath 2003
0.95
3.80
11.40
28.50
Management
R Project
R Statistics Programming
0.35
1.50
4.50
9.95
Statistics
Future shop
Microsoft Office Word 2007
$309
Cost Per Usage Chart of MS Word
Low Usage Medium Usage High Usage
Software4Rent
$3/day X
10 times/mth =
$30/mth X
12 mths=
$360/year
Buy
$360 inc tax
$9/week X 40weeks =
$360/year
$22.5/month X 16
month = $360
Conclusion
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Get over initial hurdles
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Adopting SaaS in the enterprise has to be analyzed
for economic and efficiency reasons
A lot of initial planning and negotiating with the
solution provider- security, data access, legal, etc
Long term Benefits
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Easy Access
Reduced piracy of your software
Lower Cost
Continuous Technology Enhancements
Questions?