As SaaS continues to become more mainstream, legacy enterprise software vendors are trying to stay relevant, and are putting brand new marketing stickers on their aging legacy software by hosting it on a server and calling it “SaaS” or “on-demand”. The big issue is that not all SaaS offerings are created equal, which means customers will not derive the same value from these services as they will from “pure” SaaS solutions.
Here’s a look at the major “flavors” of SaaS:
- Hosted / ASP – The ISV’s legacy application running from a hosted site. In many cases, this is the same on-premise software, only it is now delivered from a data center.
- Single-Tenant – New products designed to run over the Web, where all customers are running on their own set of infrastructure components.
- SaaS Multi Tenant – New products designed for the Web, where all customers are sharing the same infrastructure.
The chart below provide a high level comparison of the three:
Why Is It Important for the Customer?
- Product – Hosted means that it is the same product that was designed for on-premise delivery. This is NOT SaaS!It means lack of usability, complex integrations, and old architecture. SaaS products were created from scratch to be delivered as new Web applications. You want to benefit from the innovative usability and intuitiveness of these systems.
- Delivery – SaaS vendors are experts in running and operating their own software stack. If they run into performance, scalability, or availability issues, they can re-architect and improve the software as needed. Over time, this results in software that is optimized to be delivered over the Web. A hosted software vendor is delivering software built by other vendors, and has no access to the code base, so he can not extend or enhance it.
- Upgrades – SaaS vendors take care of all the upgrades, and make sure the customer is running on the latest release. The customer is not required to do any upgrade, testing, or customization work. With hosted solutions, the customers have to test the upgrade, verify all customization work (or re-do much of it), and “accept” the upgrade. It costs time, money, and resources – and its the client’s dime. And with hosted solutions, the customers is still locked in the vicious, forced upgrade cycle.
- Integrations – Integrating on-premise software is hard. Put it on a hosted server, and its still hard (and yes, integrations will break every time you upgrade). SaaS vendors are following industry Web services and integration standards, and provide common interfaces to both SaaS and on-premise solutions.
- Innovation – SaaS vendors can innovate fast and release new functionality that brings value to customers often. They can do this because they don’t have to support multiple releases of the software, and they control the delivery of it. That means customers get new value sooner, without having to do anything to get it. With hosted solutions, you are bounded by the release cycle of your legacy software vendor, so that usually means a 2-3 year cycle for new features that you may not necessarily need.
- Cost – On-demand solutions are expensive, as they involve the same cost components customers were incurring before SaaS was born (these include fees for licenses, maintenance, service operation, upgrades, testing, etc). With SaaS, many of the cost components go away. Instead, the customer pays a single fee for using the service. The big difference between SaaS multi-tenant and single-tenant solutionsis that the cost of operating a multi-tenant infrastructure goes down as more tenants are brought on board, and that cost reduction can be passed on to the customer either in the form of lower subscription fees or accelerated investment in product innovation. That’s exactly the opposite of a single-tenant SaaS architecture. Since each customer has its own infrastructure, the vendor’s overall cost of operating the service goes up as more customers sign up, which translates to higher subscription fees or less investment in product innovation.
Not all SaaS offerings are created equal. Make sure you clearly understand the differences and that what you’re getting meets your needs.
About Oz Merchant
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