In my view, cloud computing or software as a service (SaaS) will continue to dominate information management for a long time to come. Already, in recent years, many IT firms have adopted SaaS-based clouds in their information management systems. The main reasons for this shift are that SaaS solutions are not difficult to use compared to traditional applications, they have enhanced compatibility and interoperability, and they are reasonably priced by vendors (Schneier, 2009). SaaS enables agencies to access useful software applications hosted on remote servers, without having to purchase, install, configure, or maintain them. Firms only pay a subscription fee for the computing resources and functionalities outsourced. Users can interact with such applications through an interface over a network, hence eliminating the need for installation. Thus, SaaS reduces costs and saves time.
Reasons why SaaS has a Promising Future
SaaS, according to Don Fornes, the founder and CEO of Software Advice blog, presents a classic example of disruptive innovation because of its potential to “disrupt existing competitive dynamics” (2010, Para. 4). SaaS is based on the client/server architecture, a common model of cloud computing. Cloud computing refers to a technology that facilitates convenient off-site sharing of computing resources and applications, hosted on servers, over networks (Schneier, 2009). As such, the purchase and installation of software applications such as SaaS on an agency’s computer are not necessary as all computing resources can be outsourced, provided the organization has good internet access. Disruptive technologies offer new solutions using two approaches: (1) pricing; and (2) the target market (Fornes, 2010). SaaS is based on an innovative client-server model, whereby the applications are hosted on a remote server or “cloud” with payment following a subscription-based pricing model. Thus, SaaS systems reduce costs and save on time. In view of this, I posit that SaaS will dominate the enterprise resource planning (ERP) market in the future.
Initially, SaaS providers targeted smaller enterprises that needed models with unsophisticated features. This explains why SaaS CRM systems such as the late 1990’s Salesforce.com were popular with small enterprises (Fornes, 2010). In recent years, advanced feature-sets and enhanced performance have made SaaS the center of focus for larger businesses and vendors. The fact that SaaS is gaining popularity amongst incumbent developers, including Oracle, Microsoft, and SAP as a “web-based, on-demand cloud computing software” (Fornes, 2010, Para. 6), heralds a bright future for SaaS. Large enterprises have begun to switch to cloud computing as a platform for running their operations. It is no doubt, therefore, that SaaS will penetrate the large enterprise market previously dominated by Oracle and Microsoft.
In addition, SaaS is one step ahead of incumbent developers; it is web-based, which means that enterprises can use desired applications without the need to install or configure them at their client computers (Sensible Computer Help, 2008). In contrast, the competitors’ architecture is not fully web-based, which implies that end-users have to install and maintain some of the applications. Also, SaaS’s subscription pricing is convenient for risk-averse customers. The other providers rely on the upfront purchase of applications and therefore, shifting to a subscription pricing model will incur losses. Another reason why SaaS is likely to cause a storm in the software industry is because of its enhanced interoperability. In SaaS, users can share computing resources through several nodes over a heterogeneous network (Fornes, 2010) and, thus, information from one source (node) can be shared on a global scale. In contrast, for the other providers, the installation of software in each node hinders the consolidation of customers using the system.
Updates for SaaS are frequent and regular. As the use of SaaS continues to increase, more upgrades made by SaaS vendors will dominate the market. The users subscribe to get the upgrade releases on their computers as patches (Schneier, 2009). More upgrades will enhance the quality and feature-set of the products. In contrast, rival companies such as Microsoft release their upgrades semi-annually or annually, a practice well with users. Also, IT relationships are not essential when using SaaS as businesses subscribe to a software on-demand basis. This trend encourages competition as enterprises do not need IT approval as is the case with the other ERP software providers.
Benefits of SaaS
SaaS facilitates the sharing of the same software by all users over a network. SaaS offers no compatibility problems as all versions are compatible with one another (Schneier, 2009). Users in different locations or users at multiple sites can easily access the software over the internet or local area networks (LANs). This makes SaaS an application of choice for multi-site organizations. Also, the global accessibility of SaaS reduces costs and saves on time, a very important benefit to companies. A firm’s IT department does not need to implement the software in the company systems. Also, the company does not incur software configuration and maintenance costs when they switch to SaaS. Only monthly or annual subscriptions are made to the provider. Thus, the cost and time savings of SaaS, when compared to traditional applications, makes the implementation of the complete software package unnecessary and expensive for companies. In addition, since SaaS applications save time, the IT staff can devote their efforts to demanding tasks (Schneier, 2009). This will enhance organizational performance in the long-run.
SaaS provides a number of applications that are useful for business enterprises. It currently offers document, content, and project management functionalities to users as well as HRM, decision-making, security, and social networks (SaaSBlogs.com, 2013). According to Chee and Franklin (2010), a firm’s return on investments (ROI) from SaaS solutions is far much greater than traditional IT offerings. Also, it is projected that the ROI for SaaS or cloud computing solutions is realized much faster compared to traditional IT initiatives. Substantial cost savings have been achieved by companies that have switched to the cloud (Chee & Franklin, 2010). Thus, cloud implementations have the potential to reduce the operating costs in agencies. In particular, public and hybrid cloud applications generate significant operational savings compared to private clouds (Chee & Franklin, 2010). The major areas of cost savings in a firm’s operations include hardware, labor, software, and productivity.
Cost savings associated with labor primarily involve the IT staff. The Sensible Computer Help (2008) website states that client/server networks reduce costs, allow efficient sharing of data, and help manage multiple users. Thus, private cloud implementations that are based on the client-server model will help firms cut down the time spent on installation, upgrade, and maintenance of these applications. For SaaS and other clouds, one system administrator can manage several servers compared to traditional applications that need more staff to run their client-server networks. Cloud-based applications and the virtual servers can also be automated; this helps to reduce costs associated with the management of the infrastructure. Therefore, much of the cost savings from SaaS applications is because fewer employees (IT staff) are needed to manage the virtual or cloud servers.
Firms using off-site clouds also stand to gain from hardware savings. To use SaaS applications, the users rely on off-site hardware to operate SaaS functionalities. Therefore, cloud computing reduces power use, the memory needed to store data, and the cooling costs. This implies that a firm’s hardware would not need regular replacement as the risk of wear and tear of hardware is reduced. Significant cost savings are associated with SaaS software use. Cloud computing entails the use of software applications hosted on a remote, off-site server (Sensible Computer Help, 2008). Thus, organizations do not need to purchase and install the software on client computers. Also, SaaS allows organizations to pay for particular software (subscription model) monthly or annually. Thus, firms can budget for their software needs and avoid incurring additional costs. In addition, clouds can enhance the productivity of customers as some providers allow end-users to access services directly from the clouds. This approach not only reduces IT costs but also enhances flexibility and speed.
Arguments against SaaS
Although SaaS promises to revolutionize information management as we know it, some skeptics advise against its adoption by organizations. One such objection relates to its web-browsers, which are said to be less interactive (Fornes, 2010). In other words, the SaaS apps do not allow improved user interface due to poor programming. There are also concerns about the security of information when using SaaS apps. Skeptics argue that the hosted data may be accessed by unauthorized parties and cybercriminals who might interfere with the integrity of hosted data.
Another objection to the adoption of SaaS applications concerns its limited compatibility with other applications or hardware (Chee & Franklin, 2010). Initially, this limited the implementation of SaaS applications to only a small number of systems. Skeptics also raise concerns about the ability to customize SaaS systems to suit the end-user’s preferences. The argument here is that SaaS systems, unlike on-site applications, allow limited customization and user control as most of these applications are hosted in a cloud and therefore not under the full control of the user. From the perspective of gaining competitive advantage, critics argue that the subscription-based payment model prevents organizations from being competitive as their counterparts using on-site applications (Chee & Franklin, 2010). Moreover, large enterprises prefer to own the applications as opposed to renting them. In this regard, the subscription payment model would deny them a competitive advantage in the highly dynamic and competitive software market.
Personal Position on SaaS
Chee, B. & Franklin, C. (2010). Applications for Clouds: Technologies and Strategies of the Ubiquitous Data Center. Web.
Fornes, D. (2010). The Software as a Service Dilemma. The Software Advice Blog. Web.
SaaSBlogs.com. (2013).The Cloud Internet [Blog post]. Web.
Schneier, B. (2009). Cloud Computing. Schneier on Security. Web.
Sensible Computer Help. (2008). Choosing the best computer network. Sensible-Computer-Help.com. Web.
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