The ever-increasing popularity of SaaS (Software as a Solution) model has led many to believe that it’s the most cost-effective and risk-free channel of delivering services. The initial costs are low and even small and medium businesses can take advantage of modern technologies. But there are few mistakes businesses should avoid when comparing SaaS vs on-premises solutions.
This post discusses some common misconceptions businesses have about the cloud-based delivery model and things they can do to avoid costly mistakes. We have already covered choosing between SaaS and on-premises in detail so you might want to check out the detailed guide here.
Most Common Misconceptions about SaaS
Misconception# 1: SaaS Solutions are Always Cheaper than On-premise Solutions
SaaS has become the default software delivery channel for a many large enterprises and other organizations. A growing number of small and medium businesses also rely on cloud-based solutions to improve efficiency and deliver great customer experiences. However, the monthly subscription cost or the total upfront cost of on-premises solutions should not be the only factors to consider when choosing between the two software delivery models.
Moving from on-premises software to cloud-based solutions can be a very expensive endeavor and, in many cases, a multi-million-dollar decision. Thinking that SaaS is always less expensive than an on-premises solution is a mistake businesses of all sizes should avoid. SaaS licensing can actually become more expensive than one-time but costly one-time licenses in the long run.
One main advantage SaaS has over on-premise solutions is the much lower upfront cost. The recurring monthly/quarterly/annual expenses are usually lower than what you have to pay upfront for a one-time license. That’s because you are renting a solution for a specific time period instead of buying or ‘owning’ it. SaaS licenses usually start to break even after 3.5 years and although you pay less during this time, you are collectively paying more after that.
Although SaaS saves you quite some money that otherwise would have been spent on hardware and maintenance, you still have to configure, integrate and customize the software. Not all providers are generous in this regard and may charge you extra for these things. You might end up hiring consultants and specialized resources to upgrade, maintain and customize SaaS solutions, which adds up to the total cost.
Avoid assuming that SaaS is always more cost-effective (especially in the long run) and requires less resources for administration, maintenance and customization. In addition to performance and security, consider the flexibility, integration options and power of a SaaS solution. In-house hosting is another option if there is a lot of administrative and maintenance involved in a certain SaaS solution.
Understanding and testing upgradability, compatibility, integration, customization and maintenance of a SaaS solution can be challenging and time consuming. It’s also difficult to predict how a solution would behave after upgrading to newer versions. Conducting a proof-of-concept test and talking to customer references can help a lot in this regard. Due diligence might take some time and effort, but it’s worth it in the long run and makes it easier to determine if you should really go for a cloud-based solution.
Misconception # 2: You Get Control Over Availability and Performance
Businesses have to rely on SaaS solution providers to ensure availability and performance. Although these things are included in the SLA (Service Level Agreement), it’s still hard to establish if a provider will be able to deliver on its promises all the time. You are down when a provider is down and left on the mercy of its maintenance windows. You might get compensation or credits or downtimes, but it cannot fully compensate for lost productivity and damaged business reputation.
Reputable SaaS providers do offer high level of app availability, but the definitions around performance make it difficult to accurately measure the levels of performance you get. Lagging, slow and buggy apps are equally frustrating and reduce productivity and customer experience. The SLA should clearly define how you will communicate with the provider and how it will compensate for performance issues.
Measuring availability is easier than quantifying performance. You need to be crystal clear on how the vendor is measuring performance. There should be a clear understanding between you and the provider about how to communicate when performance issues arise and how the provider would handle such situations. Vendors don’t tend to report issues themselves so you need to have the capabilities and resources to keep track of performance.
Misconception# 3: All SaaS Solutions Work the Same Way
While the underlying technology of SaaS solutions might be the same, not all SaaS solutions work the same for all businesses. Since SaaS subscriptions are essentially a lease with no depreciation over time, finance organizations view the SaaS model differently than IT organizations who might be happy with the pay-as-you-go model as long as they are getting the value they expect.
Vendors can also change the pricing model or start charging for new functionalities or charge separately for capabilities that were previously part of the package. This would ultimately increase subscription costs, which can be a big problem if a business has signed the SLA for a fixed term.
SLAs become effective from a specified date, whether you have moved the solution to production or not. If a business is unable to secure resources to move a solution into production, it’ll get no value from the subscription and will be legally obliged to make recurring payments.
Differentiating between SaaS licensing and deployment is the key here and managers need to understand whether to ‘own’ the solution or ‘subscribe’ to it. Subscription in broad terms means relying on the provider for the most part. Businesses have to decide if they will run the solution from their own data centers or though provider’s or 3rd party data centers.
Running apps from your own data center provides ownership and more control over how your data is stored and processed. Some businesses mix and match both, but it also comes at additional cost and other resources.
It’s better to be smart when signing the contract. The payments should start after the solution is fully developed and ready to be deployed. The SLA should also include protections that prevent the provider from switching the licensing model or pricing terms within the agreement period.
Misconception# 4: The Service Provider is Fully Responsible for Data Protection and Recovery
Unless and until the SLA specifically says so, that’s usually not the case as providers are responsible for availability, performance, support and so on. Businesses are also responsible for data theft or loss in case of a cyber-attack. Most SaaS providers only offer short-term data retention and restoration facilities, while the recovery process is also lengthy and more of a headache.
It’s better to have solutions you can administer from one console. Not only it makes management simpler, it also allows you to take backups without having to use separate software/hardware. A backup solution that you can access from any browser makes things easier for the IT staff. Instead of leaving everything to the providers, businesses need to understand their own responsibilities to ensure regular data backups and proper security.
A solid backup and recovery solution should allow you to search and restore data regardless of where it was originally stored and without you having to search specific folders and devices. When it comes to data protection, recovery and restoration, the SLA should be clear about the roles and responsibilities of both parties.
The subscription cost should not be the only deciding factor when purchasing a SaaS solution. All models have their own set of advantages and disadvantages and SaaS is no exception. SaaS is no longer a peripheral trend and has evolved into a mainstream software delivery model. SaaS solutions can be packaged in a number of ways, which makes it very important to carry out thorough due diligence and make sure the SLA protects you from all sides.