For IT departments drowning in complex and expensive software maintenance chores, the SaaS (Software as a Service) model promises to ease the burden dramatically. SaaS reduces complexity by outsourcing most of the infrastructure required to run software applications (to the software vendors themselves) and reduces costs by charging only for what is consumed.
While the vision sounds like utopia for IT departments and the people who fund them, SaaS is not a panacea. For the right computing applications it could be a Godsend, allowing companies to outsource non-core competencies and focus on what they do best. For other situations, it's a not a good idea. Fortunately, it's not an either/or choice. In the world of cloud computing (which includes SaaS, among other services), you can adopt a hybrid model in which some systems are outsourced and others are kept in-house.
SaaS is not a silver bullet. Although the model has several benefits, it also has a number of drawbacks. You need to carefully consider both before deciding whether SaaS is right for you.
Solutions that are particularly suitable for SaaS are those that are standard across industries (horizontal) or across companies within a certain industry (vertical). For example, word-processing, expense-reporting, spreadsheet, email and online conferencing applications are standardized across industries and lend themselves to SaaS. Stock trading, medical billing and airline reservation services are examples of vertical solutions. SaaS could also work well for companies that need fast provisioning of IT capacity to reach time-to-market business goals, or if internal IT departments lack the skills or bandwidth to handle a particular task.
The Corporate Executive Board's Infrastructure Executive Council has come up with a list of factors to consider, also listed here, in weighing this decision:
The major suppliers of corporate IT - Microsoft, IBM, Oracle/Sun - are spending unprecedented amounts of money on becoming dominant Web service and platform providers. This battle for position, combined with the transformation of IT from a competitive differentiator into a commodity, may nudge you into taking a serious look at SaaS. It's time may have come.
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