Software as a Service (SaaS) offerings are almost indispensable these days. We explain what it is and how the SaaS approach works.
Software as a Service (SaaS) offerings have been gaining ground for some time now, both in private use and in the business context. This development can no longer be stopped and in the meantime everything indicates that we as companies or private users will obtain and use practically all software applications “as a service” and thus from the cloud in the foreseeable future, and for good reason.
But what exactly does “Software as a Service” mean? And what are the advantages compared to more traditional methods of use? That’s exactly what we want to take a closer look at in the following.
SaaS – Magic from the browser
First and foremost, the use of software as a service means that I, as a consumer or corporate customer, license a software solution as a service for a certain period of time and consequently the corresponding solution is available to the end users via the Internet or via an Internet browser when required (“on demand”). This means that – in contrast to the traditional use of software applications – software is no longer installed locally on the end device, but users can access the web application from almost any end device at any time via a browser.
As an enterprise customer, I don’t have to worry about hosting, operation and deployment, and the provider is also responsible for ongoing development (new functions) and updates (e.g. security patches).
A new kind of customer relationship
This setup results in some special features regarding the relationship between software provider and customer. Due to the usually low effort required for implementation, many solutions can be activated and used as so-called “self-service solutions,” i.e., via a simple order on the Internet – similar to a web store. This eliminates the need for direct contact with a sales representative, but also requires the customer to be more independent and to compare providers in advance.
On the other hand, because the solution is hosted by the provider itself, there is an additional and very direct communication channel between the two parties. For example, chats, error messages and update messages can increasingly be called up directly in the software solution itself – as a consumer, I am thus constantly informed about innovations and can give the provider direct feedback or ask questions.
In addition, SaaS providers are often very affine when it comes to marketing and regularly provide customers with information via e-mail and other channels. Larger solutions even have their own “success managers” (Customer Success Managment) who take care of the customer’s well-being and needs; as the name suggests, they want to make their customers successful and, of course, increase customer revenue at the same time.
Ongoing costs instead of high one-off investments
The cost model is also different from previous practices. Instead of high one-time acquisition costs for purchase licenses, Software as a Service providers generally rely on recurring and thus plannable costs. For customers, this means that they pay – usually more favorable – monthly amounts for as long as they want to use the solution.
If the contract is terminated (which is usually possible at short notice), no further costs are incurred, but the right to use the respective software solution expires, the customer is more or less locked out of his previously used application and typically also loses all his data. But of course almost all providers offer a possibility to export or otherwise backup data during the remaining cancellation period.
Advantages for the customer
For customers, the Software as a Service concept offers numerous advantages. The most important argument for the continued success of this type of software use is the focus on the actual added value. Customers can concentrate on their core business where the software solution supports them (e.g. in marketing, project management, human resources or CRM) and “waste” no resources on hosting or operating the solution or corresponding updates – often even the end-user support can be outsourced to the provider. At the same time, this means that complex software solutions can be deployed even without IT know-how and corresponding resources.
In addition, enterprise customers have other advantages. For example, the already mentioned lower entry costs – namely mostly monthly license rates and, if applicable, a manageable setup fee – which go hand in hand with a faster readiness for use of the selected solution after the purchase decision. These monthly license rates are easier to finance, especially for smaller companies, than earlier, large one-time investments.
Furthermore, users benefit from the easier scaling of Software as a Service solutions. More employees? More data? More customers? More functions? No problem, in the worst case the monthly costs increase accordingly.
In the end, modern software applications usually convince with simplicity and appealing design and are comparable to apps known from the private environment such as Airbnb, Uber, Google Drive and others. This means that end users in your own company will master the new software within a very short time and ideally also enjoy working with it. This is also the reason why “shadow IT” is flourishing, especially in larger companies, i.e. employees are using SaaS solutions independently to bypass the established, cumbersome and often less intuitive systems.
Not all SaaS solutions are created equal
However, all this does not mean that using the next best SaaS solution is a guarantee for success. Even modern software solutions still differ significantly in terms of functionality, quality, usability and price. In other words, as an enterprise customer, there is no way around a clean requirements analysis and comparison of suitable applications. Factors such as regional contact partners may also still play a role – many customers still feel safe knocking on the door of a nearby provider in an emergency, instead of having to rely on e-mail and telephone and possibly having to deal with different time zones.
For this reason, we will devote one of our next articles precisely to the topic of requirements analysis and vendor selection.