Beware of SaaS in sheep’s clothing 

Software-as-a-Service (SaaS) is hot. And why not? In a downturn economy, true SaaS and Cloud Computing solutions offer low-risk, low-cost access to powerful software solutions, such as CRM. Earlier in the year, we wrote about some of the advantages of SaaS here. We noted how true SaaS architecture enables economies of scale that are much more difficult to achieve with on-premise or hosted solutions, plus configuration and implementation is considerably easier in a true SaaS environment.

Now, why do I keep saying “true” SaaS? Because with all the excitement over cloud computing and software-as-a-service in recent years there are a number of software providers that are looking to join the party and jump on the SaaS bandwagon. We don’t blame them, it’s pretty awesome. However, this enthusiasm on the part of some vendors can be misleading to many that are interested in evaluating the benefits of working with a true SaaS vendor.

As such, we wanted to help clear some of the confusion and found an article published recently in Baseline Magazine, a practical guide to costing and managing the deployment of leading-edge information technology, that helps provide an understanding of the architectural differences between hosted software and true software as a service (SaaS) applications.

Here are the differences as explained by Baseline:

Hosted software is just that: It’s substantially the same as an application you might run on your own infrastructure, but it’s instanced on a server in a third-party data center. Most first-generation offerings from application service providers followed this model, and many solutions still do. The instance-hosted architecture is a stage many vendors arrive at as they try to adapt complex standalone applications to the Internet—and to new payment models.

Instance-hosted applications can, if managed properly, exploit certain economies of scale to function better in an on-demand framework (server virtualization, for example). However, the math tends to break down as scales increase, products evolve, and individual customer configurations become more complex and unique.

Changes and upgrades must be patched on numerous servers running in parallel. Fault-resilient infrastructure options, like clustering, are harder and less advantageous to apply. Often, the tools used to maintain, configure and manage such applications are only slightly more powerful than those used to drive a single user version, thus offering little self-configuration ability to the customer.

True SaaS applications, in contrast, are multitenant at core, serving many customers on a single software instance and database infrastructure. Applications designed this way are far easier to scale on more robust platforms, far easier to manage by the host, and easier to make self-configurable by customers. All other things being equal, this combination should make SaaS applications more affordable and, ultimately, higher margin.

Other experts, such as CRM analyst Denis Pombriant of Beagle Research, offers similar definitions on the differences between hosted and SaaS solutions. The Baseline article goes on to warn:

While CIOs typically understand the issues, Bloom warns that some vendors are obscuring the facts in the hope of closing a deal.

“When soliciting competing quotes for our prospective SaaS-based Association Management System implementation, several vendors that described themselves as SaaS providers turned out to be selling an old-school hosted app,” says Risk and Insurance Management Society CIO Andy Steggles. “A few were happy to finesse the truth until I asked them pointed questions.”

The lesson here? Buyer beware.

We hope you find this information useful as you evaluate the pros and cons of working with SaaS, hosted and on-premise software solutions.