Is software as a service (SaaS) the cure for what ails your business? While it offers a low-cost, low-maintenance alternative software model for SMBs, you may have never heard the term before or understood how it can help you.

SaaS, or on-demand software, is delivered through a vendor who provides anytime, anywhere access to your applications through a Web browser. The management of the infrastructure and guarantee of service delivery is the responsibility of the vendor, which means you, the customer, don’t have to buy, manage or maintain anything.

But how exactly is this model different from that of an application service provider (ASP)?

The ASP, a third party, hosts a desktop or client-server solution, and the customer pays for the number of server licences — and it’s generally not designed or delivered as a service. SaaS, on the other hand, allows SMBs to take advantage of a service delivery model where the vendor supplies all of the infrastructure, as well as guarantees of performance and uptime, says Mini Peiris, vice-president of product management with NetSuite Inc. in San Mateo, Calif. This, while valuable, is sometimes intangible, so as a customer you should consider the total cost of ownership and not necessarily the sticker price of the product itself.

GestureTek Inc. is one Canadian SMB that recently turned to SaaS for almost all areas of its business, including purchasing, sales, inventory and accounting, as well as customer relationship management (CRM) and support. The company develops gesture-based technology, which allows users to access computers without the use of joysticks, headgear, keyboards or mice.

For the past eight months, Toronto’s GestureTek has been using SaaS from NetSuite. Executives can use dashboards to see, at a glance, the status of the business — and that is the most critical aspect of this kind of software, says Gerry Sylvia, director of production and logistics with GestureTek, in Toronto. “Nobody has time to dig for details,” he says.

Prior to moving to a SaaS model, the company was dependent on Excel spreadsheets for business intelligence. This was also the case for Sylvia at a previous employer, which spent “zillions of dollars on SAP,” but at the end of the day just shoved everything into an Excel spreadsheet.

Using SaaS, he gets access to analytic tools, but doesn’t have to hire a team of technicians to keep the system up and running, nor does he have to buy any additional hardware.

But SaaS can be a scary proposition at first. “It’s a real leap of faith because the data ain’t here — it’s somewhere else, and it’s scary sometimes,” he says. “All of our company’s secrets, from purchasing to customers, it’s all sitting in California.” But the benefits outweigh the fear, he adds, and it’s worth taking that leap of faith.

Companies like (which recently added a Canadian office), NetSuite and Siebel (recently acquired by Oracle) are all offering on-demand or hosted models. But 62 per cent of medium-sized companies in Canada still aren’t familiar with the term SaaS, and educating the market is a major challenge, says Michael Hyjek, research director of customer segments with IDC Canada in Toronto.

The trust factor is critical, especially for smaller companies, says Hyjek. “If you have a set amount of customers out there, you want to be careful about where your information is going,” he says. Vendors such as allow potential customers to try the software before they buy it, he says, so test-drive the software if you want to alleviate those insecurities.

When you trust someone with your customer list, you want a commitment that it’s going to be available when you need it, in real time. When considering an on-demand model, ask the vendor for live demonstrations and customer referrals.

The most popular applications being outsourced by medium-sized firms include Web conferencing, payroll and intrusion detection, according to IDC. Other areas include workforce management and sales force automation.

While the SaaS model offers cost savings in terms of TCO, one of the most compelling reasons to consider it is for analytics and business intelligence. With dashboards, you can analyze your business through key performance indicators, says NetSuite’s Peiris, which means you don’t have to hire a business analyst to build reports or data warehouses. Look for a hosted solution that lets you easily add new metrics by pointing and clicking.

Simplicity is the key. This is certainly true for GestureTek’s Sylvia, who says the move from Excel spreadsheets to SaaS has helped him focus. “I don’t want to be in the IT business and keep systems up and running,” he says. “I get to focus on what’s actually important — getting our products out the door.”

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