The pace of content growth and file sharing within, outside and around the corporate environment has made it increasingly important for large and small organizations to set up effective document management systems and practices.
Hosted applications, also known as software-as-a-service (SaaS), provide many companies the advantages of achieving this with a much lower cost of ownership and easier IT system administration.
SaaS is delivered through a vendor who provides anytime, anywhere access to applications through a Web browser. Management of the infrastructure and service delivery is the responsibility of the vendor, which means the customer doesn’t have to buy, manage or maintain anything.
In many cases large enterprises as well as SMBs can potentially achieve more than 50 per cent savings in infrastructure and management costs over traditional document management software deployment through a SaaS model, according to Dan Carmel, president and CEO, of Spring CM, an enterprise content management firm in San Mateo, Calif.
For example, the addition of more components to an off-the-shelf or integrated enterprise content management (ECM) suite can exceed $25,000 per add-on excluding customization and maintenance, he said.
“The same component would require only $10 – $20 per month, per user in a SaaS environment,” Carmel noted.
Traditional software projects often go through a long analysis period that could last for months before the purchasing, legal issues and final application configuration is finally determined. A SaaS system can cut the evaluation period considerably because customers typically receive 30 to 70 per cent of the final configuration during the trail period said Carmel.
Despite these advantages, SaaS adoption remains low, says one Canadian technology analyst.
George Goodall, senior research analyst for Info-Tech Research Group based in London, Ont, says the model’s relative adolescence and replacement cycles that have locked-in many companies to their existing software purchases is partly to blame.
“SaaS has been around for only a couple of years. Many people are not so sure how it works and others still have to go through their seven-year replacement cycles.”
Carmel provides five practical tests that decision makers can use in evaluating the organization’s planned SaaS deployment. These questions come from a white paper authored by Carmel and titled: The On-demand Document Management Advantage.
Each test addresses a critical SaaS advantage. “If you find your project shares several of these characteristics, a SaaS solution can provide you great project success at a dramatically lower cost than deployed software,” said Carmel.
Test 1: The Breath TestDo you need a solution that integrates many different ECM components?
If you need one or more applications that are not often found in an off-the-shelf product or integrated package, then SaaS could be for you.
Some companies require multiple component features such as: the ability to receive and send faxes directly from the application; optical character recognition (OCR) to transform faxes and scanned materials into text-searchable documents; e-forms functionality; or zone OCR to read specific fields on forms to facilitate content organization.
Configuring the various interfaces can be challenging but a SaaS vendor can limit the costs and streamline the process by taking on the responsibility of integrating these components.
Test 2: The Speed TestDo you need a solution within a short period?
If rapid deployment is integral to your project, SaaS offers a definite advantage.
“With a SaaS product, you can be up and running in hours,” said Carmel.
Traditional software procurement cycles which involved request for proposals (RFPs), design, development, testing and negotiations, can take months, according to Goodall of Info-Tech.
With most SaaS systems, the customer can generally see the application working during the trial period, and return of investment (ROI) is much faster.
Test 3: The Cash Flow TestDo you have a restricted project budget? Do you want to cut your upfront cost?
On-premise software purchases often involve high upfront licensing costs, according to Goodall. “Aside from this, it will often take as much as five years for owners to break even or achieve an ROI.”
Spring CM estimates the cost of a typical installed software package is roughly 15 per cent of the five-year cost of owning and maintaining that application. This means that a user’s five-year cost may be six times the application software license costs.
“However, with SaaS the cost of ownership can be viewed as a low monthly fee rather than a huge capital expenditure,” said Goodall.
There are no large up-front licensing fees that require board approval, no annual maintenance fees as well, he added.
Test 4: The Evolving Needs TestDoes your software need to evolve quickly as you need changes and new technology emerges?
When an application package requires an upgrade, users are often faced with two options:
- Upgrade at a high cost and experience delays as the new features are evaluated and plans for adoption are formulated. Hire or enlists local IT talent to develop, test, debug, deploy and train personnel on the new application.
- Continue using the older version of the software and avoid any advantages that an upgraded version might bring.
With SaaS upgrade are relatively much simpler. The vendor applies upgrades at the data centre. The upgrades are made available to users immediately via online connection and there are only minor delays.
The upgrades also come at no cost to the user.
Test 5: The 80/20 TestCan you accomplish your goals with a product that may not have every bell and whistle that you desire?
If you can operate your business under the Pareto Principle (80 per cent of the effects come from 20 per cent of the solution), then SaaS might just be for you.
Most well-designed SaaS systems offer extensive interface capability, usually via Web services that integrate both internal and hosted systems. However, some application may require specialized functionalities that a SaaS application cannot provide even with integration and configuration.
This goes to the heart of two of the most critical reasons why some businesses are hesitant to adopt SaaS, according to Goodall.
“Many companies fear they would lose the flexibility that the on-premise software model provides.”
With SaaS, the development of upgrades or new features it is often up to the vendor. As such, some users loose deeper functionality, Goodall said.
A second concern is access to proprietary and customer data.
Many organizations are worried about the associated privacy and security risks that a SaaS system brings when vital information is made accessible to a third party, Goodall said.