The Business Case for Software as a Service (SaaS) Written by Don Jones Co-founder, Concentrated Technologies, Microsoft® MVP WHITE PAPER © 2010 Quest Software, Inc. ALL RIGHTS RESERVED. This document contains proprietary information protected by copyright. No part of this document may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording for any purpose without the written permission of Quest Software, Inc. (“Quest”). The information in this document is provided in connection with Quest products. No license, express or implied, by estoppel or otherwise, to any intellectual property right is granted by this document or in connection with the sale of Quest products. 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White Paper: The Business Case for Software as a Service (SaaS) 1 Contents Abstract ...........................................................................................................................................................3 Introduction: What is SaaS?............................................................................................................................4 Why Consider Software as a Service? ...........................................................................................................5 SaaS Reduces Planning and Development Costs....................................................................................................... 5 SaaS Minimizes Deployment Cost and Time .............................................................................................................. 5 SaaS Dramatically Saves Operational Costs .............................................................................................................. 6 SaaS Reduces Overhead Costs .................................................................................................................................. 6 SaaS Provides High Availability of Services ................................................................................................................ 6 SaaS Offers Rich Functionality .................................................................................................................................... 6 Is Software as a Service Right For Me? .........................................................................................................8 Determine the Reliability of a SaaS Provider ............................................................................................................... 8 Request a Service Level Agreement ........................................................................................................................... 8 Check the Provider’s Reputation and Industry Position ............................................................................................... 9 Ensure that the Service Meets Your Expectations....................................................................................................... 9 Security ....................................................................................................................................................................... 9 Conclusion.....................................................................................................................................................10 About the Author ...........................................................................................................................................11 White Paper: The Business Case for Software as a Service (SaaS) 2 Abstract Software as a Service (SaaS) is increasing in popularity. It has a number of benefits over more traditional software models: it can speed deployment, reduce capital and operating costs, and provide enhanced and highly available services. Of course, it also introduces a number of concerns as well. This paper explains SaaS and explores both its benefits and its challenges. White Paper: The Business Case for Software as a Service (SaaS) 3 Introduction: What is SaaS? The ability to use SaaS for more than just very basic functionality did not exist until recently. Advancements in software platforms, the reduction of technology costs, and improvements in computer and Internet speed and reliability have helped make SaaS more functional. Today most types of business software can be delivered as a service. As SaaS’s capabilities increase, its adoption will continue to grow. You might be surprised at the simplicity of the SaaS operating model. Basically the software runs, either partially or entirely, somewhere else, usually on web servers. Word processors and spreadsheets that run in a web browser are great examples of this model. They often provide rich functionality and reliability with no software installed on the local computer, and may even provide an integrated location to store and share data. Consider your e-mail infrastructure. You probably have a set of dedicated e-mail servers in your data center. Your data center is most likely in your corporate headquarters or nearby in an offsite hosting environment. Remote buildings connect to your e-mail servers through Ethernet, and remote users connect through virtual private networks or dial-up networking. In a SaaS model, your e-mail servers are run by your SaaS provider. You specify what software and services you require (in this case, your e-mail infrastructure) and connect your network to the provider’s network. The SaaS provider now supplies your e-mail as a service, including hosting your servers, verifying network connectivity, maintaining your software, repairing failed components, and other tasks associated with e-mail server management. Please note: this is not the same as e-mail "hosting." Hosting has a different business model and implementation. We'll cover both of these later in this paper. There are several different SaaS variations based on the software’s functionality, its efficiency when implemented as a service, its ability to scale, and more. In general, software written specifically to be implemented as a service is more efficient and provides greater functionality and flexibility. In some ways, SaaS is similar to traditional software deployment and use models; applications and services are installed on individual computers, such as a backup software suite on a storage server or an office productivity suite on desktop computers. SaaS typically offers the same functionality; in fact, a number of software titles are available today in both traditional and SaaS implementations. And SaaS software often provides network and Internet integration, as does most modern software packages. But SaaS is distinct from traditional software models in a few key ways. These include: You have flexible licensing options, often including per-use and per-month billing. This allows you to select software providers whose licensing model works best with your business model. For example, your business may be more concerned with monthly expenditures than capital investments; many SaaS providers support this by charging per-use or per-month instead of a large up-front investment. You may also have employees that need expensive software, but use it rarely; a per-use licensing model might be more cost effective than purchasing a traditional license. Your applications can be optimized for distributed operation and scalability. SaaSspecific applications are typically designed to operate in a distributed data center environment. They take advantage of server and bandwidth scaling to provide access to more users, run at a higher performance level and handle more data. There is no need to redesign the software or redeploy installations. This means you get the same service regardless of how many users you have and you don’t have to provision new hardware/systems. The provider will dynamically provide the scale you need. Software implementation and upgrades are eliminated. Traditional, locally-installed software is not only expensive to initially deploy; it is also expensive to update and upgrade. For example, word processor updates may have to be continually and individually installed across almost every computer in an organization. Even with software deployment automation, the deployment process can be difficult and time-consuming. With a SaaS solution, deployment, ongoing maintenance and solution upgrades are all managed by the provider. White Paper: The Business Case for Software as a Service (SaaS) 4 Why Consider Software as a Service? Now, let's focus on the business case for SaaS, including return on investment (ROI), its impact on your IT total cost of ownership (TCO), and other financial and efficiency benefits. The IT budget can consume a significant portion of an organization’s operating costs, especially for technology-centric companies that require high performing, feature-rich, and expensive software and services. SaaS can help manage these costs. It provides a holistic business solution to help reduce TCO. Industry studies have shown that almost all IT executives are now considering the use of SaaS, and more than a quarter of them intend to replace traditional software with SaaS to reduce TCO. In a large-scale software deployment, planning, development, deployment, and operations each have unique costs. There are also additional costs that can impact the overall deployment. Let’s look at both the costs specific to each step, and describe how SaaS can reduce your overhead. Throughout this section we'll use a common example: Suppose that you have a centralized Microsoft Windows Server-based infrastructure that depends on Active Directory for user authentication and authorization, as well as group security permissions. SaaS Reduces Planning and Development Costs A typical software project starts with an analysis and planning phase to identify and quantify the need for additional functionality or services. Needs may include an initial business startup, unrealized productivity, changing user needs, or even an independent audit. For our example, let's say that a business continuity audit reported that you have no off-site backup of your Active Directory data. You may have considered the data backup to be too time-consuming, expensive, and complex to implement during initial rollout, and had been unable to justify the cost of implementing it later. A SaaS model can overcome these challenges. The planning cost can be greatly reduced by engaging the services of a SaaS provider. The provider can identify a solution that meets the auditors’ requirements, provide it as SaaS, and store and manage the data in redundant, available and accessible data centers. This can be done with little or no impact on existing business processes; possibly without a visit to your data center. These SaaS-appropriate scenarios are becoming more common as the technologies develop. In this example, all of the challenges raised by the IT staff are mitigated by the SaaS model: The time required for implementation is minimized. The SaaS provider's expertise makes up for the IT staff's lack of experience. The cost for the software may be more affordable when it is purchased as SaaS, due to its flexible licensing model. The entry cost can be amortized over the life of the license, or even discarded, depending on the licensing. The complexity is reduced; the SaaS implementation requires little work for IT and virtually no changes to the existing IT infrastructure. In this case, the provider is given proper credentials to access the corporate network and then handles the entire process. You may want to see SaaS in action before committing to long-term contracts. With standalone software, you would likely get a trial package, allowing you to use the software for a number of days, after which you must either uninstall or purchase it. SaaS has a similar model, but it is even simpler because there’s no deployment required and thus the trial is a much smaller commitment. SaaS Minimizes Deployment Cost and Time A large-scale software implementation is a slow and expensive process: an administrator must log in, copy files, manually install software, reboot the computer, configure the software, and more. Deploying a SaaS solution can be significantly faster and less expensive. Most SaaS providers and packages support a completely remote, zero-touch installation and configuration, saving you considerable labor and delivering the software very quickly. White Paper: The Business Case for Software as a Service (SaaS) 5 In our Active Directory backup example, the provider asks some background questions to understand the environment and requests access to the corporate network. After that, the provider implements the solution with little or no interaction other than status reports or confirmation that the tasks are complete. SaaS Dramatically Saves Operational Costs If your organization manages application and operating system patches, you already know how expensive software operations can be. When new updates come out, they often must be implemented immediately to prevent data loss or compromised security. In fact, new software releases occur so frequently that many businesses simply skip one or two generations instead of incurring the license and labor costs of upgrading to each new version. This sometimes means that new productivity or efficiency features go untapped. In a SaaS model, new releases are managed by the provider. The result is more consistent and timely software updates, for both incremental patches and major version releases. Updates usually occur at no cost to the SaaS consumer; it is in the provider's best interest to keep the software current and fully functional. System monitoring also incurs high operational expense in a traditional software model if done correctly. If not done correctly, many organizations find that their backup system stopped functioning only when they urgently need to recover something and see that a fresh backup does not exist. This is unfortunately very common. In a SaaS model, the provider does the monitoring and if a backup fails and the issue is on the application side, they fix it; or notify the customer if the problem is with the customer environment. SaaS Reduces Overhead Costs SaaS reduces overhead costs by reducing or eliminating: The initial cost of purchasing software The time needed for IT to implement software Any up-front investment in computer hardware The cost of maintaining the application and service Additional hardware or software purchases to overcome usage peaks The time needed for IT staff to maintain software, including updates and patches Additional investments for data redundancy These overhead reductions can be short- or long-term, and in some cases, both. The reduced cost of data redundancy impacts you both initially, (because you don't have to invest in expert staff or redundant systems or software) as well as in the future (you don't have to maintain those systems or personnel). SaaS Provides High Availability of Services You’ve experienced network and service outages—you cannot connect to your e-mail or web site, or perhaps the virtual private network between your branch and headquarters becomes congested, resulting in slow communications. Even the largest, best-prepared enterprises experience occasional issues. The key is to minimize the downtime that impacts your organization’s bottom line. SaaS providers know that their clients expect dependability. For this reason, SaaS can be more stable, secure, and resilient than the best on-premise infrastructure. We'll examine this in more depth in the Provider Reliability section below. SaaS Offers Rich Functionality SaaS began in 1998 as a very basic delivery and subscription mechanism for a website-in-a-box called SiteEasy. Its limited functionality severely restricted its usefulness to the delivery of a small set of services and applications. Today, SaaS often offers the same or better functionality than traditionally delivered software. Virtually any type of application can be implemented as SaaS. On the desktop, SaaS applications range from common White Paper: The Business Case for Software as a Service (SaaS) 6 desktop productivity suites to complex workflow and design applications. In fact, many resource-intensive applications, including image manipulation and video encoding, can work better as a properly designed service that takes advantage of the provider's system scalability. In the server space, SaaS solutions include infrastructure management, data management, and fault tolerance without the need for a dedicated and highly-trained IT staff, specialized software, and dedicated hardware. One common SaaS feature that is not offered by most non-SaaS software is dynamic scalability. The concept is simple: when more people use a service, you need to provide more resources for its use; when fewer people use that service, you can remove the additional resources. Most on-premise software is limited in its ability to dynamically scale. Your IT staff can add memory, storage, bandwidth, and servers, but this work requires a significant amount of time and money. And should the need for the software decrease, removal is usually unfeasible and always expensive. With SaaS, the provider designs the service and software to dynamically scale. Your cost will be adjusted accordingly, giving you the option to manage it by reducing the demand, or pay any additional charges until the demand has subsided or a new SaaS agreement is reached. White Paper: The Business Case for Software as a Service (SaaS) 7 Is Software as a Service Right For Me? You need to understand potential concerns before you can make an informed business decision about any potential solution. The business concerns about SaaS generally fall into three areas: Provider reliability Suitability of an offering to meet your current and future needs Security Determine the Reliability of a SaaS Provider SaaS data centers today pride themselves on being highly available: they provide their services 24 hours a day every day of the year. High availability also typically demonstrates that the provider has some level of fault tolerance or disaster recovery in place to help guarantee availability in case of a major disaster. Most providers consider availability to be the same as uptime. Uptime is the amount of time that their services are online (up) as a percentage of time in a year. You'll see service providers advertise their uptime heavily when they can show history and guarantee a number of "nines" in their uptime percentage. For reference, here are my calculations of how availability numbers translate into annual downtime, based on a 365-day year: Percent availability Downtime per year 99.5% 1.83 days 99.8% 17.52 hours 99.9% ("three nines") 8.76 hours 99.95% 4.38 hours 99.99% ("four nines") 52.6 minutes 99.999% ("five nines") 5.26 minutes 99.9999% ("six nines") 31.5 seconds When you look at a provider’s availability figures, ask how the number is measured. Does downtime include scheduled maintenance? The provider may also consider "intermediate" issues, such as Internet routing problems, to belong to someone else and not count that time as downtime, even though your users may not be able to access their data and applications. Your measurement should include the total impact to your business. Also, you should remember that not every service or data set needs to have “six nines” of service availability. You might choose to use SaaS for line-of-business applications, data backup, and basic productivity suites, but you probably are not equally concerned about the availability of all three. Your lineof-business applications could impact your company's revenue if they were down for an extended period, or you could be subject to legal liability when data loss occurs. The loss of e-mail throughput, on the other hand, might not be as critical for business, so a lower availability figure might be acceptable for that application. Request a Service Level Agreement In general, SaaS providers will offer you different levels of availability and performance for different prices. Discussing these levels and their corresponding prices is a key component of negotiating a provider White Paper: The Business Case for Software as a Service (SaaS) 8 agreement. The performance and availability metrics and thresholds are often specified in a service level agreement (SLA). The SLA could be a standalone document or part of your overall SaaS provider agreement. It should provide the details of your required availability level, including: Definitions of availability and downtime A complete list of services provided The required availability for each service and acceptable downtime limits Methods used to report any loss of service and downtime Notification requirements Penalties for noncompliance Some of these factors may not be important to your business, and there may be additional ones you want to consider. This list isn't intended to be all-inclusive; use it as a guide to discuss with your provider before implementing a SaaS solution. Check the Provider’s Reputation and Industry Position Reputation is valuable in the service market. Because each provider strives for the best possible position relative to its peers, the SaaS consumer can expect that they will differentiate themselves, as well as keep their offerings strong and their prices competitive. You should look for a provider that commands a strong industry position. You should also consider the richness of their services, what the analysts say about them, and their financial solvency. All of these factors will help you identify the right provider for you. Ensure that the Service Meets Your Expectations As discussed earlier in this paper, recent advances in SaaS applications and service technologies have pushed the SaaS model forward very quickly. Not long ago, there were few SaaS-worthy features and applications. You had to work hard to find a desktop application more functional than a primitive word processor or web site creator, and few offerings were available for server- or infrastructure-based SaaS. Many SaaS applications were merely older applications repackaged, sometimes improperly, to be deployed as a service. Today the market is rich with a variety of SaaS applications that not only work well as services but offer richer features than traditional software. There are few IT functions that cannot be effectively implemented by a SaaS solution. In general, the suitability of SaaS offerings is no longer a concern. Security Using a SaaS model means your data is stored elsewhere, processing is being completed by someone else, and connectivity is through the Internet. Yes, SaaS solutions bring up a series of security and privacy concerns that require careful planning. Security considerations generally fall into four basic categories: Choosing a reliable provider Adequate redundancy for data storage and fault tolerance Technical security safeguards Physical security safeguards Because security requirements vary greatly depending on organization and industry, this paper does not attempt to cover this topic in detail. The best advice is to ask questions of your prospective SaaS provider to ensure they meet your specific security requirements. ** For more detailed information on SaaS security issues, read the Quest white paper titled: Addressing Security and Data Ownership Issues when Choosing a SaaS Provider. White Paper: The Business Case for Software as a Service (SaaS) 9 Conclusion You can now see why SaaS is rapidly increasing in popularity. In many cases, it offers more benefits than traditional software models: it can speed deployment, reduce capital and operating costs, and provide enhanced and highly-available services. SaaS can reduce both short-term and long-term IT costs in your enterprise. Despite the apprehension that businesses often have about using SaaS, SaaS applications are now high quality, eliminating many concerns. However, it is important that you document your SaaS expectations so you can discuss and agree on them with potential providers. This helps ensure that the providers understand your needs, enabling them to appropriately provide exactly what you're looking for. White Paper: The Business Case for Software as a Service (SaaS) 10 About the Author Don Jones is a co-founder of Concentrated Technology (ConcentratedTech.com), a Microsoft Most Valuable Professional Award recipient, and the author of more than thirty books on information technology. His consulting practice specializes in making the connection between technology and business, helping businesses realize more value from their IT investment, and helping IT align more closely to business needs and values. Don has been an IT journalist for more than eight years, and is currently a Contributing Editor for Microsoft TechNet Magazine. He is also a sought-after speaker at industry conferences and symposia, including Connections conferences, Microsoft TechEd, TechMentor Events, and others. White Paper: The Business Case for Software as a Service (SaaS) 11 WHITE PAPER About Quest Software, Inc. Now more than ever, organizations need to work smart and improve efficiency. Quest Software creates and supports smart systems management products—helping our customers solve everyday IT challenges faster and easier. Visit www.quest.com for more information. Contacting Quest Software PHONE 800.306.9329 (United States and Canada) If you are located outside North America, you can find your local office information on our Web site. E-MAIL [email protected] MAIL Quest Software, Inc. World Headquarters 5 Polaris Way Aliso Viejo, CA 92656 USA WEB SITE www.quest.com Contacting Quest Support Quest Support is available to customers who have a trial version of a Quest product or who have purchased a commercial version and have a valid maintenance contract. Quest Support provides around-the-clock coverage with SupportLink, our Web self-service. Visit SupportLink at https://support.quest.com. SupportLink gives users of Quest Software products the ability to: • Search Quest’s online Knowledgebase • Download the latest releases, documentation, and patches for Quest products • Log support cases • Manage existing support cases View the Global Support Guide for a detailed explanation of support programs, online services, contact information, and policies and procedures. 5 Polaris Way, Aliso Viejo, CA 92656 | PHONE 800.306.9329 | WEB www.quest.com | E-MAIL [email protected] If you are located outside North America, you can find your local office information on our Web site © 2010 Quest Software, Inc. ALL RIGHTS RESERVED. Quest Software is a registered trademark of Quest Software, Inc. in the U.S.A. and/or other countries. All other trademarks and registered trademarks are property of their respective owners. WPW-SAAS-Jones-US-MJ-20100527
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