Software as a Service: Is it time for a closer look?The market for hosted enterprise software solutions—known as Software as a Service—has grown dramatically over the past several years, largely on the success of products such as Salesforce.com. Today, this market offers an array of enterprise applications, often with lower cost and maintenance requirements than traditional, on-premises software. As a result, companies of all sizes are taking notice. In 1999, a former Oracle executive launched Salesforce.com, a new concept in enterprise software. His idea was simple: the new company would provide hosted sales force automation (SFA) and customer relationship management (CRM) software. For certain organizations—such as those with limited IT resources—this approach could provide a level of affordability and scalability that would be difficult to achieve with traditional on-premise applications. Salesforce.com was one of the early examples of what is known today as Software as a Service (SaaS), a software application delivery model whereby a software vendor develops a web-based software application and hosts and operates (either independently or through a third-party) the application for use by its customers over the Internet. Instead of buying a license to use the software and installing it on their own servers, customers instead pay a subscription fee to use the application via the vendor’s hosted service. In addition, the use of standard platforms, such as the Salesforce.com Apex platform, to create these applications enables developers to easily build or customize add-on applications to suit a broad range of needs—from email marketing and sales analysis to recruiting and finance. How hot is Software as a Service? A November 2006 Gartner study predicts that the market for SaaS applications will grow seven times faster than on-premise software deployments during the next three years and that by 2011, 25 percent of new business software will be delivered via the SaaS model. By 2009, it predicts, more than 50 percent of new business software vendors will adopt a SaaS delivery model. For business and IT executives considering new enterprise applications, therefore, it is prudent to take a closer look at this market and its potential advantages. The most obvious benefits, of course, are their lower total cost and maintenance requirements. SaaS subscription costs may be more expensive than traditional licensing fees, but keep in mind that these subscription costs also include the costs that are not included with a traditional software implementation, such as server space, application and server maintenance, and routine upgrades. Because a SaaS application is hosted by a vendor, it does not require dedicated server(s) space or internal IT personnel to maintain and upgrade the application or the hardware on which it resides. Over the life of the subscription, the total cost can be considerably less. There can be other significant benefits, as well. - Software as a Service applications are quick to implement, with no lead time required for acquisition of hardware or installation.
- As web-based applications accessed via the Internet, they offer users a familiar interface—often cutting the amount training and/or change management required and maintaining end-user productivity.
- Applications—such as those available through the AppExchange—are developed on a familiar development platform, meaning that they can be customized easily to meet particular business needs.
- And, many applications developed utilizing the Salesforce.com platform offer the host system’s strong capabilities in real-time analytics and reporting.
How does the Software as a Service market work?Today, the largest SaaS market, AppExchange, features more than 500 applications created by developers throughout the world to run on the Salesforce.com platform. Many of these applications perform related functions in the areas of marketing, sales and customer service management. But just as many SaaS applications perform a broad and growing array of other enterprise functions—ranging from wealth management to merger and acquisition pipeline management to project management to loan origination. One example of such an application is a loan origination tool created for Builders Capital Mortgage (BCM) by West Monroe Partners. Builders Capital Mortgage had grown and managed its loan portfolio with standard desktop tools and a homegrown database. While its processes were well defined, this approach required the need to duplicate data entry in several areas. The company sought to improve its operation by implementing and integrating new loan origination, loan servicing, and accounting systems that would automate the loan origination process from end to end. Working with West Monroe Partners, BCM developed a hosted loan origination system (LOS) that would meet its sales and operations needs by customizing an existing SaaS customer relationship management tool. In addition to eliminating inefficiencies and errors, the new application has helped BCM improve controls, audit tracking, business intelligence and reporting and ultimately grow its loan portfolio. The fact that it is using a hosted application provides the company with a scalable and highly controlled environment that will enable it to grow without systems constraints. Is Software as a Service right for your organization?Software as a Service is attracting the attention of organizations large and small. To determine whether it might be right for your situation, consider questions such as these: - Do you have a limited capital budget and/or a limited pool of IT resources to support your business applications?
- How quickly do you need to implement the application and begin achieving results?
- Do you have specific functional or departmental needs that require a timely and focused solution?
- What degree of customization is required in order to provide the functions and reporting capabilities that your business needs? Do you have the resources available to perform that customization?
- Will you need to integrate the software with other applications?
If the answers are “yes,” it might be time to take a closer look. West Monroe Partners works with clients in a variety of industries to develop effective customer relationship management and other enterprise solutions. For more information, please contact Kelly Milligan,
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or Omar White,
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