A case for SaaS

Published on 2016-07-15

SaaS - Software as a Service - it is certainly not something new but these past couple of years it seems the industry have been warming up to deliver eveything - every piece of software ever made - as a service.

Furthermore it seems that consumers and businesses alike are now seeing the benefits and clear gains from buying services instead of products.

Let's look at the pros and cons from a few different perspectives.

Users

The users of software will clearly have some advantages when it is delivered as a service. First of all the software is just there. It is (mostly) updated to the latest version all the time - with cloud based software delivered via the browser this is always the fact - furthermore everyone is running the same version.

For some users the constant updates and changes - even small ones - can be an anoyance or a distraction at best. Maybe the user likes the software just as it is. There might also be times when an update is welcome and others - close to deadlines eg. - when updates should not happen. With SaaS this is a challenge.

Microsoft Office Pricing

The above example has all of the mentioned properties - the 2016 edition is the buy-to-own version and 365 is the subscription version - you can see the two month saving on a full year subscription compared to the month-by-month. The image links to the full feature desciption for each version - there is a small difference but the main point remains.

Buyers

The buyers of the software (might also be the users) will usually feel the change instantly. Usually the SaaS model transforms the payment of to a subscription pay-to-play based model instead of buy-to-own. The up-front pricing is usually lower than traditional purchase model.

In the flip side of this argument the lifetime price paid for the software will probably be higher than just buying the software. There will be a point in time where these two models flip and is no longer in favor of SaaS - depending on the product the period where SaaS is cheaper is usually tied to the overall update/upgrade policy - if the software usually receive a major upgrade anually and the average user normally buys upgrade every two years a SaaS price point pr. month set to one 12th of the normal upgrade price would double the normal average price paid by the buyer.

Sellers

When selling SaaS you generally don't have to fight for every sale and justify upgrades to existing customers. The talk is more focused on recurring revenue and keeping existing users happy which in turn can/will translate to great user stories and word-of-mouth bringing in more new sales.

Sales people will need to reconsider bonuses eg. which can be done by locking in users possibly by providing some up-front discount for paying anually instead of monthly eg..

Makers

Makers and providers of SaaS also take a nice dip in the advantage pool. Especially on server based cloud software. If there is an error in the software it becomes trivial to push a resolving change to the user - the update is not done on the users system it is applied in the providers system. Testing setups that mirror the production environment is very easy to set up and delivering like this makes stuff like outsourcing testing tasks and monitoring user behavior etc. trivial.

The change-to-user time being shortened can lead to situations that in fact place every user in the beta track - if the developers/delivery team slips into the we can fix it fast, we not push it out now? track. Delivering software as a service also means that it is easy to get stuck with software that is never done.

Conclusion

Delivering software as a service is clearly the way of the future. There are some disadvantages but there is no doubt that this is the way the industry is moving to everyones benefit.