Many companies in the manufacturing, distribution and service industries use Software as a Service (SaaS) for a variety of business processes.
For some small companies, using SaaS solutions is a viable option. Most SaaS have well designed, flexible solutions to offer to companies. Companies then plug in their customers, employees, data and away they go. The costs are manageable, $27 per user for this SaaS, $35 per user for that SaaS, an so on.
But for larger companies with more than 50 employees or companies that have a rapidly growing proprietary database or unconventional processes or services, SaaS becomes detrimental to their differentiation and profitability. Whereas deploying SaaS solutions might solve a challenge for year 1, it will likely create a larger set of challenges in year 3.
Don’t get me wrong, in most cases SaaS solutions are reliable, thoughtful and very useful. But it’s important to understand why SaaS solutions were built in order to clearly see if/when your company should use SaaS.
Saas was created when software was expensive to build
SaaS has been around in one form or another since the 1960’s, as we may remember SaaS really took off when the ASP model showed flaws and Enterprise solutions put themselves out of reach of most small and medium-sized businesses. With implementation processes that are expensive, challenging to deploy, difficult to modify, hard to define, and quite often dated, technology of enterprise solutions allowed them to make significant profits from the customers they had but turned away thousands of other businesses.
In the early 2000’s, new SaaS companies launched and took their technologies, servers, and improved authoring tools along with their software development expertise to create solutions that more customers with minor differences could use. It was actually brilliant and refreshing to know your costs, implementation time, and the final functional set you’d be receiving.
Is SaaS still a great option?
Yes, of course SaaS can still be a great option for a lot of companies. You can onboard employees, manage sales, train staff, and utilize hundreds of other services fairly quickly and easily. But something has significantly changed with SaaS that many C-level executives might not realize. Most SaaS solutions can now be built for the same amount that you might spend in only a year or two of license/user fees.
For example, if a business has 100 employees using two SaaS solutions that each cost $30 a month, that yearly cost would be $72,000. The cost for 5 years: $360,000.
And many times, companies end up engaging certified integrators to modify the solution to get more benefit and power from the generic system.
But now in most cases, CRM’s, employee training or improvement systems, and customer experience dashboards can be custom designed, built, tested, and developed in the cloud for $40k to $80k. So it’s important for companies with more than 50 employees to carefully consider investing in SaaS solutions.
So where did many SaaS providers go wrong in their models? They haven’t lowered their prices to account for use on a larger scale over a long period of time, which is the same mistake enterprise companies made a few years ago. As the SaaS solution ages (and many SaaS solutions aren’t truly cloud-based), the publishers have not adjusted their price accordingly. Therefore, if you have 50 employees, 100 employees or 1000 employees, you are likely paying 10x to 20x what it might cost you to run, support, and modify your own solution.
Cloud-based, web-based development is faster and less expensive than ever
Cloud-based environments, software design tools, code frameworks, libraries and expertise have been growing, and they contain some amazing advances. Cloud-based droplets or servers set up in an instant and are very inexpensive. Developers using new authoring tools, libraries, and frameworks are plentiful and the task tracking, automated testing and scheduling tools are incredible. So building web-based, mobile-ready software may be 10x to 20x less than what your SaaS firm spent just 4-6 years ago. Most C-level execs might not understand this as they may be stuck using dated technology, enterprise systems or data held ransom by one of their vendors.
When should you use SaaS?
Here’s 5 easy tips to consider:
- The old 80/20 rule: Go with SaaS when you can supply your entire user group with 80% of the functions they need for 20% of the TOTAL COST it would take to build/support your own custom solution. Note: the 20% should be over a 3-year period, not 1 year.
- When the SaaS will deliver 80% or more of what you need in less than 3 months.
- When the Data your SaaS will build is not highly valuable or proprietary and it’s acceptable to store it with another firm.
- When the SaaS will not significantly affect or hinder your 3-year product strategy.
- When the functions you are NOT building by using SaaS, wouldn’t form a basis for MORE functions you should be building for strategic advantage.
Instead, build your value using your data and your unique experiences:
In the experience economy, our jobs as business leaders are to constantly advance the experience and differentiation seen by customers, vendors, and employees. Sometimes it is mistakenly assumed to be solved with ‘Brand’ strategy alone. But in reality, your technology and people must deliver the brand promise. If SaaS can deliver that promise year in and year out for an affordable price, then keep using it. If not, you might want to think about developing your own custom experiences.
If you’d like to see how FreshinUp is helping companies of all sizes design and build their own custom software, contact us and let’s set a time to talk.
Digital Director – FreshinUp.
You can see my availability and schedule meetings with me here:
+1.877.778.8697 Office, FreshinUp.com. Tim@FreshinUp.com