Given the choice between licensing software that you install on your computers and software that is hosted in the cloud, which should you buy?

Software as a service (SaaS) is a software delivery model where subscribers access vendor owned software via the internet, as opposed to software that is perpetually licensed and hosted in a data center. SaaS is one of three main categories of cloud computing, alongside infrastructure as a service (IaaS) and platform as a service (PaaS).

So, is SaaS right for your business? Here are three pros and three cons to consider.

3 Reasons to Buy SaaS

  1. Automatic updates. With SaaS, end-users do not have to support and maintain the software. The provider does this work. This relieves pressure on a company’s overly stretched or unsophisticated IT department.
  2. Minimal extra infrastructure needed. With SaaS, minimal additional supporting infrastructure is required apart from secure and redundant networks and access terminals. In contrast, on-premise systems oftentimes require incremental investments in supporting hardware, network security, communications gear and databases, among other things.
  3. Available everywhere. Since SaaS applications are delivered over the Internet, users can access them from any Internet-enabled device and location.

3 Reasons to Avoid SaaS

There are many SaaS skeptics. Some of them have good reasons for shunning the cloud. Here are three of the most common:

  1. Security concerns: Many companies will not outsource the risks to data security and privacy. They are simply not prepared to hand over the keys to critical data. My advice: if assessing a SaaS alternative, do your due diligence on the vendor and the host, including: reference checks, breach history, data security measures, associated policies and procedures, and associated limits on your rights to recover damages for breach. You’ll likely find that, in many cases, software vendors use stronger security measures than their customers. The challenge will be in negotiating terms and conditions that adequately allocate risk.
  2. Legal liability: Many companies have legal concerns that prevent them from using SaaS. Different jurisdictions impose different laws relating to privacy, data storage (record keeping) and reporting (the European Union’s GDPR regulations, for example). My advice: if you have any regulatory concerns about SaaS, get a legal opinion.
  3. Disruption. Many companies fear disruptions to business continuity. For example, in the event of the SaaS provider’s bankruptcy, a customer could lose mission-critical services if the SaaS service is discontinued. As another example, what if the system stops performing and your business can’t take or produce orders? My advice: before deploying a SaaS solution, understand and mitigate the business risks that could arise from service disruptions and make sure that you’re adequately protects.

So, who wins?

SaaS has reached a tipping point. The solutions are becoming more mainstream, more customizable and more widely accepted. However, certain risks remain. You should only buy SaaS for your business after you have assessed your needs, and examined all of the alternatives and risks.

Would you like to discover if SaaS is right for your business? Check out our ERP selection and contract negotiations services, and contact us.

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