Software as a Service

(SaaS)
Does it make Cents?
by
Brian Moore

Contents

Brief Background information

SaaS Architecture
Financial Consideration
Case Study
Conclusion
Q&A

Intro to SaaS - Definition

Software as a service (SaaS) is a

model of software delivery where the
software company provides maintenance,
daily technical operation, and support for
the software provided to their client.
It assumes the software is delivered over
the internet.
Software delivered to home consumers,
small business, medium and large
business

Intro to SaaS

The web as a platform is the center point

Web-browser acting as a thin-client for
accessing the software remotely across the
internet.
Network-based access to, and management of,
commercially available (i.e., not custom)
software
application delivery that typically is closer to a
one-to-many model (single instance, multitenant architecture) than to a one-to-one
model, including architecture, pricing,
partnering, and management characteristics

SaaS - Pros

Stay focused on business processes

Change software to an Operating Expense instead of a
Capital Purchase, making better accounting and
budgeting sense.
Create a consistent application environment for all
users
No concerns for cross platform support
Easy Access
Reduced piracy of your software
Lower Cost

For an affordable monthly subscription

Implementation fees are significantly lower

Continuous Technology Enhancements

SaaS - Cons

Initial time needed for licensing and

agreements

Trust, or the lack thereof, is the number

one factor blocking the adoption of
software as a service (SaaS).
Centralized control
Possible erosion of customer privacy

Absence of disconnected use

SaaS Architecture

Fueled by

Bandwidth technologies
The cost of a PC has been reduced
significantly with more powerful computing
but the cost of application software has not
followed
Timely and expensive setup and
maintenance costs
Licensing issues for business are contributing
significantly to the use of illegal software and
piracy.

High-Level Architecture

There are three key differentiators that separate a

well-designed SaaS application from a poorly
designed one

scalable
multi-tenant-efficient
configurable

Scaling the application - maximizing

concurrency, and using application
resources more efficiently

i.e. optimizing locking duration, statelessness,

sharing pooled resources such as threads and
network connections, caching reference data,
and partitioning large databases.

High-Level Architecture (cont)

Multi-tenancy important
architectural shift from designing
isolated, single-tenant applications

One application instance must be able to

accommodate users from multiple other
companies at the same time
All transparent to any of the users.
This requires an architecture that maximizes the
sharing of resources across tenants
is still able to differentiate data belonging to
different customers.

High-Level Architecture (cont)

Configurable - a single application instance

on a single server has to accommodate users
from several different companies at once

To customize the application for one customer will

change the application for other customers as well.

Traditionally customizing an application would

mean code changes
Each customer uses metadata to configure the
way the application appears and behaves for
its users.
Customers configuring applications must be
simple and easy without incurring extra
development or operation costs

Saas Financials

4 ways software companies are pricing their products

Open Source free basic products but charge a fee for
the upgrade to the premium product (i.e. Apache,
Linux, etc)
License software main way its being done. Customer
like this way because they own the software as an
asset
Leased Software deployed at customer site but
leased for a time period. Used in the days of the
mainframe
SaaS subscription pricing. Like leasing is considered
and expense but upgrades and maintenance is free
and seamless

Saas Financials (cont)

Legal should be involved in the acquisition of missioncritical SaaS software

Need to setup contractual relationship with the SaaS

provider

Companies are losing control of their data in the SaaS model

Depending on the service provider for security and data
access.

Setup escrow account

With conditions of being able to run application in house
Ability to move data from current provider to new location

Also Service Level Agreements (SLAs) for

Availability, response times, notifications of outages

Data integrity, data privacy, frequency of backup, support and
disaster recovery

Saas Financials (cont)

CIO decides if SaaS software will

benefit IT while CFO decides if it is
economical for the whole firm

Leasing vs Buying
Similar to decision of leasing or buying a car
Need to compare costs that effect cash flows
such as depreciation, interest on financing,
tax and opportunity cost
Use an experience Accountant

Case Study - Software4Rent.biz

Software4Rent.biz provides casual or long term software

application rental, enterprise wide software deployment and
management
Offerings

No contracts to sign - rent for as long as you want

Manage, deploy and track leased software resources more
effectively in real-time.
No cost software upgrades
Can 'Top up' at minimal cost in times of peak software use
Systems administrators can allocate application software to
users in real time
Change the allocation of licenses as required and reduce the
number of licenses that the company needs to buy.
Save work to local hard drives, or on their servers if you are a
pay by-the-month user.
Allow users to rent software on an hourly, daily, weekly or
monthly basis

Software offering & Pricing

Vendor

Application

Hourly

Daily

Weekly

Monthly

Category

Microsoft

Office 2003 Professional

1.65

6.60

19.80

49.50

Office Suite

Microsoft

Project Professional 2003

3.95

15.80

44.50

97.90

Management

Microsoft

Visio Professional 2003

1.95

7.80

23.40

58.50

Drawing

Microsoft

Word 2003

0.75

3.00

9.00

22.50

Document

Microsoft

Excel 2003

0.75

3.00

9.00

22.50

Accounting

Microsoft

PowerPoint 2003

0.75

3.00

9.00

22.50

Presentation

Microsoft

Access 2003

0.95

3.80

11.40

28.50

Database

Microsoft

Publisher 2003

0.95

3.80

11.40

28.50

Drawing

Microsoft

Outlook 2003

0.95

3.80

11.10

28.50

Email

Microsoft

InfoPath 2003

0.95

3.80

11.40

28.50

Management

R Project

R Statistics Programming

0.35

1.50

4.50

9.95

Statistics

Future shop

Microsoft Office Word 2007

$309

Cost Per Usage Chart of MS Word

Low
Usage
Software4Ren $3/day X
t
10 times/mth =
$30/mth X
12 mths=
$360/year
Buy

$360 inc tax

Medium
Usage

High
Usage

$9/week X 40weeks =
$360/year

$22.5/month X
16 month = $360

Conclusion

Get over initial hurdles

Adopting SaaS in the enterprise has to be

analyzed for economic and efficiency reasons
A lot of initial planning and negotiating with the
solution provider- security, data access, legal, etc

Long term Benefits

Easy Access
Reduced piracy of your software
Lower Cost
Continuous Technology Enhancements

Questions?