When selecting a finance solution, not all Software as a Service (SaaS) offerings are equal. In this blog, we discuss the characteristics of different ‘SaaS’ variants that have emerged over time, and what they mean for buyers.
Introduction
In the ever-evolving landscape of digital finance solutions, the term ‘Software as a Service’ (SaaS) has become a ubiquitous buzzword. However, beneath this umbrella term lies a diverse spectrum of service models, each with its own set of features, capabilities, and limitations. As businesses strive to stay ahead in a competitive marketplace, understanding the differentiation between SaaS offerings is crucial for making informed decisions.
The genesis of SaaS and its evolution
The concept of SaaS originated in the early 2000s, fundamentally altering how software solutions were delivered and consumed.
Initially, SaaS was characterized as a delivery model where at a minimum:
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- The software is hosted remotely and accessed via the internet
- Payment is via a subscription model, rather than a one-time purchase
- Software updates are executed by the vendor
These foundational principles enable:
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- Faster time-to-value and lower initial costs vs on-premises solutions, thanks to the elimination of hardware and software provisioning
- The option to shift from capital expenditure to operational expenditure, which can be more favorable for budgeting and financial planning
- The ability to access the software anywhere over the internet
What about multi-tenancy, scalability, and other key characteristics and benefits that you’ll find in many modern descriptions of ‘SaaS’?
The truth is that these other characteristics are attributed to the way that the software vendor has chosen to engineer, deliver, and market its service; and as technology and the experience of software vendors have evolved so too has the range of characteristics within different SaaS offerings.
Today, we see a range of services, from simple, single-tenant applications to complex, multi-tenant platforms offering a plethora of integrated solutions. Below, we outline some key questions that buyers ask to cut through the complexity.
Key considerations for buyers
Is multi-tenancy available?
Looking for the lowest Total Cost of Ownership (TCO)? Multi-tenancy involves several organizations sharing a single software service “under the hood”, enabling the vendor to offer the service at a much lower price than a single-tenancy solution provisioned exclusively for your organization.
Multi-tenancy is completely invisible – your organization sees only the data from your organization and has no awareness of the presence of others.
Ask the vendor how their multi-tenant solution secures your data as part of your due diligence, and watch out for urban myths suggesting there are regulations that forbid or limit the processing of financial, health or other sensitive data in multi-tenant solutions. We’ve yet to see one.
Be sure to also ask how their solution is protected from ‘noisy neighbor’ issues. These occur when one tenant (organization using the shared service) has a lot of data processing to do and grabs as many resources (CPU power and memory) as possible, slowing down the processing for other tenants. A well-engineered multi-tenant SaaS service will have safeguards against this.
How scalable is the solution?
Big growth plans? Have a think about how much data you need your finance solution to process today, and how much it might need to process in the future. How quickly do you need processing to complete? Ask the SaaS vendor whether the solution can handle your future data volumes within the desired processing time. Is their claimed performance proven with similar data volumes for other clients with live implementations?
Does the base solution require customization?
All software requires configuration of some kind – entering information and settings so that it behaves in the desired way. Distinct from configuration is customization – writing bespoke code to suit a specific business requirement.
Because customizations are bespoke to your business they will typically require additional maintenance and testing to ensure compatibility with new product releases after product upgrades. This can increase your costs and the more complex the customization the greater the possibility of bugs, so it’s important to ask potential vendors for information on:
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- Which areas of the software require customization to meet your specific business needs, and the extent of the customization required
- The customization maintenance strategy, especially as it applies to product upgrades
- Who is responsible for implementing and maintaining the customizations, and how they are priced and paid for financially
Does the vendor automatically update the software for all clients on a pre-scheduled basis?
Automatic updates managed by the vendor ensure that your software remains current with the latest features, security patches, and improvements. It reduces the burden on your IT team and helps you stay competitive.
However, not all SaaS providers offer automatic updates, and some may require manual updates by your organization.
Clarify the vendor’s update policy to determine how frequently updates occur and what your organization’s responsibilities would be before, during, and after an update.
What is the vendor’s data backup and recovery strategy?
Data loss and service downtime safeguards are critical to ensuring your business can continue to function in the event of a disaster (natural or technical). Discuss the vendor’s data backup, recovery, and business continuity procedures to ensure your data is protected against unforeseen incidents.
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- Does the service have redundancy in all of its components to ensure continuous operation if one component fails?
- Would you expect to see an interruption to the service if any one component failed?
- How often is data backed up and how long are backups stored for?
- How quickly can a system be restored from a backup?
Can the vendor satisfy your security, compliance and audit requirements?
Does the vendor offer SOC 1 and SOC 2 reports that independently verify the service’s controls operate as described?
Is the vendor ISO 27001 certified, offering independent assurance on data protection and security?
The future of SaaS
The SaaS landscape is poised for further diversification, with services becoming increasingly specialized and aligned with specific industry needs. The continuous integration of emerging technologies – especially Artificial Intelligence – is expected to further expand the capabilities and influence of SaaS in business operations.
Asking the vendor about their plans concerning AI and other emerging technologies can act as a useful barometer of their level of technological sophistication and dedication to creating more value for clients through innovation.
Conclusion
In the ever-evolving world of digital transformation, understanding the nuances of different SaaS offerings is essential for informed decision-making.
As this buyer’s guide has highlighted, not all SaaS is equal. From multi-tenancy and scalability to customization and automatic updates, each characteristic can significantly impact your experience with a SaaS solution. It’s crucial to assess your unique requirements and ask the right questions to match them with the right SaaS variant.
The future of SaaS promises even more specialization and integration of cutting-edge technologies, making it an exciting journey for businesses seeking to gain a competitive edge.
