Why Buy Software when You Can Rent

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Renting software is commonly referred to as Software as a service (SaaS).  SaaS is a model for using software as a subscription service instead of buying the license and installing the application files on a local computer from a CD, or increasingly as a download from a vendor website.  I am a big believer in SaaS, but I tried to be somewhat objective.

According to a large technology analyst firm, key characteristics of SaaS include:

  •   Network-based access to, and management of, commercial software.
  •   Server management from a central location rather than at each customer site.

Software delivered as a service generally is priced on a per-user basis for each application, with billing managed by a major credit card or invoice. Sometimes there are minimum user requirements, minimum subscription time periods, as well as additional fees for setup, extra bandwidth and storage.

Who it's for . . .

In the business-to-business arena, the SaaS model is most often focused on the small-medium business segment. Unlike large enterprises, smaller companies have:

  • Little or no staff devoted to information technology, and the employees they do have are often stretched thin and are generalists in their knowledge and skills.
  • Limited budgets, particularly for capital expenditures.
  • More fluid needs for tools and people due to rapid growth and other changing requirements.
  • Greater demands on time, as most small business owners and their employees wear multiple hats.
  • Growing propensity to operate on a ‘virtual' model, with employees working from home, at remote work sites, or from rented office space that is shared with other businesses.

The flexibility of software as a service is particularly attractive to small business owners 

  •   No upfront investment in money or time, and often no contracts.
  •   Ability to use powerful business applications without having to acquire the specialized infrastructure and staff needed to manage them.
  •   Power to mix and match applications or add and remove users as needed
  •   Freedom to work from any location.

How it works . . .

The SaaS model requires primarily a web browser and an internet connection:

1.       The customer goes to a website and ‘buys' a subscription - generally monthly - to the desired applications and number of users. An account is usually set up with a major credit card for billing.

2.       The person who places the order (who generally becomes an administrator) is given login credentials and a web URL for secure access to the application.

3.       Every user added to the account receives his/her own log-in credentials granting them web access to the application(s) for as long as needed and as long as specified terms are met.

Most SaaS vendors provide a secure web portal with additional services such as support, along with administrator access for changing the number of users or applications and maintaining other account information.

Compared with traditional software licensing . . .

Using an application as a service has a similar look and feel as if using it from a local PC or server, particularly with today's fast and reliable bandwidth. Performance and availability generally are outlined and guaranteed by a Service Level Agreement (SLA).

  • Traditional software is purchased as a license, with the application files delivered on a CD or downloaded from a website. As a license, what is purchased is the right to use the application, either by one user or on one computer.
  • The buyer is responsible for ongoing management such as backups, patches and upgrades. Most software vendors offer annual maintenance fees and/or upgrade pricing for existing customers.
  • There are no refunds for software no longer used or wanted.

Potential disadvantages of the SaaS model . . .

  • Some companies wish to keep all software and hardware under internal control. They want to be able to ‘see and touch' the hardware.
  • Companies with unique requirements or a need for significant customization may not be able to utilize the model.
  • The concept of leasing or renting is not popular with some business owners who prefer ownership, or who have had bad experiences in the past.
  • Owning is considered to be less costly than renting.

Demonstrated advantages of the SaaS model . . .

  • Since nothing resides on a single hard drive (with a few exceptions in which files must be installed locally), the application can be used from any internet connected PC, providing greater flexibility.
  • With pay-as-you-go terms, you pay only for what you use.
  • You're never locked into a license, so there's no obsolescence and no buyer's remorse if something doesn't work out the way you thought it would, or if requirements change. While purchased software cannot be returned, software subscriptions may be cancelled.
  • Reap the productivity rewards from an application whenever you want, without a commitment or big upfront investment in money or an evaluation process.
  • Add or remove users as staffing needs change and applications as business needs change.
  • Predict and budget how much you will spend, and move the cost from a capital expenditure to a business expense.
  • Redirect financial resources, people and time for other needs and priorities.

We're a reseller of SaaS applications through our online portal - ww.workplace2go.com 

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