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Using SaaS to Better Define the Cost of Providing IT  [ IT Business Edge ]
August 11, 2009 05:46 AM

Posted by Paul Mah
Aug 9, 2009 6:11:22 AM

You have probably heard a lot about SaaS by now. Looking beyond the hyperbole and marketing fluff, however, what are some of the real-world advantages of implementing it in an SMB? 

Let's take a look at a couple of them. 

Software licensing 

If your small and medium business is like most, you will be working with an annual budget allocated in advance for various costs and projects spread through the year. And unless your company is in a growth spurt, the bulk of your IT budget will probably be going toward software licenses and operational costs. 

While there are perfectly sound reasons for working with a fixed IT budget -- and having a proper budget is indeed something that I advocate -- one weakness of such a system is that it generally reacts poorly to changes on the software licensing front. This is because the smaller size of SMBs means they typically do not have the purchasing clout to negotiate volume licensing terms, and instead generally purchased software licenses in packs of 5 CALs. 

This means that any new hires could incur a disproportionate cost as more licenses than are actually needed are purchased; by the same token, any reduction in the workforce will see limited benefits since the various software licenses would already have been acquired for the year. 

With IT being increasingly commoditized, it makes sense to tap into SaaS to break down the cost of IT to be less monolithic, and to be more reactive and agile. The reasoning is simple: by distilling the various applications used in the company into services, it becomes possible to better optimize the cost of software, paying only for whatever is used. 

Managing hardware costs 

One of the basic promises of SaaS is in its ability for businesses to avoid investing in costly hardware. The value of this benefit might not be intuitive to IT at first, but becomes apparent when viewed from the perspective of the CEO or CIO.  For one, senior executives can now more accurately extrapolate the cost of expanding the headcount or even the opening of additional branches. 

In the absence of SaaS, these executives could be blindsided by potentially complex licensing terms and pricing tiers, or by monolithic hardware which can only be at once place at a time. In addition, a reduced reliance on specific hardware translates directly into lower associated maintenance and support costs, which can vary greatly between geographical locations. 

In my next post, I will be exploring some common software applications that are ripe for an SMB to exploit using SaaS, so stay tuned.