28 August 2008

A few years ago cloud computing was something the early adopters said was going to be big but hadn't taken off. With the increasing use of Software as a Service, more and more companies are choosing to put their head in the clouds.

As a result of the current climate, the demand for more economical and efficient ways of doing business has begun to develop. Perhaps this goes some way to explaining the growing popularity of Software as a Service (“SaaS”) solutions at the expense of more traditional on-premises applications.

SaaS is a model of software deployment where an application is hosted as a service provided to customers across the internet. For example, instead of your word processor being installed from CD-rom or internet download, with SaaS you would simply load it up onto your web browser. Whilst it is a model that is best known for its use in customer relationship management and sales automation solutions the number of SaaS providers is rapidly increasing and SaaS alternatives now exist for nearly every field.

Forecasts have predicted that by year-end 2011, over 25% of all software sales will be SaaS, whilst present trends indicate that it is becoming an option that will need to be considered. Whether it is an appropriate solution for a business will depend not only on the commercial benefit but will also demand a consideration of the new risks and vulnerabilities that the model creates.

The functional capabilities of SaaS have improved immeasurably in recent years due to the ever increasing speed and reliability of the internet. Whilst there will always be a threat of disruption, many businesses are beginning to balance this risk against the ongoing cost of enhancing and maintaining their own software.

The SaaS model can offer customers a cost-effective subscription based on per-use pricing, limiting the need for substantial capital expenditure connected to the purchase, maintenance and updating of software under perpetual licences. Customers are also being drawn by further savings when it comes to the cost of running and maintaining the system hardware and ensuring that appropriate security is in place.

Worries about security have hung heavy around the neck of SaaS from the outset but, following recent, well publicised, security breaches arising from organisations running traditional application models, businesses are beginning to recognise that the storing of critical data in remote hosting facilities may prove beneficial and that, rather than adding risk, adopting this model may be a way of making information more secure.

Customers have been demanding greater assurances from their SaaS providers, requesting guarantees in service availability, security and privacy by bolstering the number and standard of contractual warranties and service levels given by the vendor. Before choosing a SaaS solution businesses are considering the vendor’s credentials and ability to comply with industry certified security and privacy standards. In a competitive market vendors have had to adapt and now offer a range of security functions, providing a higher degree of comfort to wary buyers.

Another long running concern has been that SaaS solutions are inflexible and are difficult to customise but, again, businesses are beginning to recognise that customisation of traditional applications is either not possible or is likely to be very costly. Given the increased range of solutions that are becoming available, buyers are considering whether it might be possible to adopt a standard package which has been reconfigured to meet the bulk needs of the market, rather than incurring the time and expense involved in reworking a package to meet their specific needs.

Integration remains an issue and care should be taken to ensure that the solution is capable of working alongside existing back-office applications but, provided that businesses carry out a reasonable level of due diligence, it should be possible to identify any areas where a vendor’s solution falls short.

Finally, it is important to consider the financial and general stability of a vendor in a market that is rapidly growing. As SaaS software is hosted off-site, any disruption to the service arising from the supplier’s insolvency could have a significant impact on business continuity. With more companies being drawn to this market it is important that a customer considers the history of the vendor at the outset.

Escrow arrangements may or may not be appropriate. SaaS solutions are designed to supply services to a number of clients at the same time and therefore often require massively powerful and expensive software. Even if source code materials were to be released, it may not be possible to run the program on a company’s existing system. Other precautions should be taken to ensure that data and documents are properly backed-up and that the customer does not become “locked in” with one supplier, so that if escrow does not provide a solution there are other options available.

There are risks attached to SaaS but provided that the right questions are asked and that preventative measures are taken, it is possible to mitigate those risks just as with any technological solution. A reduction in costs was not enough in itself to draw businesses to the SaaS model but, now that it has developed and the level of safeguards has improved, it is becoming an increasingly realistic and attractive option.