A small business guide to SaaS

Charles Pittaway - Netcash CEO

But what exactly is SaaS? For a change, it does exactly what it says: offer a way to buy software as a service, rather than a product. In practice, this means that instead of buying, say, an accounting package that comes in a box, you or an IT person need to install and maintain, you just buy the ability to do your books using software that lives on the Internet and is somebody else's problem to look after.

Pay-as-you-go monthly fee

This is a much more cost-effective way of buying software than traditional packages. Typically SaaS works on a pay-as-you-go monthly fee, either per user or according to the use of the system - per invoice generated using an accounting package, for example. There are no initial purchase fees, implementation costs, annual licence fees or other hidden costs, like the need to buy new servers or hire specialist IT staff to manage the system. Everything is up-front and regular, so it's easy to budget for - and it all comes out of the operating budget.

The technical reasons to go SaaS are even more compelling than the financial reasons. For many small and medium businesses, it provides access to a level and quality of technology they would never be able to afford otherwise.

The traditional software vendor has a difficult task. On the one hand, it needs to keep upgrading its product to keep up with customer demand and take advantage of new technology opportunities. On the other hand, a lot of customers don't want to pay to upgrade too often - so the vendor needs to make sure that every new version is still compatible with older versions and devote resources to supporting all those people still running old versions. Inevitably things get messy, bugs creep in and customers lose out on the benefits of new technology.

Changes instantly available

With SaaS, things are very different. No matter how many thousands of customers there may be, none of them is running the software on their own premises - they're all using the same software, hosted at a central location. Whenever a change is made - to fix a problem or add a function requested by a customer - that change is instantly available to everyone who uses the system.

Instead of waiting for and installing large upgrades every few months - and then fixing what goes wrong afterwards - customers get small upgrades all the time. Continual updates mean you always have access to the latest technology, as well as fewer bugs to cope with.

In some ways, SaaS is finally offering software customers what users of other technologies have taken for granted for a long time. We don't have telephone exchanges or TV studios in our homes - we just pick up the phone, or turn on the TV and they work. The combination of cheaper bandwidth, more powerful processors and inexpensive storage is finally making this possible in the world of software as well.

Security advantage

There's even, contrary to what some might think at first, a security advantage. Back-ups are part of the service - and the SaaS vendor has the money and the incentive to put a lot more time, effort and technology into keeping each customer's data secure. Where would you rather store your data - in a server in your back office that, let's face it, is probably not backed up as often or as well as it should be - or in a secure data centre owned by someone whose business depends on how well he protects it?