There are a few reasons why businesses are favoring the SaaS model over a capital expense, and for a lot of companies the SaaS model has a ripple effect on their budget.
The way that you acquire your resources can have an impact on your budget. Capital expenditures are typically for long-term asset investments, while operational expenditures are meant to cover daily operational costs. Software-as-a-Service (SaaS) is a software licensing model that has quickly become a norm for software and technology expenses. Rather than investing capital funds in perpetual licenses, hardware, and annual maintenance contracts, with a SaaS model, your company doesn’t need to worry about the licenses, upgrades, or software upkeep. Instead, your organization pays a monthly or annual subscription fee for access.
There are a few reasons businesses favor the SaaS model over capital expenses, and for many companies, the SaaS model has a ripple effect on their budget.
Supporting Infrastructure
One of the main impacts of SaaS on operational budgets is the long-term costs of supporting an internal product. For example, a company with an internal accounts payable system must invest in a supporting infrastructure. The software needs to be run locally on a server, so there is the cost of the server itself. Since it’s financial data, there should be a redundancy solution in place. A proper solution requires not only UPS hardware, but also external drives and cloud-based storage to ensure that the data is not lost.
The data and server must be secured against data breaches and hacking. That means you must ensure the server is maintained. This isn’t without cost: you’ll need an IT staff member or you’ll have to outsource the task to a managed service provider.
SaaS, on the other hand, puts the burden of infrastructure investment on the SaaS provider. As part of their service offering, there should be a guaranteed uptime, insurance liability against data loss or breach, and a continuous maintenance and support agreement in place to minimize downtime.
The data and server must be secured against data breaches and hacking. That means you must ensure the server is maintained. This isn’t without cost: you’ll need an IT staff member or you’ll have to outsource the task to a managed service provider.
SaaS, on the other hand, puts the burden of infrastructure investment on the SaaS provider. As part of their service offering, there should be a guaranteed uptime, insurance liability against data loss or breach, and a continuous maintenance and support agreement in place to minimize downtime.
Access Costs
If a company is using a SaaS product, they will need access to the internet to run it. Depending on how critical the application is, a good risk governance model will include a redundant internet connection as part of the overall risk strategy. You’ll want to be sure you mitigate any outages and downtime. This redundant internet often takes the form of a point to point wireless solution. This method doesn’t rely in the cabling coming into the building. Otherwise, a physical cut of one cable could involve multiple providers running on the same conduit.
The cost of redundant access can add up quickly. The connection’s monthly cost can vary depending on how much speed the company wants to provide during an outage and the costs of a managed failover to minimize the time between an outage and recovery. Voice over IP services are a good example of something that is cloud based that needs redundancy.
The cost of redundant access can add up quickly. The connection’s monthly cost can vary depending on how much speed the company wants to provide during an outage and the costs of a managed failover to minimize the time between an outage and recovery. Voice over IP services are a good example of something that is cloud based that needs redundancy.
Support Team
One area where there are impacts on budget in a positive way is in support costs. Since a SaaS model shifts the burden of support to the vendor, it frees your internal support to focus on other things. Rather than spending time or money supporting internal solutions, an IT technician simply needs to know the escalation path for the software and the basic troubleshooting steps. This impacts budgets either by only needing to higher an entry level technician, or by not having to higher as many staff to support the organizational IT needs.
Being able to plan the monthly costs of a SaaS solution as part of your overall operational budget and removing that from capital can show obvious impact on budgets. But you must consider the total costs of cloud-based solutions, including supporting infrastructure costs, to ensure you are not squandering your savings on excess hidden fees.
Being able to plan the monthly costs of a SaaS solution as part of your overall operational budget and removing that from capital can show obvious impact on budgets. But you must consider the total costs of cloud-based solutions, including supporting infrastructure costs, to ensure you are not squandering your savings on excess hidden fees.
