Choosing an Online Service Provider (A White Paper by Symantec Corporation)

February 24, 2008

Courtesy of www.Symantec.com

By Chris Schin, Director, Product Management, Symantec Corporation

Small to mid-sized businesses (SMBs) can always benefit from any IT enhancement that will save both time and money. But as the application software industry continues to evolve and progress, price and complexity have edged some SMBs out of the competitive landscape. These companies have suffered because they lack the budget or expertise to pursue the appropriate applications needed to run their businesses.  For that reason, many SMBs are exploring how to get around those limitations by utilizing a more on-demand approach to software applications, and have discovered Software-as-a-Service (SaaS).  

SaaS, sometimes referred to as “online services,” have traditionally been associated with offerings at the application level – such as CRM, but have evolved to IT infrastructure offerings as well.  The SaaS model has helped SMBs increase productivity and reduce IT costs while upgrading their software applications.

Nevertheless, many SMBs are confused over what the SaaS model is and how it works. The lack of standards categorizing the on-demand software services industry has resulted in multiple terms and phrases that try to define essentially the same idea. This creates confusion for companies who would consider a SaaS approach, and for vendors who wish to provide these services. Consequently, companies that would benefit most from the SaaS model are left to find a resolution on their own.

Why SaaS?

Capabilities that are delivered via the SaaS model are provided to end users over the Web, rather than software that is installed and maintained in-house by the customer. With SaaS, a vendor (or other service provider) owns, hosts, manages, and updates the software so that the customer does not spend valuable resources implementing or managing software applications themselves.  Instead they can rely on the SaaS provider to keep the service up to data and available.

Customers pay for SaaS on a subscription or per-use basis, which simplifies budget planning, reduces upfront costs, makes payments more predictable, and lowers total cost of ownership. This allows SMBs to eliminate many of the overhead IT expenses and operational concerns commonly associated with traditional software products. Also, SMBs using SaaS will be less likely to have to deal with an IT infrastructure that has become obsolete over time.

Despite all of its benefits, some SMBs are hesitant to make the move to SaaS applications. Why? Many are resistant to change what is working for them.  Their thinking could easily be summed up with the old saying, “if it ain’t broke, don’t fix it!”  Other SMBs worry that their unique business needs can’t be met by a new SaaS solution – that the solution will not provide robust features or will be unreliable.  Still others are afraid the transition to SaaS would not be smooth and that the vendor won’t be available to help (or worse – that the vendor will not be around in a year or two!). Finally, another common obstacle is that businesses worry about the security of their information when it’s hosted and/or stored offsite by a vendor.

Choosing a Vendor

When choosing a SaaS vendor, every SMB should look for the following attributes, and ensure that they align with their business requirements:

• Service Level Agreements: Trusting data to an online service means that the service must be available when usage or recovery is needed.  Make sure that the vendor is offering 99.99 percent uptime of the applications.
• Datacenter Security, Reliability and Availability: Customers should expect vendors to take measures to ensure the security, reliability, and availability of their data, to take into consideration data encryption services that allow only the end-user to see what the data contains, and to ensure redundancy and availability of the application and data in times of disaster by hosting the applications in multiple data centers.
• Industry Expertise: The SaaS vendor needs to understand the market.  The vendor should be a leader in IT infrastructure offerings and services.
• Affordable and Easy To Use Solutions: The vendor’s solution should not require additional IT staff or infrastructure and should be easy to use, with service plan structures that support your needs.

Buying Direct vs. Channel

During the past several months, SaaS buying options have shifted – traditionally, SaaS solutions have only been available for purchase direct from a vendor through a sales representative, but more and more such offerings are available for purchase from a vendor’s channel partners.  Customers are now provided various alternatives when seeking a SaaS purchase option.

Many channel partners indicate they want to take on more of the provider and advisory role. With the ability to build deeper relationships with their customers, they are better positioned than vendors to offer SaaS along with additional value-added services to their clients, ensuring the best overall solution and experience for the customer.

Channel partners can adopt SaaS options to quickly augment the toolkits they have at their disposal to help customers solve a myriad of problems and issues. Moreover, channel partners are usually well positioned to offer SaaS along with additional value-added services to end users because they have developed relationships, know their customers’ needs, and can recommend a full suite of offerings – as a trusted advisor – with the end user’s specific needs in mind. This helps to ensure the best overall solution and experience for the end user.

Channel partners can also offer these best-of-breed technologies to their SMB customers at a lower cost and with lower risk to the end user. The SaaS provider has the ability to achieve economies-of-scale across a huge array of SMB customers, and these channel partners can pass those savings along to the end user. This results in a lower-cost solution to an SMB when compared to purchasing, configuring, and maintaining a comparable on-premise solution. Additionally, SaaS solution providers – with more targeted expertise in the specific solution area – implement and maintain the SaaS solution, lowering the risks typically associated with the adoption of new technology.

Delivery Options

If a SaaS solution is well-built, vendors can deliver it to SMB customers in multiple ways, enabling them to cater to both the tech-savvy and non-tech-savvy customer.

Tech-savvy companies want direct involvement in the management of their solutions, and will seek to provide input and help manage their network. Vendors can set these customers up with the ability to log into their own dashboard and easily control the SaaS solution from anywhere in the world. In this scenario, the vendor plays the role of “trusted advisor.”

On the other end of the spectrum, vendors or its channel partners may need to take more of a hands-on approach when working with less-tech-savvy customers, providing them with more consultation, expertise, and even runtime management over the SaaS solution. In this scenario the vendor or its channel partner acts as a hands-on technical advisor – or even IT adjunct – fostering deeper relationships with their customer via hands-on, day-to-day management of the solution. This way, the provider focuses on the technical aspects of the customer’s IT infrastructure while the SMB focuses on the business.

SLA (server level agreement)

In-depth Service Level Agreements (SLAs) allow vendors to guarantee that they will meet the needs of customers.  SLAs also monitor the service expectations as well as the repercussions of failing to meet these agreed-upon terms.

While customers have depended on their IT departments to handle the managing of typical software products, the new SaaS model turns the SLA into a tool that provides protection for both the software provider and their customers.  With SLAs, customers can expect a certain level of accountability from their software provider, including a way to check and assess the performance of the service.  In turn, SaaS providers enjoy the solidity of clearly defined expectations with their customer and the steps for compensation if these expectations are not met. Ultimately, SMBs should expect enterprise-class capabilities from their SaaS providers.

Conclusion

Research has shown that SaaS revenues are growing faster than traditional licensed software revenues, with adoption rates especially strong among SMBs. While the SaaS model is unlikely to ever completely replace traditional software offerings, market analysts predict money spent on SaaS-delivered software solutions to increase $6.5 billion from 2004 ($4.2 billion) to 2010 ($10.7 billion).

The SaaS model provides SMBs with the ability to eliminate a large part of their IT costs, reduce the risks of acquiring new software, strengthen their relationships with service providers while receiving higher quality products, and satisfying usage demands as the business grows and develops.

SMBs can also roll out, implement, or eliminate applications as they see fit. If the solution doesn’t serve the customer’s unique needs, there is no penalty for changing to other alternatives, rather than being over-provisioned or stuck with it. Overall, SaaS provides a much less risky investment while giving SMBs access to enterprise-class applications they otherwise might not be able to afford.