CLOUD COVER: WHY SAAS AND ONLINE SERVICES MAKE SENSE
Business computing has moved to ‘the cloud’ with small businesses now able to access data storage and backup facilities, accounting and payroll services, banking and even customer contact and sales force applications online. How does it all work and what are the benefits? Vikki Bland reports
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They call it ‘cloud computing’ yet delivery of business software and services online is far from a pie in the sky concept in 2009. Telecommunications and software companies are gearing up to offer a range of business software and services online. Even better, the flexibility and ‘small IT footprint’ of many small businesses mean they are often best positioned to take advantage of online applications and services. Some of these you know about already. There’s nothing new about doing business banking online, or using an Internet meeting service like Microsoft LiveMeeting, Citrix’s GoToMeeting or Webex for online collaboration with customers and business partners. Most small businesses are also aware email can be hosted by a third party like an ISP or a telecommunications company. Hosted email is centrally managed, accessed with a web browser, and can be sent out to a number of devices – including desktop PCs, laptops and smart phones – at the same time. You may also be aware you can use an online service provider to remotely initiate PC and server data backups or to remotely monitor your business network using an Internet connection. Many ISPs and other support specialists offer these services. Less well known is the availability of online software for accounting, payroll, CRM, and sales force processing. Traditionally, small businesses have needed to install such software on their own systems and pay up-front licensing and maintenance fees. But when an application is available as an online service – a model known as Software as a Service or SaaS – ownership and maintenance of the software application is left to the SaaS provider and the customer simply uses it. Information specific to each business is then stored securely by the SaaS provider in a data centre (often located offshore) and can be accessed by the customer anywhere, anytime via a web browser and secure log in procedures. The customer pays a monthly subscription fee for the service so there are no up-front capital costs and no need to maintain the software or back up information. An additional benefit is that SaaS services are typically charged on a per-user basis, meaning the service can be scaled up or down according to changes in the business. SaaS: Easy as? SaaS sounds easy and often it is – that’s the attraction for small and large businesses. If a business needs to export part or all of its information from the ‘cloud’ to its own in-house systems, most SaaS providers allow this, and in fact actively facilitate it because a business will obviously want to download parts of its information at times for using in other applications or for analysing. The only time a business may encounter problems extracting its information from a SaaS service is if the service has been affected by non-payment of subscription fees or if a customer tries to terminate a SaaS service before the contract period is up. Rod Drury, CEO for SaaS company Xero, which offers online accounting software as well as payroll software in conjunction with partner iPayroll, says using SaaS opens up other opportunities too. For example, accountants can access the accounting information of their clients through Xero, with that client’s permission. This reduces administration time, giving accountants time to be more proactive with their customers, says Drury. He says although "a lot of security and controls" are required by any SaaS provider to ensure customers using the same online application can’t see each other’s information, these technologies exist and a proven SaaS provider will be adept at using them. Drury points out banks and telecommunications companies already have an online relationship with millions of customers and deliver a secure online service. "There’s quite a body of evidence to suggest that being online and having someone else monitor and store your data is actually more secure than maintaining your own systems," says Drury. Aden Forrest, "Small businesses basically get an enterprise class solution at a fraction of the cost. And using the applications is simple; if an IT solution is complicated, people won’t use it," says Forrest. He says the main challenge is the initial upload of business information from installed systems to the SaaS application and ‘cloud’ environment. This can take time, and the SaaS application may also need to be modified to suit business needs. However, SaaS providers are increasingly able to accommodate these challenges, as well as offer customers access to new applications that extend an existing SaaS application, says Forrest. For example, SalesForce.com has more than 900 ‘add-ons’ – around 300 of which are free. Examples include integration components for phone sales systems and screen popping tools. Peter Simons, general manager ANZ for Maximizer Software Solutions, which offers CRM software both as installed software and SaaS, says most Maximizer customers have between one and 20 employees and are looking for a CRM solution ‘off the shelf’ – requirements that can easily be met by the company’s SaaS service. However, he says consultants first determine whether small businesses would be better suited to installed software or SaaS by asking the right questions. "Do they have a specific workflow to follow; do they need particular screen designs or other customisation? If so, then we may have to look at a non-SaaS solution; a SaaS solution is really best suited to a non customised [software] environment," says Simons. Simons says some organisations try to over-engineer their SaaS solutions to the point they become a "white elephant". "Our advice is: keep it simple." He says it is also possible for one business to use both models, with information stored in installed software being used to regularly update information held ‘in the cloud’ on a SaaS service. SaaS savings Subscribing to a SaaS service is not necessarily the answer for every small business – while many SaaS services run well over even modest Internet connections, SaaS providers spoken to for this feature recommend a business broadband connection, and preferably one enhanced by the use of a higher grade modem. Without this, a SaaS service may be a little frustrating to use. Drury agrees Drury says Xero has attracted 4000 global customers in 20 months of operation, between 2000 and 3000 of them are New Zealand customers – success he attributes to the convenience, budgeting and time saving benefits of using an online software service. "The cost of using SaaS can work out less than the cost of ongoing software maintenance depending on the business application. And a small business could gain a day a month in [productivity]. All SaaS services should provide value for money or they’re not worth having," says Drury. Simons says cost savings can balance out the time it may take to integrate existing business information with a SaaS service, but small businesses first need to read the fine print relating to SaaS service contracts.
"Some SaaS companies say they charge a monthly fee, but the contract actually says you will be invoiced [up front] for the first 12 months. If that happens, SaaS costs may be similar to those of an on-premise solution," says Simons.
He says a report by Springboard Research showed the SaaS market in the Asia Pacific region was worth $US274 million in 2007, and that lower cost of ownership was the most significant reason for Australian and
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Future focus As in many IT areas these days, the future for SaaS is definitely the mobile computing platform. Some SaaS applications can already be accessed from ‘smart’ mobile devices like Blackberries, iPhones and Windows Mobile phones. For example, Salesforce.com users can carry a ‘snapshot’ of their Salesforce.com information on a mobile device, then upload any changes when the phone connection is established or initiated again. SaaS providers say the variety of mobile SaaS applications will continue to grow as the cost of mobile data services drops over time. Victoria Crone, general manager business for Telecom, says SaaS is a model that particularly supports ‘IT-light’ businesses and telecommunications companies are building platforms that allow SaaS services to integrate easily with other small business applications. "Telecom is building a platform that will see us able to partner with any SaaS provider we like. The advantage for small businesses is that they can then use a range of online services [via Telecom] and have these all appear on one bill," says Crone. Telecom presently offers remote monitoring of PC and server networks via SaaS, has partnered with Xero, and will offer more SaaS services in the near future, says Crone. These will include communications and telephony software applications and collaboration tools. Meanwhile, if you’re wondering what the future of installed software is, you might be interested in hearing what the world leader in installed software thinks about SaaS. Microsoft says rather than delivering SaaS per se it will offer its own hosted solutions via a model it calls ‘Software-plus-Services’. "Our vision is you add online services to existing software to make the overall experience better. For example, you might have Exchange Server installed, but subscribe to a Microsoft online data security [and backup] service. Or you might have Exchange Server but decide to outsource email hosting. Then if you don’t want email hosted anymore, you can easily move it back in-house," says Brett Roberts, national technology officer for Microsoft New Roberts says pure SaaS services may not be future-proofed against any future legislative issues relating to what companies do with their customer information and where they store it. He says the Software-plus-Services strategy is more "robust" and expects SaaS vendors to begin to adopt a similar model to Microsoft’s. "We will build data centres; we will build online services, and grow the business for hosting partners. But it’s about customer choice and the ability to move – businesses should be able to host a server, have a third party host the server, or have Microsoft provide the service, and move between any of these when they see fit. The future proofing thing is really important," says Roberts. At present, Microsoft offers traditional online collaboration and communication tools including hosted email, and has partners able to offer an online version of its Dynamics CRM product. An online Business Productivity Suite is also currently on trial. Kevin Ackhurst, managing director for Microsoft NZ, says Microsoft Online Services will let "We expect customers to save between 10 percent and 50 percent in IT-related expenditures as a result of deploying Exchange Online, SharePoint Online, Office Communications Online and Office Live Meeting," says Ackhurst.
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