Thursday, September 10, 2009

The ROI of Software-as-a-Service

Click Here for Article is offering a webcast (see attached article above) to openly discuss the ROI of Saas.  Saas and Cloud computing have filled the trade news this past year as a technological and financial competitive advantage.  Surely the concept of a Shared Service (my favorite topic) infrastructure to centralize and reduce expense is very attractive.  Most CFOs would agree that eliminating redundant infrastructure and hosting expenses would interest them.

Each company has their own unique culture and business objectives in which they use to guide their implementations.  This article and the ROI discussion about Saas centers around the rent (lease) or buy (in-source) options.

At a high level, it may be viewed as analogous to a lease v buy decision for a new car.  If you lease, you have no capital outlay, but retain no equity.  If you buy, you need to capitalize the purchase but you then own the equity. 

In a technology world, it gets even more complicated.  While there are many short-term advantages of an expense-only subscription to Saas, such as no capex, less development cost, faster time to market and no inherent infrastructure to maintain.  Buyers need to evaluate their own needs by evaluating key issues such as:

  • Who owns my data in a Saas world?  How easy will it be to evolve a Business Intelligence toolset on Customer, Product, Inventory data?
  • Will I ever need to move this application in-house and what would that mean to my business?
  • What are the long term TCO (Total Cost of Ownership) costs over a 5-7 year span versus in-sourcing?
  • How well will the Saas option scale if we expand and how will that impact subscription costs over time?
  • Will the Saas model align with your business process over time?

On the flip-side, taking the application in-house has challenges and opportunities as well.

  • Do we have the Infrastructure to support this application
  • Do we have the application expertise to administer and enhance the application to align with business processes?
  • Do we have the Capex to invest?

All questions that need to be raised and carefully ALIGNED with the business culture, business processes and business objectives.

I await the webcast next week and and hope to hear further clarifications to this ROI discussion

Caveat Emptor


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