There is an interesting article in CFO magazine1 this month about the continued move of finance departments to the cloud for their software needs. The clear message from the article is that SaaS is rapidly becoming the dominant delivery method for enterprise software, making up 52% of sales in 2014, according to Gartner.
While the take-up of SaaS solutions is certainly higher for what Gartner describes as “edge” solutions, which lightly interface with the ERP system (such as CRM, travel and expense management and talent management), solutions such as treasury management, which have a much deeper ERP interface, are also seeing a continued (and growing) progression to SaaS.
One piece of research cited in the article which caught my eye is KPMG’s Cloud Survey Report2, which discusses some of the issues organizations face when deciding which delivery method to adopt. As you can see by the chart on the right, there are several major considerations about the challenges of moving to the cloud. Given that these challenges were cited by +/- 50% of all respondents shows that these impressions are widespread and should not be ignored. But actually, while KPMG’s survey shows several concerns for transitioning to a cloud based solution, how accurate are they?
Sure, every software implementation project will certainly have its own – let’s say “nuances” – many of the supposed challenges that are associated with SaaS versus installed software implementations are less based in fact and more on often outdated perceptions. Even for the most risk-averse technology users, any possible drawbacks of migrating to the cloud are far outweighed by the operational, innovation and cost benefits that it will continue to deliver throughout its lifecycle.
Data loss and privacy: A well-implemented SaaS solution with a respected vendor will likely result in data being more secure than when installed in the company’s own server room. SaaS solutions contain a wide range of security measures, such as encryption of data in transit (from the desktop to the server, so it can’t be intercepted) and at rest (while on the server, so it can’t be hacked); multiple firewalls, protecting data both internally and within tiers; multiple, redundant storage solutions in different locations; and outsourced penetration testing – getting a third party to try and hack your server – which will vastly reduce the possibility of any data loss. In fact, the investment that SaaS software vendors make in security is much higher than individual end-users can typically afford, and given that this cost can be spread between hundreds or even thousands of users means that the cost per subscriber is low.
Risk of IP theft: With SaaS solutions being fully hosted outside the corporate network, the potential for IP to be stolen is minimal, and certainly less than with an installed solution. As system data and workflows are the only items that are hosted in the cloud, so there is no real likelihood of corporate IP being compromised. As mentioned above, the security provisions put in place by SaaS solutions are such that any kind of compromise of data is significantly less likely than when the solution is hosted on the company’s own servers.
Impact on the IT organization: One of the key benefits of SaaS is its lack of implementation or maintenance impact on the IT organization. Since the SaaS lives offsite, there is no need for the in-house team to implement or support the system; security protocols focus on in-house user identification vs. data base protection; and, since SaaS is browser based, there is little concern of whether or not it will be stable in a particular environment or have an impact on other systems. In most cases, SaaS enables the in-house IT team to elevate its role from implementing and babysitting third-party software platforms to developing high-impact initiatives that drive business value.
Measuring ROI: ROI is obviously a critical element of every new IT implementation, and every organization needs to thoroughly assess and measure spend versus benefits. While the “R” – each organization’s return – Is variable and specific to system’s capabilities for their project (regardless of how the software is delivered), the “I” is fixed with SaaS – upfront implementation cost plus monthly subscription fees. Given that these monthly costs are known for several years in the future and agreed on the initial contract, it’s easy to calculate what the total investment will be. Compare this to more traditional solutions, where the base license fees are supplemented by hardware investment (and replacement every few years), upgrades, support costs, storage and so on. Given that many of these costs are both variable and often unscheduled, and it makes the overall investment much more difficult to assess.
High implementation cost: In addition to more easily measurable overall investment, as mentioned above, start-up costs are also easier to track. An on-promise solution will require a number of upfront investment items in addition to the license cost – such as a database and storage hardware, reporting package. Again, all these are part of the ongoing subscription fee for a SaaS platform. The only additional costs that the company will need to pay are the upfront implementation costs (in the case of treasury, this typically means paying for bank connectivity and implementing that functionality, usually a custom API, into the corporate ERP system.) These costs are generally similar regardless of whether the solution being implemented is SaaS or otherwise. In fact, given that SaaS implementation is done by the provider’s own team, which will have many years’ experience with the solution, it will often be a quicker, and therefore less expensive, process.
1. Considering the Cloud – CFO magazine, February 2015
2. KPMG 2014 Cloud Survey Report