Tuesday, 16 April 2013

Software as a Service Pros and Cons

Software as a Service advantages and disadvantages in the point of Service Recipient and Service Provider

Software as a Service Pros and Cons
From the perspective of the service recipient

The SaaS model offers small and medium businesses a number of advantages over the traditional license purchase:


  • Low risk investment
  • Transparent IT costs
  • Accelerated implementation
  • Reduce IT complexity process
  • Mobility
  • Focus on core business

The service recipient has a lower investment risk as it does not need any introduction for the software and IT hardware paid solely for the introduction advice. Two studies of McKinsey Consulting and Yankee Group indicate that the investment costs of a SaaS solution compared to an on-premise solution to 30 percent can be reduced, regardless of the number of users. In addition, the service users transparent IT costs, he usually paid only for the actual usage of the software. Because SaaS solutions are usually standardized, the configuration and the set-up of the application is implemented for new customers faster and easier than with traditional license purchase. 

This allows the implementation of a SaaS solution can be realized within a short time. A further advantage is the outsourcing of the process complexity by maintenance, updates and other IT tasks are performed by the service provider. The software access via the Internet ensures high mobility because the service users can be time-and location-independent access to the system. With an outsourced IT infrastructure, companies can focus on their core business and value creation, and therefore the annoying IT Tasks deal. So that IT is an easy to handle commodity to secure growth, flexibility, competitiveness and hence the existence of the company.


  • Depending on the service provider
  • Slower data transfer rate
  • Smaller adjustment possibilities
  • Data and transaction security

A disadvantage of software as a service is welcome that the service users are in a dependent relationship, the so-called vendor lock-in, since the customer does not own the software. There is a risk that the service provider shuts down the system for a specific reason (eg, insolvency). The service users need a working Internet connection, otherwise a work with SaaS solutions is not possible. Another disadvantage is the data transfer speed, which is in on-premise solutions usually higher. SaaS solutions are usually standardized, so there is little customization of the feature set. An important aspect is the data security. It is confidential data resides on service provider, so they must be protected with appropriate security measures. 

Therefore, to consider before using a SaaS solution, whether they have been tested according to certain safety standards. SaaS vendors should be selected, which were according to the standard for data centers, ISO 27001, the Federal Office for Security in Information Technology tested and certified.

From the perspective of the service provider's

Also for the service provider resulting from the SaaS model advantages and disadvantages, which are described below:

  • Expansion of IT services offered and generate additional revenue
  • Secure long-term revenue and better liquidity planning option
  • Less likelihood of software piracy

The service provider has the opportunity to expand its IT services and thus generate more revenue. As the service users usually pays a monthly fee for the use of the software, can secure long-term revenue and thus the liquidity be better planned. In addition, fewer losses are achieved by software piracy, as the software is centrally managed at the service provider.


  • Investment risk
  • Acceptance problems in the IT market
  • Potential reputation damage and lost sales

A disadvantage of the SaaS model is the high investment risk, as the acquisition and management of IT infrastructure is provided by the service provider. In addition, the SaaS model is relatively new in the IT market, so there are currently problems with the acceptance service users. The acceptance problems are mostly due to the lack of safety data. In the event that the security measures are not adhered to and enter sensitive corporate data to an outside body, could be a huge loss of image with a drastic drop in sales arise.

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