Inovus Intelligence - Insights on IT Alignment                               December 2015

Considerations for Adopting Software as a Service (SaaS) 

Software as a Service (SaaS), which makes business software available as a cloud-based multitenant application, has become increasingly popular with all variety of organizations, particularly for ERP solutions. Whether embraced with the goal of cost-containment, rapid rollout, or immediate implementation of common best practices for a given business area, this approach deserves close consideration prior to adoption. Rather than accept prevalent assumptions about the value of multitenant applications, organizations should examine the option for themselves, asking two questions: “Why is this good for me?” and “How will my organization own this application in the long term?” Specific factors to consider include customization and control, ownership and management of data, and long-term cost of ownership.

Because a single vendor hosts the multitenant application, providing a different instance of that application for each of its customers, this model is limited in the degree to which it can be configured or tailored to an organization’s preferred business practices. The application is developed based on a common denominator for business processes. As a result, an evolving organization must decide if it will force its departments to continue to conform to the dictates of the multitenant application, or if it will allow disintegration of the approach. In the latter scenario, the organization would augment the SaaS solution and replace some functionality with applications that address the specialized needs of various business areas.

While ownership of data may be specified within a SaaS contract, true control over data demands that the organization also account — within the contract — for the data structure and how data can be migrated from it to another system. The organization must ensure that it can take action against stored data in a way that serves its needs.

Consider, for example, an ERP application, which serves as the central hub of an organization’s administrative systems and typically integrates with a wide variety of subordinate products that provide key services — payroll, benefits administration, etc. An organization invests in this solution expecting stability and long-term value, but some multitenant applications are untested with respect to their long-term value, especially as defined by the consistency of support and services provided by the vendor, as well as the flexibility of the application as the business evolves.

The relative inflexibility of a multitenant application compared with software maintained in-house can, over a decade, eliminate any cost benefit of moving to the cloud and, in some cases, introduce higher costs and greater complexity to operations. This is a very different model than organizations know from working with hosted applications, where they can simply break open the code set and make them work. Benefits such as greater business conformity, less variability, and continual upgrades can be balanced or even outweighed by ongoing subscription costs, lack of access to historical data, limited integration with other critical applications, and the need for additional applications to realize all the functionality required by the organization.

These tradeoffs are neither good nor bad, but they do illustrate that working with SaaS presents a new array of considerations. For this reason, an organization must approach a move to a multitenant application with eyes wide open, understanding its requirements with respect to the adjustment of business process and management of expectations over time.

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