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Advantages & disadvantages of Software as a Service (SaaS)

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Last editedAug 20223 min read

From Xero to AWS, Dropbox to Slack, the rising popularity of the software as a service (SaaS) business model has had a staggering effect on the way we work. SaaS (a term for a popular cloud-based software distribution model in which service providers make software available to subscribers on a pay-as-you-go basis) is currently in a boom period, and many businesses are contemplating moving from on-premises software to a SaaS solution, if they haven’t already done so.

Thinking about moving to the cloud? Here’s our quick and easy guide to SaaS pros and cons, giving you a greater insight into the benefits of SaaS vs on-premises software.

What are the benefits of software as a service?

SaaS is everywhere, and as a result, many businesses are contemplating the benefits of SaaS vs on-premises software, a traditional alternative. Could this type of outsourced technology be a good fit for your business? Here are five of the top benefits of software as a service:

  1. It’s ready to go – One of the major operational benefits of SaaS is that fact that it offers out-of-the-box functionality. Put simply, you can get started almost immediately, as the software is installed and configured ahead of time on the cloud, and you won’t need to go through a lengthy deployment process, as is often the case with on-premises software.

  2. It costs less – As SaaS is subscription-based and often doesn’t require any up-front licensing fees, you’ll enjoy much lower initial costs. This and other features such as proration ensure that your business has greater liquidity, freeing up cash flow to use in other areas of your business. In addition, SaaS provides small-to-medium size businesses with access to software that they wouldn’t otherwise be able to afford due to the expensive licensing fees.

  3. It’s easy to scale – One of the most significant SaaS benefits for customers is its scalability. Compared with traditional software models, SaaS can scale up and down to meet fast-changing business requirements, while also providing integrations with other SaaS offerings. So, if you receive a sudden influx of new users, SaaS offers the flexibility you need to immediately boost your capacity.

  4. It’s simple to upgrade – Research by GoCardless has shown that as many as 37% of all businesses choose SaaS because of the regular product updates, making this one of the key operational benefits of SaaS subscriptions. Instead of buying the upgrade package and going through the lengthy installation process, your provider will simply upgrade the solution and make it available to you.

  5. It can improve all areas of your business – Although many businesses only apply SaaS to finance, accounting, and sales, SaaS solutions can benefit virtually every area of your business, including marketing, HR, project management, and customer service, making this one of the most important SaaS benefits for customers. Don’t underestimate the extent to which SaaS is revolutionising business operations and providing customers with benefits across the board.

What are the disadvantages of software as a service?

While there are a broad range of SaaS benefits for customers, it’s not without drawbacks. Here are five of the most important disadvantages of software as a service to pay attention to:

  1. It’s only available via the internet – To make the most of SaaS, you need a speedy internet connection, otherwise, you could experience issues with lengthy load times and unsynchronised data. High-speed broadband is still not available in many areas of the UK, so this could be a limiting factor on the uptake of SaaS.

  2. It requires you to share your data with your provider – Concerns around privacy and security are one of the major disadvantages of software as a service for many customers. While many service providers offer an excellent standard of data security, data breaches and hacks are still possible, and some companies simply aren’t comfortable handing over confidential company data to a third party.

  3. There’s a danger of service termination – Although it’s unlikely that you’ll ever spontaneously lose service, if a SaaS company goes bankrupt or discontinues their service for any reason, you won’t be able to continue using the service. While you’ll generally receive prior warning, giving you the opportunity to back up your documents and transfer them over to another service, this is an issue that generally doesn’t affect on-premises software.

  4. It requires compatibility with your operating system and browser – SaaS tools may work differently depending on your browser or operating system. This may be a more prevalent issue for macOS users, as many SaaS vendors optimise their tools for Windows.

  5. It leaves critical business functions in a third-party’s control – Finally, it’s important to remember that – with a SaaS model – you never actually own the service you’re using, leaving the control of important business functions with a third party. This can cause a number of issues. For instance, you may not be able to opt out of software upgrades you don’t want, while you’ll also have limited control over changes to features.

Making the move to outsourced technology

Ultimately, the suitability of SaaS for your business depends on the specifics of your company. However, when you consider the potential cost savings, flexibility, and ease of implementation, it’s easy to see why so many businesses believe the operational benefits of SaaS far outweigh the downsides.

With Gartner predicting that the worldwide public cloud services market will grow 17% in 2020, SaaS looks likely to become an ever more integral part of the business world over the next decade.

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