The Software as a Service Model and What It Means for Your Business (Podcast)
On this episode of Tech Tuesday, John Maher talks with Steve Ripper from PCG about Software as a Service (SaaS). Steve explains the SaaS model and covers the benefits it offers to businesses.
John Maher: Welcome to Tech Tuesday brought to you by PCG, a managed services and security provider with headquarters in Portsmouth, New Hampshire. I’m John, and with me today from PCG is Steve Ripper. Welcome, Steve.
Steve Ripper: Good morning, John.
What Does Software as a Service Mean?
John: Steve, today we’re talking about the software as service model, sometimes called SaaS, and what it means for your business. What do you mean when we say software as a service?
Steve: When we’re talking about SaaS, we’re really talking about the vendor who supplies those services, and what they’re trying to do is get away from the application-based model where they’re going to sell you a piece of software that you then take and install it somewhere, configure it somewhere, build it somewhere, house it somewhere.
Traditional Software Vs Software as a Service
John: Either on your server or on your PC or laptop or something like that?
Steve: Exactly. A classic example of this for most users, regardless of business, that most will understand is that whole Amazon model of moving away from the books to the Kindle, right? That’s a classic example of software as a service, where instead of purchasing a book, you are just accessing the book via a device or just in the web browser and then reading the book. You have access to it, you’ve purchased it, but it exists somewhere else.
That’s an example of what we’re talking about with software as a service, and the same thing is true for applications, when a vendor says, “Listen, here’s version six of our software, you need to install it, you need to upgrade this.” We’re moving away from that. We’re going to do everything in our data centers, and all we’re ever going to do is give you a link, give your users a link with a logon, and you log on and you’re going to access all the things that this application did for you. What we’re taking away from you is that you’re never worrying about whether it’s upgraded.
John: Right.
SaaS Saves Users Time With Automatic Updates
Steve: That’s one of the serious hallmarks that let you know you’re in a software as a service model… when there’s really no point in telling you what the build number is, where they’re at, they’re just adding features and changing things on their end, you’re just logging in and accessing what you need. It really solves many problems. One of the big ones, as I mentioned, was just updating. How do we move to the newest version, right? You need someone like me, and then there’s time and there’s downtime.
John: Yeah, I remember that when the IT person would come around and say, “Hey, I need to borrow your computer for half an hour today, because I need to install the new version of the software,” or something like that. You’d be, “Oh, I’ve got all this work I got to get done.”
SaaS Saves Users Money
Steve: Yes, and there isa cost associated with that, maybe you’re paying PCG to come and do that, that’s a cost, right?
John: Sure.
Steve: From the vendor side of things, John, they’re looking at a scenario where half of their customer base has upgraded to the new version, another quarter of their customer base is a few versions back, and yet the last quarter of the user base is very far behind, right?
John: Right.
Steve: They either didn’t want to incur those costs, don’t believe in new versions, or it causes all kinds of problems. From their point of view, supporting the application across this large user base is very problematic, right? Because every time somebody calls in, “Well, what version are you on?” “Well, I’m on the latest one.” “That’s great, okay, this and this.” “Well, I’m on the very first version.” “You haven’t upgraded in seven years? We can’t help you.”
SaaS Benefits Software Vendors as Well as Businesses
Steve: From the vendors’ point of view, software as a service absolutely makes sense, right? They can just do all the new feature upgrades on the background during off-times. Whenever it needs to happen, they can keep redundancy, they’re not getting calls for data loss, “Our server crashed, we need help.” It’s not necessarily the vendor’s fault, but the vendors end up getting pulled into a support scenario where this customer’s lost data, and then they need to try and help them get back. Maybe they lose that customer because the customer feels like they didn’t have enough resilience.
Those issues go away in software as a service. The vendor makes sure that they have redundant systems so nothing ever goes down for their entire base. So, their entire base is protected, everyone’s on the same version, there’s almost no tech support other than, “Why couldn’t I access it in my Chrome browser?”
SaaS Simplifies How Businesses Deal With IT
Steve: So, it really simplifies all the different parts of how you interact with that. And as you and I talked about in a different podcast, John, it also then frees that customer from a lot of that monolithic type of thinking. If the app that they’re using is provided by the vendor, then they can just do that anywhere, and they can build their business model around that.
Do we need a large space? Maybe we don’t need a big business. Maybe we can be completely distributed. Maybe we can just focus more money on our internet and WAN connections and less on our servers, so we have a better experience overall for our WAN links, our internet usage, for all the other things we do with that. So, it works on both sides for that and it’s good, but it totally makes sense for the vendor to start saying, “We can just serve this to the customers over the internet and we’ll handle all the maintenance.”
SaaS Providers Software Users With Mobility and Enhanced Security
John: Are there any other aspects of IT that can be solved by going to this software as a service model?
Steve: Yes, the biggest thing is mobility, right? For a business, you’re really solving a lot of the support costs that go with that application. The constant, “I need PCG,” and as I said in the other podcast, John, am I talking myself out of a job? No, you still need me, I’m still a consultant, my expertise is now being pointed in more efficient areas of your business, as opposed to less of what were important things 10 years ago but are less important now.
Now, it’s almost like, “Why are we worrying about how this person is VPNing and getting to things that are inside the network?” We’re more focused on big picture items that can really help the business grow.
So, really mobility is the biggest one. You’re starting to see, I don’t need to engage IT all the time to get this person, maybe we just need to get them a new device, and they already know how to get to the software as a service application.
The second one, John, is that it’s easier to manage. You can literally take this software as a service bundle and add security to it in a much easier way when you’re using these older apps that are on servers. You can say, “Listen, we’re going to not allow anyone to access this on their phone, we’re going to keep that mobility in check. We don’t have to worry about people losing their phones and I’m going to lose businesses because people are getting into my data.” So, security is also far easier when the vendor is providing the software as a service.
Subscription Model Pricing
John: Okay, and then what’s the major pushback that you get sometimes from customers to move into this SaaS service model?
Steve: So, the biggest pushback is, unsurprisingly, cost issues. Almost all software as a service, SaaS, applications, are subscription-based models. Customers really have to get comfortable with the idea of moving away from that older model of saying, “I’m purchasing this software, I’m going to drop 20 grand, whatever it is, on this application. It’s going to get installed, the cost to put the server in, and then the migration or the implementation, I’m going to do a one-time upfront cost, and then I’m going to try to spend the next five or six years recouping that ROI.”
ROI becomes far less of a factor when you’re talking about subscription models, because now you’re just building out, “I have 30 users, I’m going to do a 30-user license model, and I’m going to pay that every month in perpetuity.” That solves many issues, You’ll see a lot of companies, they’re never getting out from under that payment, it’s a constant cost, and that is a thing that they have to kind of readjust, their priorities.
The good news is that we’ve had Google apps, Office 365, these are all things that are in wide adoption by companies, and those are all subscription-based models. So, it’s getting much easier now in the last five years to have that discussion with a customer that says, “Listen, you’re going to a subscription-based model.” “So, I’m going to have to pay this every month, Steve?” “Yes.” Okay, that’s less of an issue now, because they’re already paying up an Office 365, a Gmail or something else.
John: Right, so they know how that works.
Software Customizations With the SaaS Model
Steve: Yes, absolutely, the service model. If I were to say that there’s any other pushback, it’s sort of a minor one, John, but it’s worth bringing up. I do see some customers where they’ve done some heavy customizations of their application.
Not only did they purchase this application and get it installed on their hardware, but then maybe they’ve gone in, maybe they hired a developer who does that for a living, who’s gone in and customized that application for different things that they do. That becomes problematic in the software as a service model. By doing the software and service model, you are absolutely buying into how the vendor envisions how that product is used.
John: Right.
Steve: You’re kind of marrying yourself and your business practices to how that’s designed. So, if you were used to maybe putting three or four fields in, getting a developer to kind of write customizations into it, maybe the vendor that you’re talking to for the software service can customize it, maybe they don’t, maybe you’re just doing that, “I’m going to accept the way they’ve done the fields for my business, and I’m going to modify our workflows for that.” That’s generally the other pushback sometimes.
John: Right, do they have the ability sometimes to go to the software company and say, “Hey, for me to move to your cloud-based version, these are really the features that I need to see in first before I’m able to do that. Are you able to make those changes in time for me to be able to make this shift?” Would a software company work with a company like that to do that?
Steve: So, the answer is, is that some of them. Some of them don’t, where they’re just like, “Listen, this is the software.” Salesforce will do that. Salesforce is a CRM, customer relation management software, they’ll have a, “Listen, once you’re in it, we can do some customizations, you can engage our custom…” For a fee, they’re going to charge you extra for that, but they can do some customizations for that.
You see it in some in EMRs as well, electronic medical records for doctors and the medical industry where they’ll come in and they’ll say, “Listen, we can engage our customization team.” Many of these companies will have divisions that are solely devoted to that where we can come in and say, “So, our software can be customized a little bit for the rehabilitation services… maybe, part of the industry. We can go meet these needs and do that.”
Some say, “Listen, this is how we’ve designed our software.” Where you don’t see them doing that a lot is very much when the software as a service is very narrowly focused. When they’re saying, “We are the product for dentists or manufacturing for physical steel manufacturing, we are the primary software as a service vendor for your particular thing.” Because I don’t really feel like there’s a lot of need for customization because it’s so narrowly focused, they’re already aiming at pretty much everything that you would be doing. You’re signing up to follow their turnkey beginning to end method for doing your business.
John: Right, and they know what you need as that type of business.
Steve: So, they like to think that anyway, but that’s what you’re getting and a lot of this is done through a trial period. You’re going to trial the software and see how it fits your business. But generally, they’re going to say, “This is how we do it,” and there’s not going to be a lot of customization.
But other products that really try to reach a bunch of different types of companies within a particular industry, Salesforce, as an example, EMRs are another one, they will have some customization services where you can add some fields, change some things, maybe work on some flows that are a little bit different or that you’d like different and they can help you with that.
How Do Companies Know When They Are Ready for SaaS?
John: Right, so how do I know, as a company, that I’m ready to move into this SaaS service model and that I should really embrace this and move forward into the future?
Steve: It’s one of those things when you look around, are you already using Office 365? Your email already probably moved out of your facility a long time ago. So, for my job, I used to do Microsoft Exchange Servers, we used to build email servers in the company. I don’t really have any of those out there anymore. So, pretty much every company I talked to, their email is software as a service, right?
They’re getting Word and Excel. Even if they’re downloading the app from the software as a service… that’s where it can confuse some people sometimes, you’re still pulling the Outlook app, the Office apps from that software as a service and choosing to install it onto your device. But it’s still software as service, you could access everything that you need in there without ever getting an application.
With your email and your files, if you’ve put your files in OneDrive or Dropbox or any of these cloud-based locations to put files, you’ve used SaaS. Your users are now primarily working from home, which is a very widespread phenomenon in the last year and a half. You’re looking at the landscape of your business and you’re saying, “Everything else has moved. My users have moved, my data has moved, my email has moved, what are we doing about my line of business? Is there a software as a service model for the one piece of software that really is keeping track of what I do for a living, whether it’s dental scheduling, whether it’s manufacturing, whether it’s CRM?”
That’s an easy one-two example, “Is it time to move away from my monolithic software that’s on the server to Salesforce when everybody else is mobile and I’m already doing email?” That’s probably the time to start having those discussions.
Contact PCG to Talk About SaaS Today
John: All right, well, that’s really great information, Steve, thanks again for speaking with me today.
Steve: Yeah, thanks, John, it’s been great.
John: And for more information, you can visit the PCG website at pcgit.com or call 603-431-4121.
