Cloud Computing: SAAS – Jumping on the Cloud Bandwagon?

Cloud Computing is a key component of Digital Transformation. It has many components like IAAS, PAAS and SAAS. Our discussion here is focused on the SAAS component. Many organizations are selecting cloud solutions on subscription basis without doing a detailed analysis of TCO or validating the other touted benefits.

 1.       While for many small organizations, the SAAS model is very cost effective, there are many mid-sized and large organizations where it may end costing you much more over 3+ year period. Subscription costs for many SAAS offerings can get expensive over long term.

2.       In addition to the subscription costs, you will still need to factor the implementation and support costs. The implementation costs are still comparable to on-premise systems implementation (minus costs to setup and manage infrastructure components). It is a myth that cloud SAAS implementation costs would be much lower than on-premise implementation costs.

3.       Support costs are also typically charged for SAAS similar to Annual Maintenance Costs for licensing On-Premise software.

4.       Lock-in disadvantages are significant for SAAS. It is difficult to migrate or move away from SAAS models. Also, usually longer term (multi-year) commitments are needed from SAAS vendor. The subscription agreements are complex, significantly favor the SAAS vendor in terms of SLA’s, and live little recourse to client in case of failure of SAAS vendor to meet customer expectations.

5.       It is a myth that cloud applications are more configurable than on-premise applications. While this may certainly be true in certain applications, there is a significant disadvantage of not having access to application source and typically being restricted for professional services to vendors within the SAAS partner community. Also, SAAS applications are more difficult to customize or extend to meet specific business needs than on-premise solutions. This fundamentally exists due to the challenge that SAAS solutions need to minimize different supported code-base for all customers.

6.       The touted agility by vendor pushing new functionality/features via frequent updates also affects production stability of the application. Since some of the periodic updates are mandatory in nature, there are occasions when production environment is negatively impacted due to these upgrades. In summary, the touted agility comes at a cost of application stability.

7.       It is a myth that Cloud SAAS require no IT involvement. In fact, business users are usually not comfortable configuring the Cloud solutions as well as working directly with the SAAS vendor support team for issues. Data Integration with other applications is a significant undertaking where IT team needs to be heavily involved. Importing and Exporting data from Cloud SAAS is always relatively difficult task that typically needs IT involvement.

Cloud SAAS is definitely beneficial in certain situations like small organizations or agility need for standalone applications and in many other scenarios. However, when considering the use of cloud software, it is important to evaluate its appropriateness based on economic, technical, and strategic perspectives. In the long-term, falling into the ‘all cloud’ solution trap can cost more and be extremely problematic.