It also makes a lot of sense when you can not amortize that cost across a large population of users. Given that the value proposition is so good, what is important when looking at a SaaS solution? Which types of solutions make sense and what should you look out for?
Some SaaS solutions have been wildly successful in the small, medium and even large organizations. SalesForce.com is a great example of this. CRM (customer relationship management) is an ideal SaaS solution. The reason for this is because CRM solutions tend to be expensive to license, and even more expensive and time consuming to install and configure.
From the above example, you can see that the benefits make sense any time the solution you are looking for has a large up front cost for the software, the software has a significant cost for installation and configuration, and the software needs to interface to other products or environments, which may or may not be under your control. Of course, when determining the ROI you must look at the maintenance/support fees as well as the cost to upgrade. In particular, customization work that was done will not necessarily upgrade smoothly and may have to be reimplemented.
Another good example of an application that lends itself well to SaaS is e-mail. For a small company, the cost of building and maintaining an e-mail server can be significant. Many people use SaaS for e-mail, either for an individual account or for the entire company.
What to Watch For
The accessibility of your data is an area to review carefully when evaluating SaaS. You need to be sure that you have clear access to your data when you want it and in the form that you want it. For example, if you want to move off of one CRM system to another, you need to be able to download all of your customer data into some interchangeable format (even comma delimited form for spreadsheets normally works) and across all of your users.
This is more difficult when you look at services such as data protection. Clearly, backup/recovery services are becoming readily available. They protect your data and give you access to it. The concern here is the speed of access. For CRM, obtaining a record is fast. For backup/recovery, if you need to recover a many gigabyte disk, it can take hours, if not days, to download all of that information over the Internet. Here you need some other method of getting your data back.