What do you do when you have a whole room full of computers but you don’t want the expense of loading each of them with the software applications you know you need? This may be an extreme example, but it is the kind of question that led to the development of Software as a Service (SaaS).

SaaS is a way of deploying software applications across your business that alleviate the need for purchasing separate licenses for each application on each computer. With a SaaS set-up, an application is licensed for use as a service provided to customers on demand. This on demand licensing changes the way your software is expensed, maintained and licensed.

Some of the things that various SaaS applications include:

* Access to, and management of, commercially available software.
* Activities and upgrades are centrally managed.
* Customers access applications via the Internet.
* Access by multiple users to the service on a single account.

With the economy in deep recession, Software as a Service is also the center of an increasingly intense debate over whether it really does provide the cost and flexibility benefits that its defenders claim. We will go through SaaS and make a conclusion, but in the end, it is up to you, the business owner, to decide if SaaS would be a good fit for your business.

Software as a Service has a number of things, from costs to licensing to maintenance, which the companies that have gone this route appreciate.

It begins with cost. With the traditional software model, you buy the software license for a single computer. All of the cost, therefore, is an up front fixed expense. SaaS changes this. The cost goes from being a fixed expense to a variable expense if the software is only paid for when it is used. This is great if you cannot afford that must-have $5,000 application or you want to spread out the cost. Moreover, you can roll out the new application to a limited number of employees to test it. If it works, great, if not, you have risked little. Over time, however, costs can mount as you continue to spend for the service, but that money can be offset by savings elsewhere.

One such area where you can save money is in your Information Technology (IT) area. This is because the responsibility for all of the technical aspects of the product is on the vendor, not on your IT people. You don’t have to worry about software licensing, piracy, or the other myriad of concerns that go along with software ownership. That means you have complete control over what is on your machines and you don’t have to worry about the software company imposing mandatory updates or other intrusions into your computers. You are no longer responsible for these, except in regards to your own computers and in-house software.

For the SaaS services you are using, all of the software and server maintenance is done by your SaaS service provider and they have a strong motivation to do it right. If the software is faulty, you will go elsewhere and the vendor won’t be in business very long. The same goes for data security, SaaS vendors accept the responsibility of hosting your data with the understanding that a data breach could easily put them out of business.

Because of this, vendors make security a top priority and back up data files religiously.

That said, problems do occur but these can be minimized by doing your vendor research up front. Before signing up, discuss security concerns with your prospective vendor. The following questions are some of the things you need to know according to Gartner, a technology analyst and consulting firm:

Privileged user access. Inquire about who has specialized access to data and about the hiring and management of such administrators.

Regulatory compliance. Make sure a vendor is willing to undergo external audits and/or security certifications.

Data location. Ask if a provider allows for any control over the location of data.

Data segregation. Make sure that encryption is available at all stages and that these “encryption schemes were designed and tested by experienced professionals.” You might also decide to encrypt the data yourself, but this can lead to the problem of managing private decryption keys in a pay-on-demand computing infrastructure, which can make things very complicated and could eat into your IT staff time savings.

Recovery. Find out what will happen to data in the case of a disaster; do they offer complete restoration and, if so, how long that would take. One test you can make is to ask to get back old data, see how long it takes and then check to see that what was returned matches the original data.

Investigative Support. Inquire whether a vendor has the ability to investigate any inappropriate or illegal activity.

Long-term viability. Ask what will happen to data if the company goes out of business; how will data be returned and in what format.

Once you have decided on a vendor and are up and running, you will find that SaaS frees staff time to handle more important tasks more closely related to your income stream, which will add further value to using SaaS. Still, other selling points include:

* Upgrades and customization. More feature requests from users can be granted as there is usually little or no marginal cost for new features.
* Speed of upgrades. Faster new feature releases that benefit the entire community of users.
* Best practices. SaaS is the picture of recognized best practices because the users demand no less.

Costs are low because they are spread out, no up-front investment, no maintenance hassles or expense, new feature requests are honored quickly, best practices: What’s not to like? You might be surprised.

Debunking the SaaS Hype

While the supporters of this technology hold that SaaS is a great, cost-effective tool, there are others who see things differently. One such SaaS detractor is Gene Marks, owner of the Marks Group, author and writer of the syndicated column “The Penny Pincher’s Almanac.” In a July, 2008, article in Business Week, he took it upon himself to debunk five of what he calls the myths of Software as a Service.

Myth 1: SaaS is cheaper. Marks suggests that it can be a lot more expensive over time since you are going to be paying a monthly fee.

Myth 2: SaaS reduces hardware investment. Your workstations need to be running up-to-date operating systems—which generally means up-to-date computers—and they’ll need to be tied in, by wire or not, to hubs and routers to access the Net.

Myth 3: SaaS is quicker to set up. If you’ve got a basic setup, then no problem, but what if your needs are more complex? Whether an application is sitting on a server in Taiwan or a server in your office, someone’s got to do the work and that can take time.

Myth 4: Your data is secure and backed up. Given the sophistication of today’s hackers, it doesn’t matter how many redundancies and data centers and encryptions are baked into the system, accessing your data over the Internet is risky.

Myth 5: You’ve actually been using SaaS for years—look at your bank account. Yes, we’ve “hosted” our financial data with banks for many years before SaaS, but we’re talking a totally different set of rules. After all, if you are in a billing dispute with your bank, they don’t cut off your access to your account or stop you from getting any work done by denying you access data or applications.

The Choice Is Yours

Marks’ point with all of this is not that Software as a Service is a bad thing. No, far from it. His issue is with the hype that surrounds this emerging technology. “For many business owners,” he writes, “Software as a Service is a great option. There’s no question that it’s going to be a big part of our future ... But let’s tone down the hype a little. SaaS isn’t, and won’t be, for everyone. It’s just another option for getting stuff done.”

That is the important lesson here, that SaaS is just another option—one of many—for getting things done. Before you jump into it, do your homework. Can you sustain the ongoing costs? How important is data security? Is your hardware up to speed? These are some of the basic questions you need to ask yourself. By answering them, you will have a better idea of whether this is worth it. —Charles Cooper