Do you need to ‘own’ your business software?
Everywhere you look, businesses are reinventing themselves as ‘service providers’, charging their customers every month rather than waiting for the occasional lump sum.
Becoming a service provider offers plenty of benefits, such as smoothing out cashflows and forging ongoing relationships with customers.
But what about when your business is the paying customer, rather than the service provider? Is your business ready to pay every month for software as a service (SaaS), rather than simply buying a new version every few years?
Large enterprises tend to have software maintenance and volume licensing deals with software giants like Microsoft. But Microsoft is making a serious play for small business customers with SaaS offerings such as Office 365 Small Business Premium.
The deal includes the desktop Office suite, hosted email and cloud services for only a few dollars per user per month, which might work out to be far more economical for a small business than buying Office licences outright and paying for the email and cloud services separately.
It’s not just Microsoft which is trying to convert the occasional small business customer into a regular revenue stream.
Chances are your small business accounting package is also available as an online monthly subscription, along with other line of business applications such as customer relationship management, project management, human resources and enterprise resource planning.
Adobe is also pushing hard to move its creative customers to a subscription model.
These software providers are throwing in all kinds of discounts and extra benefits to break you of the habit of only upgrading your software every few years.
SaaS also tends to offer small business customers the extra flexibility of cloud services, making it easier for staff across your organisation to access systems anywhere at any time, rather than locking everything away on a single PC.
At first glance the move to SaaS might seem like a no-brainer for your average small business, but it’s important to crunch the numbers and consider the long-term implications before taking the plunge.
The first thing to consider is how often you need to upgrade to the latest version of software like Microsoft Office.
If you don’t need all the latest bells and whistles then you might still be happily using the last version of Office and the other business applications which reside on your desktops.
Many businesses hold off on upgrading key applications until they’re ready to upgrade their desktop PCs and perhaps move to a newer version of Windows.
Switching to SaaS decouples your software upgrades from your hardware and OS upgrades, which is great news for software providers but perhaps not great news for you if you tend to delay software upgrades to stretch your budget a little further. Move to SaaS and there’s no way to delay your software expenses.
Also keep in mind that once you embrace SaaS, you’re much less likely to change providers.
Even if you’re not locked into a long-term contract, it’s easy to grow complacent and simply keep handing over your money each month whereas in the past you might have evaluated the competition and shopped around for a good deal when it was time for a major software upgrade.
It’s also harder to justify paying upfront for new software once you’ve grown accustomed to the subscription model. Things become even more complicated if the SaaS model has seen you commit your important business data to the cloud.
Don’t jump headfirst into SaaS and restructure your business around it until you’re sure that you’re backing the right horse.
Even then, check what your options are for rolling back if you change your mind.
None of this necessarily means that SaaS is a bad deal for small businesses. Turning a significant capital expense into an ongoing operational expense might free up cash for other projects.
The less tangible benefits of SaaS, such as the flexibility of the cloud, might also add to the bottom line and help you punch above your weight when fighting against larger competitors.
Simply make sure you weigh up the good and the bad before you take the plunge into software as a service.