As software-as-a-service tools for managing IT make their way into small and midsize businesses, BMC Software’s SaaS CTO Marc Ferrentino discusses how on-demand applications help them reduce cost, scale services and boost customer satisfaction without any major upfront investments.

Here’s an excerpt of his recent thought-leadership article:

Deciding whether your organization should move to a software-as-a-service (SaaS) model for IT service management is similar to figuring out if you should buy or lease a car. The presumed benefit of a purchase is that you can sell the car later (at a depreciated price) when it no longer meets your needs. If you lease a car, there’s no large outlay of cash up front, just a monthly fee, which is often lower than a car payment when financing a purchase. The total amount paid over the life of the lease will be lower than the purchase price, but you have to return the car at the end of the lease. Though buying may seem like the wiser choice because you will own the asset, this assumption does not consider the opportunity cost in terms of other investments you could make with the purchase money.

Similarly, using SaaS for IT service management allows IT to avoid the upfront purchase costs, maintenance, upgrades, additional staff, and other expenses associated with on-premise solutions. In the long run, SaaS solutions are a wise business investment not only because of the lower overall costs, but also because the enhanced level of service can drive even greater business growth.

Because best practices are built directly into the SaaS delivery and maintenance model, now smaller organizations can begin to adopt those practices and formalize their IT processes earlier in their lifecycle. This can help businesses grow more rapidly. Since they’re not spending as much on overhead, they’re getting a lot of the value from these solutions early on. This means they’re able to become much more efficient earlier in the history of the company, which ultimately will allow that company to flourish even faster and increase its chances of ultimate success.

A small business is typically under 500 employees, and a company with 500 to 5,000 employees is generally considered a midsized business. This article reviews how these businesses can benefit from cloud-based solutions for IT service management, because the SaaS delivery model offers ease-of-use and rapid time-to-value, which are particularly critical for small to midsized businesses.
Lower Costs, Greater Capabilities, and Standardization

With the SaaS model, you’re paying only a per-month, per-user fee. There is no hardware and no additional licensing. You pay only for what you use. This is a much more efficient cost model, which can ultimately add up to a 50 percent reduction in the total cost of ownership (TCO) of a SaaS solution versus an on-premise solution over a five-year period.

When looking at the realities of deploying on-premise solutions, this includes the initial costs of hardware, installation, setup, and ongoing maintenance. There is also the normal lifecycle of any product to consider; the company may want to switch to a whole new product in five to ten years. Of course, in that case, IT incurs more costs, and the cycle begins again.

Typically, SaaS companies will have immovable tiers. They have a per-user, per-month rate and different tiers that allow you to add certain features and levels of functionality. This enables you to have the ability to consume a certain level of service for a designated number of users.

With SaaS, you have the ability to literally add or remove services based on the service level functionality you require. For example, if you suddenly want to leverage social networking technology or mobile technology, many of those features will come standard with your SaaS solution with most of those functional levels. You have the option of increasing your service levels to adopt those technologies sooner. SaaS gives you the option to try some of these new technologies, and, if they don’t work for the business, you can turn them off. Deployments become much easier, too. With an on-premise solution, you typically have to buy add-on services, do your own upgrades, and incur more maintenance and hardware costs.
SaaS Advantages for Midsized Businesses

Before there was the ability to easily automate order management, the supply chain, and related functions, only larger companies could afford those tools. Technology was their differentiator in the marketplace. And that was true until cloud came along. If a midsized company was competing with a larger company and the larger business had deeper pockets, it could purchase the latest and greatest technology to defeat the competition.

With SaaS, a midsized company has access to the same level of functionality and technology as a large company has, but for a price that fits its model and budget. Any company can now go toe-to-toe against the bigger competition. It levels the technology playing field.

In this very technology-driven world, you can’t understate the impact of that capability. For example, consider social media. Many companies came out with social offerings or wanted to be the first ones on Facebook or Twitter. With SaaS, even a small company can now buy subscriptions to a social media tool that allows it to quickly get up on Twitter or Facebook, with a presence as big and engaging as a larger competitor.

The same concept is true with running your IT organization or your help desk. With SaaS, you have the agility and speed needed for your services to react to changes, issues, and problems and to react to them at the same speed, thoroughness, and breadth as a larger company. Before, that wasn’t possible simply because you couldn’t afford the level of technology implementation that a large company could afford. So the cloud has a very democratic effect on technology in that organizations of any level or size can get access to the same technology.
SaaS = Greater Access and Maintainability

SaaS solutions typically offer a higher level of accessibility than on-premise solutions. SaaS delivers multiple services per customer, based on the functionality offered, which they supply to all customers. For example, some customers need to support Androids, BlackBerries, and so on. Some customers use Safari, others use Chrome. The list goes on and on. A SaaS provider will look at those requirements together and ensure that customers get the features they need.

There’s a larger breadth of options to access with SaaS. This includes supporting different browsers, providing access to any location in the world, and accessing all types of mobile devices. SaaS services are also easier to maintain. Most SaaS solutions could easily be administered by a business analyst, not a tech person. That’s because the services are run by the SaaS provider. The customization or the configuration of the system is typically done in a way that is very comfortable and user friendly for someone without a technology background. So you won’t need to hire extra staff to do customizations.
SaaS and Growth

As your company grows and requires more functionality, you can pay for that service or functionality. In many cases, the functionality will already be part of the technology that you’re operating with; you just need to start using this capability. As your business grows, those features you want will be waiting there for you when you need them. You may start out as a small or midsized business and grow to an enterprise-level corporation. Look for an IT management vendor that can meet your needs every step of the way.

By Alf Abuhajleh