Edward Lucente, Lead Product Marketing Manager, AT&T (twitter: @edlucente)
Software-as-a-Service (SaaS) applications have freed small businesses from the headaches of IT hardware purchases, life cycle management, and costly capital expenditures (CapEx). Before SaaS, for example, a small business was forced to make a capital investment in hardware (e.g., servers, storage, and network equipment) that had a three-to-five year useful life, AND required IT administrators to manage all the infrastructure upgrades and maintenance along the way.
Even if a small business wanted to lease their IT equipment in order to shift from a CapEx to an operating expense (OpEx) structure, many were not creditworthy due to a limited track record, weak financial statements, or both. This was unfortunate since small businesses would much rather invest in developing superior customer solutions --- not in IT infrastructure --- in order to out-compete and beat larger, established competitors. Today, SaaS services are allowing small businesses to increase productivity and competitiveness, reduce IT costs, and develop solutions that link small businesses to global customers.
Productivity and Competitiveness
A survey commissioned by Microsoft showed that of the small businesses that use the cloud, 41% said they were able to employ more staff in roles that directly benefit sales or business growth, 39% invest in more product development or innovation, and 37% experienced improved agility and competitiveness. The cloud has made it easier for small businesses to scale their business to explore new markets, according to 42% of respondents. And 52% said that using the cloud enabled them to add new solutions and services that benefit their business more quickly and securely.
Small businesses also need ready access to global markets in order to grow and compete against established enterprises. SaaS solutions facilitate this by delivering a wide range of powerful, yet affordable, business or office applications in these areas:
- Customer relationship management (CRM) and sales force automation (SFA)
- Revenue performance, corporate performance, and financial planning management
- Office productivity (email and collaboration)
- Marketing / campaign management
- Human capital management (HCM)
- Business intelligence (BI) and reporting
- Website and blog development
- Backup and disaster recovery (DR)
- Enterprise resource planning (ERP)
- Expense management
- IT service desk
Jeff Kaplan, founder and CEO of THINKstrategies, a consulting services company, points out in the CIO’s Guide to Software-as-a-Service that:
SaaS solutions enable customers to quickly and easily acquire essential business applications without a significant up-front capital investment in perpetual software licenses and additional hardware systems. They also avoid extended deployment cycles and added consulting and support costs. SaaS solutions have also been specifically designed to be more flexible and accessible for a highly dispersed and variable workforce than legacy applications.
SaaS Cost Advantages
In another white paper entitled Cloud Services Opportunity in the SMB Market for Traditional Telecom Service Providers, Gerald J. Canavan illustrates specifically how small businesses have more affordable access to office applications via the cloud (i.e., SaaS), which achieves important savings. For example, small businesses have seen their IT costs drop due to SaaS-delivered solutions like Microsoft’s Hosted Exchange email by 64% to 92% versus on-premise deployments (source: Osterman Research); Microsoft has also reduced prices on Office 365 and Sharepoint by about 20%.
Finally, McKinsey’s study, Winning in the SMB Cloud, does a good job detailing the positive impact of cloud applications on small business:
With cloud services, small businesses are able to reap the benefits of not having to deploy Email and File Servers, Backup systems and other physical infrastructure as well as local software installations. While this grants an immediate cost benefit to business, cloud services are often subscription-based from month-to-month, so you only pay for what you use, when you use it. When used effectively, it can become the enabler that allows everyone in the business to easily collaborate together on any project, regardless of their computer system, computer software, or geographical location.