Software-as-a-Service (SaaS) : considerations and implications for SaaS customers

Dippenaar, Jacobus Frederik ; Butler, Rika (2008-12)

Thesis (MAcc)--Stellenbosch University, 2008.


Software-as-a-Service (SaaS) is a software delivery model whereby software applications, such as Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), Human Resource administration and payroll and Procurement, are hosted centrally by various service providers at their premises. These hosted applications can be delivered to multiple service customers via an existing Internet connection, with a browser based front-end, or via a thin client system. As all hardware and support services are provided by the service provider, operational costs for customers are reduced in comparison to a traditional, in-house supported software application. Traditional cost estimates for the deployment of on-premise software applications exclude personnel costs that are needed for ongoing support and maintenance. Depending on certain variables, such as the application involved, these costs can vary between 50% and 85% of the total cost of ownership of the application. Additionally, the cost of maintenance, periodic upgrades and continued support, on an annual basis, can be up to four times the initial cost of purchasing the application. From the perspective of the service customer the most difficult part of determining whether to move to SaaS is the total cost of ownership (TCO) calculation. This is due to the fact that the TCO does not merely include the cost of new licences, but also the careful consideration of certain variables, before a potential service customer can make a decision regarding a potential move to SaaS. These variables include considerations such as: - Physical and logical communication interfaces; - User requirements; - Security and privacy of information and data; - Customisability; - Availability of services and data; - Service levels; - Data ownership; and - Integration with existing systems. Presently no comprehensive framework exists that sets out the various aspects to be considered by a user company when determining whether to adopt SaaS, or not. The purpose of this study is to provide a comprehensive framework of considerations relating to the adoption of SaaS by user companies in the form of a Total Cost of Ownership calculation. The framework was compiled after considering the variables that would influence the decision to move to SaaS, the impact of these variables on the potential SaaS customer and the costs associated with each of the above aspects. The framework compiled can assist potential SaaS customers in the decision to adopt SaaS. In addition, this table of considerations can also be used by the potential SaaS vendor in determining the viability of their SaaS offering, when compared to an equivalent, on-premise based software solution.

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