SaaS: The Advantages and Disadvantages

Adoption of Software as a Service (SaaS) continues to increase, and today, it is considered to be the most thriving branch in the IT market. Analysts from Forrester Research estimated the average market value growth at 56.2% annually and forecast that it will continue to burgeon by 2020 at a speed of 18.9% per year. With the rapid expansion of the digital age, we are seeing more and more businesses adopting SaaS models as part of their architectural framework. 

Over time the benefits of SaaS, or cloud-based technology as it’s also known, have become apparent in the industry, leaving server rooms a thing of the past. Today over 70% of insurers use some cloud-based technology across their business; Thus, providing quicker, more dynamic solutions to support their business growth in the evolving global marketplace.

What is SaaS?

As defined by Salesforce, SaaS is a way of delivering centrally hosted software applications over the internet, as a service. It facilitates the remote hosting and delivery of software, which is accessible via any internet connection. 

SaaS can provide scalable, flexible platforms for businesses, making life easier for users. These cloud-based systems have many benefits, primarily with cutting business costs and increasing flexibility; which enable companies to adapt to current market trends more quickly.

Advantages of a SaaS Model

1. Lower Cost

SaaS is priced on a monthly per-user basis, which enforces a different operating model from the traditional capital expenditure (CapEx) approach. Novarica has stated that there is a shifting trend in IT budgets, with a move from CapEx to Operational Expenditure (OpEx) as more applications move towards the cloud.

As your Cloud Service Provider (CSP), i.e. Salesforce or AWS, provides the hardware for hosting cloud-based applications, you will no longer need to maintain servers, meaning no significant upfront investment will be necessary.

2. Faster Implementation

SaaS solutions can be implemented much more quickly than on-premise solutions. Adrian McDonald, EMEA president of EMC, says that “The average time for new application deployments will be reduced by more than 20 percent” through the use of cloud technology.

3. Easy Integration

SaaS allows businesses to easily integrate with other systems, including both legacy systems and other cloud-based applications, using pre-built APIs (Applications Programming Interface). At ClaimVantage, we can set up a one-way integration in as little as 10-15 days. 

4. Less Internal Responsibility

Your SaaS vendor (e.g. ClaimVantage) will be responsible for maintaining the software application, upgrades, and adding new features. On the other hand, your CSP (e.g. Salesforce) will provide you with the hardware for hosting your cloud-based application, removing a significant workload from your in-house IT department, allowing them to focus on other business improvement activities. 

5. Scalable and Flexible

Cloud technology can be scaled up or down to meet your business needs. You only pay for what you use, which is why startup costs are substantially lower when compared to on-premise solutions. As your company grows, so can the solution by simply purchasing additional user licenses.

6. Anywhere Access

All you need is a browser and internet access to connect. This makes mobile access, remote working, and the secure sharing of information easier than ever.

7. Regular Upgrades

Your SaaS vendors platform is continually being upgraded so that you never have to worry about the latest security threats or supporting the latest browsers. 

The software is regularly updated by the SaaS vendor to ensure you always have access to the latest technology: No more legacy systems! At ClaimVantage, we update our solutions with three major releases per year that align with Salesforce’s release cycle. You have the opportunity to decide if you want to upgrade to the latest version or not, and we work with you to upgrade when you are ready.

8. Resilience

The IT infrastructure and any information inputted into the software is stored in the CSP’s data center and backup data center. If a disaster strikes your business premises, you can get access to your data and get back up and running from another location.

Of course, along with the advantages, there are some disadvantages to adopting cloud-based technology. Although these drawbacks may not be barriers for your business, moving to a SaaS model, they need to be addressed. 

Disadvantages of a SaaS Model

1. Security Concerns

One of the main inhibitors to cloud adoption is access management, data security, and the privacy of sensitive information. However, a survey has shown that these concerns are decreasing every year, with 80% of US respondents confident in their companies ability to secure cloud data.

The ClaimVantage solution is hosted on the Salesforce Platform, which incorporates Salesforce Shield as a back-up security solution. Shield offers security conscience businesses the opportunity to implement platform encryption, event monitoring, and a field audit trail, allowing them to monitor data and app use, encrypt sensitive information, run compliance audits, and automate security policies.

2. Data Residency

Certain countries and industries have regulations relating to where data is stored. For example, in some regions, PHI data needs to be confined to geographical borders due to compliance and regulations. Businesses need to ensure they comply with and implement a SaaS model that satisfies the requirements needed. 

Salesforce has partnered with Amazon AWS to offer its customers access to data centers within their jurisdictions.

3. Accessibility & Performance

A browser-based application hosted remotely and accessed via an internet connection, is likely to worry some businesses when compared to software running on a local machine. While this may not be a challenge in developed countries, it can be a limitation in developing ones. Some tasks will be better suited to a SaaS model than others, but with the advancements in technology, internet connections have improved severely over the past few years.

PaaS providers typically provide customers with access to real-time data on the availability of services and advance notice on any potential downtime for maintenance. 

4. Downtime

As SaaS systems are internet-based, service outages can occur at any time and for many reasons. Businesses and customers need to be aware that these outages are unfortunate events and as a result, can be disruptive to performance. Ensure you do your research on your vendor’s reliability and history performance beforehand. 

As mentioned above, PaaS providers typically offer real-time updates on maintenance periods or downtime. Although downtime can be frustrating, real-time updates from a CSP are just as effective as updates from your internal IT team if an outage occurs. Do your research and find a SaaS provider that matches your business needs.

5. Features may be Limited

Not all cloud providers are created equally. Different providers may have different features and functions. It is important to make sure you choose a provider that aligns with your business goals and has all the necessary features and services that you need to proceed and be successful, today, and into the future.

6. Technical Issues

Unfortunately, if you experience any technical issues with cloud-based computing, it cannot typically be fixed in-house. Please make sure you are aware when you are purchasing, that not all providers offer 24/7 support to their clients.  

Salesforce offers different types of support, depending on the severity of the issue, and there is always an option to purchase additional support, if deemed necessary. 

Companies who have implemented cloud technology have had the ability to grow and achieve a competitive advantage against those who don’t. 

In an ever-changing regulatory landscape, it can be overwhelming for businesses to accurately determine the advantages and disadvantages associated with SaaS concerning security, legal compliance, and business diligence. Doing thorough research will help you to find out which SaaS vendor and CSP best aligns to your business needs.

About the author

Author Denise Garth

Denise Garth is Chief Strategy Officer responsible for leading marketing, industry relations and innovation in support of Majesco’s client centric strategy, working closely with Majesco customers, partners and the industry.