Adopting SaaS - some practical considerations

SaaS on a blue screen with a finger stretching to touch it
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So, you've decided to take the plunge and move your company to a software-as-service. Now, all you have to do is take a hop, skip and a jump and you’ll be there.

Well, not quite. Unless you are a start-up, or currently have very little software in place, your transition is going to require some careful planning.

Whether you are moving towards software in the public or private cloud, or moving between cloud providers, if you are trying to identify the best point at which to write of your investment in one software application or system, and move to another, you face a multi-faceted decision-making process, where a number of factors must be taken into account. Just as in the decision to adopt a cloud-computing platform, timing is everything.

Even if you are considering a single software application, and moving an on premise business application such as accounting or customer relationship management to an on-demand Software as a Service (SaaS) alternative, licensing will create challenges. "Software licensing and pricing models are not intuitive, simple, or user-friendly," observes Amy Konary, an analyst with research company IDC, but they are particularly complex for those with large number of users using many devices and points of access, for infrastructure software such as databases and network management, multiple systems, and those moving multiple systems into a hosted private cloud.

"Application producers understand the inevitability of virtualisation and the cloud, but they are struggling to incorporate more flexible licensing and pricing models’ says Konary. So working through software licensing issues defintely requires upfront planning, and may require the support of specialist software. "As organisations virtualise their applications and move to the cloud, they struggle to fully appreciate the migration challenges, licence compliance risks and true-up exposure,"suggests Konary, and this is placing ‘greater emphasis’ on the need for the sort of ‘automated tools’ that can be used to deliver software asset management and licence optimisation.

The importance of these tools will depend on the complexity of your existing software licences, maintenance costs and support fees. But if you are to put a cost, or series of costs, on various potential courses of action and potential timeframes, all of the options will need to be modelled and assessed.

These may demand specialist support from an accountant or economist, and somebody with legal and/or software contract expertise. "Because licensing crosses so many roles, you need someone who understands part of everything," suggests Konary, acknowledging that finding one person who can do this will be a challenge.

It may be prudent to start by figuring out what your existing software is costing. "Calculating total cost of ownership over the lifetime of an asset is difficult,’ says Chas Roy-Chowdhury, head of taxation, Association of Certified Chartered Accountants. "You must include factors such as the cost of operations, maintenance, training, useful lifetime, risk, operating efficiency and effectiveness,’ he says, "and consider tax and financial reporting" You also need to decide if any of this needs weighting, to reflect its unpredictability. As he observes: "You can’t be certain of future maintenance costs, as software upgrades can require hardware upgrades too."

Some of the timing issues are entirely predictable, whether you are moving from on-premise into a public or private cloud, or moving between cloud providers. ‘You may not need to go through a physical installation process, but many of the implementation processes are the same,’ reports Mike Risley, commercial director with Nolan Business Solutions, which installs, develops and supports both cloud and non-cloud systems. "You still need to run your systems in parallel, run test data, chose a switch over date, do the data migration and set up your opening costs and balances," says Risley, and you may need to consider customisation, risk planning and integration.

Integration tends to be easier between cloud-based software than it has traditionally been between on-premise software, but it still requires time and effort, especially if you need to integrate cloud software with on-premise software. Take the cloud planning and performance management system Adaptive Planning, which has to dip into many other systems to get the data it needs. It has ‘connectors’ for Great Plains, Lawson, MAS 500, Oracle Financials, QuickBooks, SAP, and various other systems, but if a user want to integrate it with a new system, they will probably need to involve Adaptive Planning, a third party integration specialist, or their own IT department.

For some organisations, however, integration – or the lack of it – is more than a minor hurdle. "Over the past 10 years, many organisations have been consistently simplifying and standardising their processes and moving towards the most integrated architecture they could in terms of systems and data, says Tony Chauhan, a director with The Hackett Group, a strategy and consulting firm. Because the cloud can increase fragmentation, this influences decisions about what type of software to move into the cloud and when,’ he says, and businesses are experimenting with systems and data that are ‘not in the core data spine of the company."

According to Hackett research, many are cherry picking software that can be moved into the cloud with "relative ease, minimal disruption and maximum benefit", such as payroll, email and collaborative tools. Though cloud software is also enticing small and medium-sized businesses that have outgrown their on-premise software, and those Chauhan describes as ‘architecturally challenged’ where evolution or fast growth has created a mishmash of disparate and disconnected systems. ‘Cloud offers them a way out of a difficult situation,’ he says, without the massive investment and upheaval that would otherwise be necessary

All of which helps to explain the experiences of NetSuite, the cloud provider of the integrated business suite. ‘People tend to come to us when they are near the end of an existing licence or maintenance contract, because they see this is as an opportunity to move around,’ reports Paul Turner, director of product marketing. ‘We also see businesses that are looking at a major upgrade to an existing system that would mean a re-implementation, businesses looking for a system that’s a better fit, and businesses that are consolidating three or four systems, because they want to exploit the efficiencies of being with just one supplier.’ Timing is everything.

Lesley Meall is a freelance journalist and editor. She has been writing about accountancy, business and technology for more years than she cares to remember, and before this, at some point in the dim and distant past, she used to be a software engineer.