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Saas vs. ASP: Pick the best solution for your company

Saas vs. ASP: Which is the best solution for your company? We asked our readers if SaaS is going the way of ASPs. Here's what they had to say.

In a recent editorial, Karen Guglielmo asked readers about the Software as a Service (SaaS) model vs. the application service provider (ASP) model, and whether waiting for a similar market shakeout in the SaaS industry was necessary before considering SaaS a viable delivery option. She referred to a Babson College Executive Education seminar in which THINKstrategies Inc. speaker Jeff Kaplan recommended that users review the financial viability, management structure and list of current certifications of SaaS vendors they consider before making any final adoption decisions.

So, Saas vs. ASP: Which is the best solution for your company? Here's what some of our readers had to say:

TCO and delivery make SaaS standard

I, for one, believe the SaaS model is here to stay. It will become the standard by which applications will be delivered by providers in the very near future. The total cost of ownership model for a SaaS deployment is simply too good of a model for business to pass up. As the industry continues to mature and businesses become more comfortable with the idea, the SaaS model will be the infrastructure of choice. Compared to the traditional model of having to purchase an application and the hardware to house and deploy it, it just does not compare.

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One of the major reasons I see that distinguishes the SaaS model versus the ASP model lies in the delivery mechanism. I recall the ASP model and all the hype; however, the delivery of the applications was no different than hosting your own application at a colocation or data center facility. Most of the applications, as I recall, were still client/server-based.

For the most part, they were bulky. Web applications were still in their infancy and developing. Today, that has changed dramatically. Web applications are the norm by which all new software is being designed and delivered. That fact is what is going to keep SaaS around as a standard and norm going forward. The pricing model, of course, is a big part as well, but not as important as my previous point.

Today if I were building an infrastructure from the start for a new company, I would not hesitate in looking to a SaaS model first as the default. Additionally, I am ever conscious of conducting the necessary ROI research in analyzing a SaaS model when I'm in a position where a company needs to change out a major application. It usually works out to the advantage to move toward SaaS.

I believe SaaS is here to stay and will only get bigger and better.

-- Jesus V. Arriaga
Bosely Inc.

ASP vs. SaaS: A list

If my memory serves me right, the more specific distinctions between ASP and SaaS were as follows:

  • Higher setup cost: ASP had a rather high bar.
  • Poor billing granularity: ASP had a model on per server or per user. SaaS can bill by CPU cycles, bytes transferred. This facilitates scaling a system.
  • Lack of strong interfaces: That's before Web services, mashups, etc.
  • Ubiquitous, higher-speed networks.

The first two are inherent benefits of SaaS, the last two derived from technological evolution.

SaaS becomes accessible to smaller companies as well.

-- Francois G. Koutchouk
Atlantic Decisions Inc.

SaaS costs a concern

We are considering an SaaS solution, but we are put off by the monthly subscription cost. [One] particular vendor does not use concurrent licensing; they require that we pay for a named license for every user that might need to access the system, which is many times the number of licenses we would need if they used a concurrent licensing scheme. I wonder if this is generally the trend for SaaS vendors.

-- Carolyn Dugas
Clark County, Las Vegas

Do your homework

I do believe that Jeff Kaplan is absolutely correct in his thoughts about carefully reviewing the viability of the vendor and product before making any decisions to move forward.

However, to add to his thoughts, I have found it to be particularly important to also consider the scope, purpose and intent of the product versus the needs of the business unit(s) who will be utilizing the product. After all, we are not buying an IT product simply to acquire more tech toys for our IT portfolio, but rather to solve a business need or objective.

Secondly, I have also found SaaS vendors and products can do very well in providing a product that meets a niche set of requirements, and that does not require systems interfacing to another product. In essence, if the SaaS product does well on its own and does not require any inbound/outbound data feeds, then there is a very good chance the product will do A-OK.

-- Kevin G. Karl
Resurrection Health Care

SaaS adds value

My personal view is that SaaS will survive the hype cycle. I think this for several reasons:

1. The ASP value proposition was much more limited than SaaS. People are buying SaaS for the value it adds. ASP was always an outsourcing deal designed to cut costs.

2. The decisions on buying SaaS are in the business mostly, meaning people buy SaaS because they use it; most other software purchases are different -- people use software because they've bought it.

3. The flexibility of the subscription model allows a much more flexible adoption approach.

4. Finally, ASPs were undifferentiated; SaaS providers actually have different propositions, fulfilling different needs.

-- Paul Quickenden
NZ Business

A new IT purchasing model

I am not concerned at all. My view is that it will absolutely outlive the ASP, as there is a significant difference here in this market. Companies are deploying mission-critical applications in this model to run their businesses, and the "new" economics of utility-based pricing (not unlike the electric power industry in the past in the manufacturing industry). [This] is the new IT purchasing model.

In addition, SaaS is not only for the IT-strapped small and midsized businesses anymore, when businesses like Dell and Merrill Lynch and others bet their sales operations (the lifeblood of the business) on SaaS. It is more so the end of the enterprise software market.

Also, keep a watch out for other "aaS" models based on utility-based pricing to evolve in the ecosystem, like "DaaS -- Data as a service" for custom manufactured data for specific business needs like targeted B2B lead generation.

-- Suaad Sait
ReachForce Inc.

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