Nowadays, it’s more frequent to hear terms like “SaaS” (Software as a Service) or “Cloud Solution”. The services are transforming SMEs in Kenya through information technology today. SaaS is an alternative to the standard software installation on customer premises. It is now possible to have a data warehouse in the cloud that you can access with business intelligence software running as a service, and connect to a cloud-based ERP (Enterprise Resource Planning) system such as Microsoft Dynamics NAV or any other industry-specific software solution, such as Health MIS (Management Information System) software solution for Health SME’s e.g. Dispensaries, Pharmacies etc.
Although the term SaaS is not strictly equivalent to the term “cloud” solution because local software license also pays in the cloud, in this blog we’ll use both terms.
For SMEs in Kenya, SaaS has changed the focus of IT departments and created a major dilemma. Do we go cloud or not? This is the question that arises for each manager, when it comes to choosing the software. Particularly in the case of Kenyan SMEs, a couple of issues like price, simplicity, functionality, support packages, etc are major factors to consider before embarking on getting a SaaS solution. That leads to the most common questions when choosing the software, if you choose SaaS OR a local solution. Which one is better? Which one is faster to implement? What about prices? Is our business ready for the cloud?
There are a couple of issues to consider when comparing SaaS and on premise software models before deciding on either of the option. We’ll share the factors in 3 parts starting from the factors below:
- Solution Cost:
Pros: Software-as-a-Service (SaaS) is a Pay as You Go model (pay for what you use), no additional payments for IT resources or system maintenance, no upfront licensing fees, no in-house IT staff required.
Cons: It may be not be valuable as a long-term investment, particularly for larger businesses with IT structure and staff already in place.
Costs are undoubtedly the most significant factor when choosing software. SaaS and On-premise solutions use different pricing models. The SaaS solution is built on a “subscription” Model, where clients pay for what they use; it’s like monthly rent payment enabling you to continue using the services. There is no need to purchase software and hardware to start using a new application. In addition, licensing and upgrading costs are FREE for SaaS customers. Thus, total cost of possession is reduced and is lower than for On-premise solutions. The management can save on money and time, since the client obtains everything equipped to use the solution and the system is upgraded on a continuous basis. The company saves on licensing costs, avoids employing IT staff, and can focus fully on essential core operations of the organization.
When choosing On-premise solutions, be ready for up-front costs that are required to purchase the software system. The client ought to pay for the infrastructure – that is the hardware, software, deployment and upkeep of the solution. One also needs to consider that software versions change-a new software version may not work on the old infrastructure, which will therefore need to be upgraded constantly. In addition, IT staff are required to maintain and develop the systems. However, from a long-term viewpoint, an On-premise model might be more valuable, especially if you consider operational rather than capital expenses: the investment is upfront, and after that the company should pay only yearly maintenance and support fees, which can be easily planned. However, On-premise solutions are usually too expensive for start-ups or small companies (SME’s) if they are not well funded.
2. Solution Set-up Time & Risk
Pros: SaaS dramatically saves deployment time. There’s usually a FREE trial version to enable customers have a taste of how the system would solve your organization’s problems. Therefore, the risk of choosing the wrong system or solution decreases dramatically, even if the system won’t fit your business needs, it becomes possible to escape with zero losses.
In the SaaS model, the solution is already set up and ready for use. The only thing required is a new customer account needs to be created and enables the customer login very easily the same way we login to our Facebook or Gmail accounts. For more sophisticated cloud solutions, some additional set-up time might be needed. Cloud-based solutions can be up and running within days or even hours. With a cloud-based application, the client needs only to open a browser, log in, customize the application if necessary, and start using it immediately.
Cloud solutions usually offer a Free Trial Option, and at that point customers can ensure that the solution fits their needs and applies to their business model. In addition, by using SaaS, SME companies manage their business risk in an efficient manner in that, they can add or remove system users on the go. Typically, the customer cannot return purchased on-premises licenses which is a major disadvantage for SMEs in Kenya which makes most of them opt for subscription-based SaaS solutions.
Cons: It’s not possible to negotiate specific features that you need; even if the negotiation is successful, it might take a long time before the requested features are developed.
The implementation of On-premise software solutions depends on the size and scope of your project, but usually takes one to several months to go live to be ready for use by customers. In addition, the companies take all the financial risk upon themselves if the system appears not to fit their business needs completely, or if something goes wrong in the business processes. It follows that, on the one hand, a software demo will never replace a free trial where you can have real people test the software solution for themselves. On the other hand, a specific customer’s needs cannot be reflected in any standard system demo. Customers should ask for specific demo scenarios reflecting their critical business processes to be shown in the system; in addition, referencing the expertise of customers and suppliers in the field you work in always helps.
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