Traditional, on-premises software was not designed to satisfy today’s business needs. Legacy software was designed to support a highly centralized and static business environment that didn’t have to contend with change on an ongoing basis.
The on-premises software of the past required a substantial upfront investment in license fees and put the burden of success on the organization to successfully implement and utilize the capabilities – no small task for a mid-sized organization.
Legacy software also forced mid-sized organizations to dedicate in-house staff or pay for outside services to customize, configure and administer it. Implementing this software often took months, and cost more than the original software license in ongoing maintenance fees and support services. Despite this investment, there was still significant risk that the software would not be properly configured to be fully utilized by employees who found it difficult to use.
SaaS solutions are designed to be quicker to implement and more user-friendly, so they can be adopted more easily to ensure a quicker time to value. SaaS solutions also eliminate many of the upfront costs and ongoing complexities associated with legacy, on-premises software.
As a result, Gartner is projecting the SaaS market will grow at a compound annual growth rate (CAGR) of 19.5% through 2016, while the deployment of traditional, on-premises software is declining.
The Advantages of SaaS Applications
The appeal of SaaS solutions is gaining recognition among a growing number of CFOs, especially those who don’t want to place additional burdens on their limited in house staff to deploy and administer complex software applications.
Our desire to take advantage of best-of-breed applications to satisfy our day-to-day needs has become a common practice among many of us as consumers. It is an intuitive approach of finding the best apps available to satisfy our preferences and match our behavior in our personal lives.
There is no one-size fits all app that contains everything we need for our daily lives. Instead, we get the most out of the best-of-breed consumer apps at our disposal. It’s no wonder we enjoy ‘personalizing’ our app choices to best meet our individual needs.
Likewise, there is really no software suite that contains everything a business needs to effectively support all of its organizational processes. In reality, businesses are best served by utilizing best-of-breed solutions that specifically address their unique combination of needs and don’t force CFOs to accept a one-size-fits-all solution that is not catered to their particular requirements.
One of the primary justifications for adopting a software suite in the past was the argument that it reduced the amount of integration necessary to tie together multiple applications. The unfortunate reality has been that suites tend to create greater implementation complexity while providing only modest functional capabilities across their various application areas. As a result, CFOs face greater risks fully implementing these suites while having to accept fewer features to meet their financial management needs.
Meanwhile, today’s best-of-breed SaaS solutions include a new generation of common application program interfaces (APIs) which eliminate much of the integration issue, and enable best-of-breed SaaS solutions to interoperate with other solutions from many other SaaS vendors ‘out of the box’.
Best-of-breed vendors are taking advantage of the cloud to offer integrations that are easier and cheaper to manage than ever before. This progress by best-of-breed vendors means that an organization can pick and choose applications from different vendors, integrate them through APIs or third-party cloud integration services and have the business systems they always wanted within weeks. This simplified, rapid integration solution dramatically weakens the primary reason that customers were buying applications from the suite vendors.
As a result of modern APIs, organizations no longer have to sacrifice the deep functional capabilities of best-of-breed SaaS solutions in order to attain interchangeability.
Some industry observers refer to this new best-of-breed approach as creating an “API economy” in the SaaS marketplace. In this new ‘ecosystem’ of best-of-breed SaaS vendors, CFOs can extend the value of their SaaS deployments by plugging in additional applications via APIs that are supported by third-party developers that offer complementary functionality to their mutual customers.
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