Some 40 years ago, legendary adman David Ogilvy commanded advertisers to “sell the sizzle, not the steak.” The product itself is not what a consumer ultimately is purchasing; rather, the customer wants the benefits and capabilities that the product provides. Today, in the business-to-business world, the concept is being embraced in the software market.
Software increasingly is delivered as a service and companies pay not for owning the software itself but for actually using it. Software as a service, or SaaS as it is commonly known, refers to enterprise applications hosted by a third party and accessed for a subscription fee via the Web. With SaaS, rather than buying and installing software on an individual computer, users access the software online only when they need it.
One major benefit of this approach is cost savings. Organizations need not buy licenses and install applications on each user’s desktop. They do not need to invest in computer servers to host the application, set up networks, or manage the day-to-day operation of that software. In addition, organizations only pay for what they use, such as the number of users accessing the application. Using a SaaS model also significantly reduces the internal technical resources needed to manage an application, because there is no need to specify hardware, install software or, in many cases, even to support end-users.
Another benefit is that the SaaS model offers quicker and more frequent access to new features and functions. When a vendor enhances an application, the new features are available to all users immediately – companies don’t need to install new software versions across their organizations. Under the SaaS model, feature enhancements also tend to be more frequent because they are far more readily implemented.
Those benefits have captured the attention – and pocketbooks – of many large organizations. Last November, management consulting firm McKinsey & Co. released a survey on the adoption of SaaS, which found that 61 percent of North American companies with sales greater than $1 billion planned to adopt one or more SaaS applications over the next year. It was a significant increase from the 38 percent who were planning to install SaaS applications one year earlier. And enterprise businesses are not the only ones increasingly attracted to SaaS. Computerworld, a news source known as “the voice of IT management,” recently reported that venture capital investments in SaaS companies increased 18 percent between 2002 and 2005.
Embracing Change
Initially, SaaS models were most commonly adopted for applications in areas such as customer-relationship management (CRM), payroll and other human resources functions, and workplace collaboration. Today, with improvements in technology and computing bandwidth, SaaS models are being embraced in a much wider range of business functions.
One example is capital planning and management, which encompasses planning, budgeting and spend management for all of an organization’s capital expenditures. Boston’s VFA Inc., a firm of architects, engineers and software developers, offers VFA.facility and VFA.spendManager software for this function through the SaaS delivery model.
The typical buyer of VFA’s software products generally is a business manager in a function such as facilities management, capital planning or finance. Using the SaaS model, buyers can easily preview the application and see how it will fit their needs without involving technical resources. When it comes to implementation and support, organizations need a fraction of the IT resources typically required for large ERP and financial applications. Creating business rules in the application, for example, can be completed by individuals within the business functions, together with VFA.
In the realm of capital management, providing anytime, anywhere access to information about capital assets and current spending provides organizations with significant productivity enhancements. In many cases, the information previously was managed using multiple spreadsheets, word processing documents, financial software and home-grown database applications. Getting the answer to what might seem to be a straightforward question – such as what is in the organization’s facility portfolio, or what is the cost of all currently planned upgrades to building systems – therefore had the potential to become highly labor-intensive. And because the information was scattered and maintained in inconsistent formats, the answers could often be unreliable.
Using SaaS-based capital management software can streamline several critical steps in the processes of documenting asset information, creating budgets and ensuring ongoing spending is managed against that budget. All the participants in the processes, wherever they are in the organization, have access to the same current information, although their views of the information may be restricted based on their function and role. This access and common format promotes more timely updates to relevant information, and a local facility manager or a corporate planner has access to the appropriate information needed to make decisions about what actions to take.
VFA.spendManager’s SaaS model also promotes greater productivity when it comes to making requisitions for capital improvements, getting needed approvals and ensuring that the capital budget remains on track. In many organizations, the requisition process may involve manual purchase orders, e-mails and spreadsheets – which often results in significant lags from the time an item is requested until it is actually purchased. By centralizing critical information and supporting the workflow involved in routing requests and getting necessary approvals, one health care network that implemented VFA.spendManager estimates that it reduced the time it takes to go from requisition to purchase-order from an average of 30 days to less than five days.
It is not unusual for reports from an ERP or financial system to take several weeks to produce at the end of a month or quarter. The delay means spending often can exceed budgeted amounts before the overage comes to the attention of managers. By sharing information with financial systems in real time, VFA.spendManager helps keep enterprise-wide information about spending up-to-date and allows managers to see the current status of requisitions and purchases, and their impact on the remaining budget.
SaaS-based applications can deliver benefits similar to those that VFA applications provide for the function of capital planning and spend management, for a variety of business purposes. Costs and time to deploy such applications often are substantially lower than enterprise software systems delivered through traditional models. Enhancements are more frequent and easily implemented. A Web-hosted solution eliminates the need for hardware and IT resource support. A common platform for managing information provides a distributed workforce with ready access to current information needed for day-to-day decision-making. Support for better and more timely business decisions at a lower cost ultimately will drive the adoption of the next wave of SaaS, with applications that will address an increasingly broad scope of business needs.
