The SaaS (Software as a Service) market is large, estimated to be worth about $300 Billion by 2024, and continues to grow. Almost every organization uses (a lot of) SaaS, and it is often deployed for critical processes. It is important to make the right choice to maximize returns and manage risks. Selection and deployment of SaaS is underexposed. Through two articles we are going to do something about this. This first article focuses on the selection and procurement of SaaS services. In the next article we will discuss the integration of SaaS into the organization. Because although SaaS unburdens, it also requires other competencies in your organization.

Appearances of SaaS

Modern SaaS is software delivered as a service and running in the cloud. There are several definitions of SaaS but it is more important to be able to recognize and understand the different manifestations. This helps in selecting the right vendor and service and determining the impact on your organization. In this article we discuss technical implementation models, single- and multi-tenancy, service models, manifestations and target groups.

Technical deployment models of SaaS

SaaS runs on infrastructure chosen by the vendor. Because you are purchasing a service, you may be inclined to think that is irrelevant to you. You are happy for the vendor to take that part out of your hands as well. But the choice of supplier affects the customer. So it is better to understand how the SaaS service is delivered. We distinguish the following four implementation models:

1. Classic hosting: This is an initial version of providing software as a service but the provider does not use cloud. Therefore, there is in fact no true SaaS.
2. Private cloud: supplier uses a cloud service set up specifically for the supplier. This offers more control over infrastructure, for example, but fewer services than public clouds that the supplier can use. This may affect the supplier’s innovative ability to continue developing the software.
3. Migrated to public cloud: Existing software has been migrated but not optimized for the public cloud. Therefore, many benefits of the public cloud are not utilized.
4. Fully cloud native: The software is developed according to the principles of the public cloud and makes optimal use of the available services.

SaaS providers use infrastructure (IaaS) and platform (PaaS) services from the cloud. It makes quite a difference whether they use a private or a public cloud.

SaaS vendors who develop their SaaS application in the public cloud have much more opportunities to add modern functionality to their application and better manage it with a plethora of modern tools. For example, the security services offered today are a reason to use the public cloud. However, the private cloud offers more control over the infrastructure, which can be important if you have very specific requirements for it. Both clouds have advantages and disadvantages. So it is important to think carefully about the requirements.

Single-tenancy vs. multi-tenancy

Single-tenant software runs in a separate, isolated environment for each customer. This provides more control over performance and data isolation, but can be less scalable and more expensive because of dedicated hardware.

Multi-tenant software shares infrastructure with all customers, which increases scalability but can affect performance if other customers use a lot of resources. Understanding these models helps avoid surprises.

Service models

• Freemium SaaS: basic functionality is free, but you pay for additional services.
• Subscription-based SaaS: you pay a recurring (fixed) amount per period depending on the subscription type chosen.
• Pay-as-you-go SaaS: you pay based on what you use.

Many organizations desire predictable costs. With freemium and pay-as-you-go, that predictability is lower, while pay-as-you-go can provide lower costs.

Market orientation

SaaS can be categorized in several ways. We choose to look at market orientation (vertical or horizontal) and whether the service is specialized or generic:

SaaS with a vertical market orientation is better suited to your business and therefore easier (faster) to implement ánd it can give you a competitive advantage. The SaaS vendor also has more knowledge of your sector and processes and can offer better support.

Target groups

SaaS services target either consumers or businesses. SaaS specifically for consumers does not fit businesses as well. With consumer SaaS, it is wise to check whether the service is also adequate for businesses. Consider support options.

The SaaS journey

Switching to SaaS starts with a thorough preparation and selection process. Once this is complete, migration takes place, followed by aftercare and optimization. I will discuss these last two phases – as mentioned earlier – in a subsequent article.

Phase 1 – Exploration and preparation

The first outcome of phase 1 is a shortlist of suppliers or services. Both the service and the supplier should be closely scrutinized. In doing so, look at functional, technical, operational and business aspects. Involve the various stakeholders from the organization in this process. The figure shows the different topics within these four categories that we distinguish.

First, determine which criteria are critical to your organization by topic. Using these knockout criteria, make a list of SaaS services you want to evaluate further. You do this by scanning the market and making a longlist. You then evaluate these services “high-over” to arrive at a shortlist. To do this, use a limited number of criteria from the categories and topics listed.

A second outcome of Phase 1 is an inventory of the impact on your own organization. It is wise to identify as soon as possible the competencies that need strengthening, new competencies that are needed, competencies that are shifting to other roles and competencies that are no longer needed. If necessary, actions can be initiated now to prepare the organization for change.

Phase 2 – Selection and contracting

Agree with the procurement department and other stakeholders on exactly how your selection process will work. A tool helps to select in an objective and structured way. For each of the topics within the four categories, we have drawn up evaluation criteria and incorporated them into a SaaS evaluation tool. You decide which criteria are relevant to you and how important they are. If you wish, you can add criteria. For each topic we have indicated which criteria we consider to be of great importance, so you can get started quickly.

After entering whether or not a supplier or service meets the criteria, the tool provides a number of scores and graphs. Deeper analysis of both categories and topics is possible through the various graphs that are generated. This gives you a better understanding of the extent to which the targeted SaaS service and supplier meet the needs of your organization.

Avoid pitfalls with proactive IT and procurement

SaaS is quite often purchased by the business, without the involvement of IT or procurement. As a result, important criteria are often overlooked, especially the non-functional criteria. A proactive attitude by both procurement and IT in which the business is facilitated with knowledge and assistance can help prevent this.

Smart SaaS procurement requires thorough preparation and a well thought-out selection process. By making the right choices, you can take full advantage of the benefits SaaS offers. In the next article, we will discuss integrating SaaS into your organization and the associated challenges and opportunities.