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The SaaS model: Driving competitive business strategy

The SaaS model can help trim IT costs, but it’s also key for driving your business strategy.

As companies transform to stay competitive, they have shifted their IT models to become more efficient, innovative and agile.

One aspect of this transformation is increased adoption of centralized, web-based software as a service (SaaS) applications. SaaS is a delivery and licensing model in which software is accessed on the web via a subscription rather than installed on local computers. With SaaS, companies need not manage applications or invest in hardware to run their applications on-site. Instead, a provider hosts and manages the infrastructure to support software, which enables updates and patches to be applied automatically and universally and reduce the burden on a company’s IT team. While this can enable IT to focus on more strategic projects, it also requires companies to rely on the provider to  manage the application and underlying infrastructure.

The SaaS market will grow to nearly $160 billion in 2020, according to Statista. Companies are already on board with software as a service: 89% of companies use SaaS-based applications. And Gartner predicts that SaaS will account for 45% of all application software spending by 2021.

“Not so long ago, cloud services were perceived as a risky and unstable solution,” wrote Melissa Burns in a piece on cloud trends for 2019. “However, in no more than five years, they transformed into something that permeates every aspect of our life. . . . Cloud technology should be perceived as a crucial element of a company’s competitiveness.”

Adopting a SaaS model may start as a tactical decision about choosing IT platforms but evolve into a business strategy about how companies do business as a whole.

 

SaaS benefits business goals, not just IT

From the IT vantage point, the SaaS model has had major impact because it frees IT departments from having to install, patch, upgrade and manage many of their applications. SaaS technology can reduce IT infrastructure costs as well as IT management headaches by freeing staff to focus less on configuration and management of applications and infrastructure and more on higher-level issues, such as enabling business goals.

But the SaaS model enhances business strategy in other key ways, such as improved workplace productivity, opportunities for business innovation and improved customer experience. Let’s look at each in turn.

1.       SaaS benefits for workplace collaboration and efficiency. With SaaS, applications are in the cloud, centralized and available from any location and multiple devices. Workers can now share documents and edit without overwriting others’ changes and can collaborate in real time. They can work from the office, home or airport and meet with coworkers in other locations easily. Quick changes to documents can often be made on multiple devices; anywhere, anytime access enables worker flexibility but also worker responsiveness and productivity.

Workers gravitate toward workplaces that enlist collaborative tools. Workers were 17 percentage points more satisfied with workplace culture when they had access to effective digital collaboration tools, and they were 24% more likely to see their workplace as transparent, according to Deloitte.

2.      SaaS benefits for business innovation. Because SaaS models enable the IT environment to be set up and changed more quickly, it can also spur a culture of change on the business side.

According to data from Ernst and Young Global Ltd., companies surveyed on their SaaS model said that the ability to design and create new products was the primary reason for using SaaS (25%). As the report indicates, SaaS models spur a different kind of business dynamic, with speed, innovation and change at the core.

“It is no coincidence that such a high percentage of unicorns are built on SaaS platforms,” the report indicates. “They enable speed to market.”

3.       SaaS benefits for customer experience. Companies can also use the SaaS model to develop a different kind of relationship with customers. With the SaaS model, customer relationships can be less transactional and more engaged than is possible in a traditional sales dynamic.

In the past, sales reps may have landed an account, and then contact with the customer petered out. Customers interacted with the company only if something went wrong and it needed customer support or when a license needed to be renewed a few years down the road.

But today, with SaaS-based applications, companies have opportunities to interact with customers not only to renew subscriptions and to up- and cross-sell but also to get customer feedback on products and to use feedback for product innovation. Having insight into customer needs also helps with pricing and customer support.

Getting broad feedback on products applies to SaaS providers as well. They can better fine-tune products because they have a wide base of user feedback, and they get this information in real time.

As a result, enterprises can have insight into how customers “use the system, which features they employ most often, and which are least relevant, as well as how long it takes companies to complete tasks,” wrote Steve Miranda about using SaaS for business innovation. “This process allows vendors to . . . to make [products] better and more relevant to end users.”

While it might seem simplistic, one of the keys to better customer experience is the more regular contact that a SaaS model supports. “The key is to establish frequent, ongoing touch points with your customer,” wrote Ryan van Biljon in a Forbes piece on the role of SaaS in Cx.

SaaS as a force multiplier

SaaS technology can spur a series of enterprise changes that also prompt companies to rethink their customer relationships, business processes and product strategies. Adopting a SaaS model may start as a tactical decision about choosing IT platforms but evolve into a business strategy about how companies conduct operations as a whole.

“The full value of cloud comes from approaching these options not as one-off tactical decisions but as part of a holistic strategy to pursue digital transformation,” wrote Nagendra Bommadevara and co-authors in a McKinsey and Co. report on cloud as a foundation for enterprise modernization.. “Such a strategy is enabled by the standardization and automation of the IT environment through an open API model, adopting a modern security posture, working in an automated agile operating model, and leveraging new capabilities to drive innovative business solutions. While cloud is not a prerequisite for any of these features, it does act as a force multiplier. 

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Lauren Horwitz

Lauren Horwitz is the managing editor of Cisco.com, where she covers the IT infrastructure market and develops content strategy. Previously, Horwitz was a senior executive editor in the Business Applications and Architecture group at TechTarget;, a senior editor at Cutter Consortium, an IT research firm; and an editor at the American Prospect, a political journal. She has received awards from American Society of Business Publication Editors (ASBPE), a min Best of the Web award and the Kimmerling Prize for best graduate paper for her editing work on the journal article "The Fluid Jurisprudence of Israel's Emergency Powers.”