The Benefits and Risks of Moving to SaaS for Mission-Critical Applications
We recently wrote an article on Moving from On-Premise to SaaS – How Insights from Disputes can Safeguard Your Organisation. While that article centres around the potential for disputes and how to mitigate them, this one focuses on the benefits to first consider when determining whether it is time for a move from your provider’s legacy on-premise solution to its SaaS (cloud-based) offering.
In this article, discover how to maximise or avoid:
- Opportunities and material risks of moving to Software as a Service (SaaS) solutions
- Key advantages that make SaaS an attractive option for businesses
- Critical risks and hidden costs that need careful management during your transition to SaaS
- Difficulties in integrating SaaS that may impact operational efficiency
- Strategies for overcoming user resistance to SaaS
- Compliance with industry-specific regulations and data protection laws
Navigating the Transition: Opportunities and Risks of SaaS Explored
The purpose of this article is to provide an exploration of the opportunities and material risks associated with transitioning from an existing on-premise solution to a new SaaS offering provided by the same legacy provider. In fairness, the transition aspects of the principles below also apply if you decide to move to a different SaaS provider.
By examining these factors, organisations can make informed decisions that maximise the benefits of SaaS while mitigating potential downsides. Through this article we aim to offer insights and practical guidance to help organisations navigate this complex transition in a good practice focused and balanced manner.
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Embracing Change: The Evolution from On-Premise to SaaS
The last decade has seen a significant transformation in the landscape of IT solutions. Traditional on-premise solutions – which require businesses to manage and maintain their own on-premise hardware and software – are increasingly being replaced by Software as a Service (SaaS) offerings. This shift is driven by the numerous advantages these cloud solutions have the potential to provide, advantages such as reduced upfront costs, ease of scalability and the ability to access software from anywhere with an internet connection. As organisations strive for greater efficiency and flexibility, the adoption of SaaS has become a strategic priority for many.
However, this transition is not without its challenges. While the headline benefits of moving to a cloud-based solution are compelling, there are also not-so-obvious significant risks that often go unmentioned, but which need to be carefully managed. The most predominant of these risks include different (and often missing) functionality in comparison with the same software that you have been using ‘on-premise’. Other key risks include data security concerns, potential service disruptions (when your internet access provider experiences service interruptions) and the complexities involved in integrating new SaaS solutions with existing systems, though some of these complexities may well be on-premise related and not cloud based.
Understanding both the opportunities and the material risks is crucial for organisations to be appropriately informed when considering this move.
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Overview of SaaS (Skip this section if you already understand SaaS models)
Definition and Features
Software as a Service (SaaS) is a cloud-based model where key business applications and information are accessed via an internet browser, or similar browser based tool, rather than being hosted on an organisation’s own infrastructure. SaaS can encompass a wide range of business tools, from your ERP solution to unified communications. For example, you may already be using cloud-based applications like Microsoft 365 or Google Workspace, among others’.
The key characteristics of cloud-based SaaS include:
- Accessibility: Applications and information are accessible from any device with an internet-type connection, allowing users to work from almost anywhere. This provides flexibility and supports remote working environments.
- Scalability: Capacity can often easily be scaled to accommodate the growth of an organisation or business with users being added or removed as needed without significant changes to the underlying infrastructure.
- Maintenance: The service provide will handle all maintenance and updates, ensuring that you always have access to the latest features and security enhancements without the need for internal management.
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Opportunities of Transitioning to SaaS (Skip this too if you are already familiar with SaaS model)
Cost Efficiency
One of the most consistently attractive advantages of transitioning to SaaS is the potential for substantial cost savings. Traditional on-premise solutions require a significant upfront investment in hardware infrastructure and software licenses. Additionally, there are ongoing costs for maintenance, upgrades and an IT services maintenance team to manage and support the infrastructure. SaaS significantly reduces the need for this capital expenditure. Instead, businesses pay a predictable monthly or annual subscription fee, which can lead to lower initial costs and a more manageable expense structure. Moreover, the responsibility for hardware and maintenance falls to the service provider, freeing up internal resources and reducing operational costs.
Swifter Deployment
On-premise solutions often have lengthy deployment times, involving the installation and configuration of hardware and software, which can disrupt business operations. SaaS solutions, however, are ready to use almost immediately after sign-up, significantly reducing the time to deployment and minimising disruption.
Scalability and Flexibility
SaaS solutions often offer seamless scalability as standard. As businesses grow or their needs change, they can adjust their SaaS subscriptions to scale up or down based on demand. This flexibility allows businesses to respond quickly to make changes without the need for significant investments in additional hardware or software licences as would be the case with an on-premise solution.
Maintenance and Access to the Latest Features and Updates
On-premise solutions require dedicated internal IT resources (or a budget for outsourced support) for maintenance, upgrades and security patches. However, SaaS providers usually manage all of these aspects, regularly updating their applications to include new functionalities, performance improvements and security measures. These updates are deployed automatically, ensuring that users always have access to the most current version of the software without incurring additional costs or experiencing downtime. This continuous improvement cycle helps businesses stay competitive and efficient.
Enhanced Collaboration and Accessibility
These online solutions enhance collaboration and accessibility by enabling remote access to applications from any device with an internet connection. This capability supports a remote or hybrid working environment, allowing team members to collaborate seamlessly regardless of their physical location. Cloud-based solutions facilitate real-time collaboration, document sharing and communication, leading to increased productivity and more efficient workflows. The ability to access the software from anywhere also means that employees can stay connected and productive even when on the go.
Improved Security and Compliance
SaaS providers typically offer robust security measures and compliance standards that may surpass what smaller IT teams can manage. These providers usually invest heavily in security technologies and practices, including encryption, multi-factor authentication and regular security audits. Additionally, these providers often adhere to stringent compliance standards such as GDPR, HIPAA, and SOC 2, ensuring that their services meet regulatory requirements. By leveraging this security expertise, organisations can reduce the risk of data breaches and ensure that their data is protected according to the latest industry standards.
In summary, transitioning to SaaS offers numerous opportunities for cost savings, scalability, continuous access to new features, enhanced collaboration and improved security. These benefits can help businesses operate more efficiently and adapt quickly to changing market conditions.
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Material Risks in Transitioning to SaaS (Whatever you do, please don’t skip these following sections…)
Data Security and Privacy
One of the primary concerns when transitioning to SaaS is data security and privacy. Storing sensitive business data in the cloud can increase the risk of data breaches. Companies may feel a loss of control over their data since it is managed by a third-party provider. Additionally, compliance with local data protection laws, such as GDPR in Europe or CCPA in California, becomes more complex. Organisations must ensure that their SaaS provider adheres to these regulations and implements robust security measures to protect against unauthorised access, data theft and other cyber threats.
Service Reliability and Downtime
Relying on a third-party service provider for uptime introduces the risk of service outages and downtime. Even the most reputable SaaS providers can experience technical issues, server failures or cyber-attacks that disrupt service availability. However, a more frequent issue for those working from home is the reliability of their home-based internet service provider (ISP), as domestic ISPs often experience more frequent service disruptions when compared with higher-tier commercial broadband providers.
Such interruptions can significantly impact business operations, productivity and customer satisfaction. Therefore, it is crucial for businesses to evaluate the reliability of potential SaaS providers and review their Service Level Agreements (SLAs) to understand the guarantees and compensations offered in the event of downtime.
Vendor Lock-In
Vendor lock-in is often cited as a significant risk associated with transitioning critical solutions to SaaS. We don’t really perceive this as any different risk to using on-premise solutions. By way of example, ERP solutions become so engrained in an organisation’s business-as-usual (BAU) operations, whether you are on a SaaS based platform, or being on-premise, in practical operational terms, you are pretty much ‘locked-in’ in any event.
However, one key lesson learned from many other projects we’ve worked on, is that migrating to any different provider (SaaS or on-premise) can be challenging and costly. The high operational dependency you have with any solution being ingrained into your BAU, often limits flexibility and makes it difficult to switch providers. This is often the case even if the current provider’s service quality declines, software licence / user access costs significantly increase, or better solutions become available. To mitigate a small element of this risk, organisations should seek SaaS (or on-premise) providers that offer more data portability and better interoperability features, enabling easier transitions between platforms as required.
Hidden Costs
While SaaS is often marketed as a cost-effective solution, there can be hidden costs that organisations need to consider. Subscription fees can add up over time and additional costs may arise from necessary add-on services, premium features or enhanced support options. Moreover, as an organisation changes its user profiles, increasing licences is usually straightforward. However, reducing the number of licences can be more challenging. It is important to check your licence and contract terms to ensure that you are not tied into a long, pre-defined period of maintaining the highest number of user licences. For example, you may be able to upgrade the number of user licences at any time, but not reduce them for at least 12 months (or longer). A thorough cost-benefit analysis and a clear understanding of the user licencing pricing structure in the contract (ideally as part of your early marketing engagement or procurement exercise) are essential to avoid unexpected financial burdens.
Performance Issues
Performance issues, such as latency (the speed of response of the solution you experience as a user) and the need for a stable internet connection, are also potential risks when transitioning to SaaS. Since SaaS applications are accessed via the internet, any disruption in connectivity can hinder access to critical business functions. For users operating from their corporate place of work, this rarely presents itself as a problem. However, for remote workers operating from home, domestic internet provision tends not to be quite as robust and in turn, latency can be particularly problematic for applications requiring real-time data processing or high-speed performance. Organisations should therefore consider the geographical location of SaaS providers’ data centres as well as their own remote staff, to minimise latency and optimise performance wherever their workers may be based.
In summary, while transitioning to SaaS offers numerous benefits, it is vital for organisations to be aware of and address the material risks involved. Data security, service reliability, potential provider lock-in, hidden costs and performance issues must all be carefully managed to ensure a successful transition and to fully realise the advantages of SaaS solutions.
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Unexplored Material Risks (It’s really important not to skip past these five key considerations)
Customisation Limitations
One significant yet often unexplored risk of transitioning to SaaS are the potential limitations your users will often find in both configuration and customisation options. SaaS solutions are generally designed to cater to a broad audience, which can result in a one-size-fits-all approach. This standardisation often restricts an organisation’s ability to configure and/or tailor the software to specific needs and (necessary) unique workflows. Unlike on-premise solutions, where organisations can usually modify and configure the software extensively, SaaS platforms often offer significantly more limited options which can often render the SaaS solution completely unfit for your purposes. Organisations with highly specialised processes may find it challenging to fully align the SaaS application with their requirements, potentially impacting operational efficiency and effectiveness.
Integration Challenges
Integrating SaaS solutions with existing on-premise systems or other cloud services can present significant challenges. Organisations often rely on a mix of legacy systems and modern applications, necessitating seamless integration for optimal functionality. However, compatibility issues often arise, leading to integration failures, data inconsistencies and workflow disruptions. Additionally, integrating multiple SaaS applications from different providers in a practical manner, can complicate data exchange and process automation, despite high level assurances from your SaaS and legacy solutions partners. To mitigate these challenges, organisations must thoroughly assess the integration capabilities of the SaaS solution to (1) ensure that robust APIs and middleware solutions are available and that (2) appropriate inter-provider integration update governance is adhered to, to facilitate smooth interoperability.
Data Migration Complexities
Migrating existing data to a new SaaS platform is another area that is often fraught with potential misunderstandings. The process of transferring data can be complex and time-consuming, involving the extraction, transformation and loading (ETL) of data from old systems to the new platform. There are often further misunderstandings between ‘master’ (static) data requiring transfer and individual transactional data. During this process, there is a risk of data loss, corruption or more often, data mapping and compatibility issues, which can lead to incomplete or inaccurate data in the SaaS application. Ensuring data integrity and consistency requires meticulous planning, validation and testing, again, despite the high level assurance of your SaaS provider that it is straightforward. Organisations must also consider data migration costs and the potential downtime during the transition period, which can disrupt normal operations.
User Resistance and Training
User resistance to change is a common yet often underestimated risk when transitioning from on-premise solutions to SaaS. Employees accustomed to the existing system may be reluctant to adopt the new SaaS application, fearing the learning curve and potential disruptions to their routine. This resistance can hinder the successful implementation and utilisation of the new system. Comprehensive training programmes are essential to address this issue, helping users understand the benefits of the SaaS solution and equipping them with the necessary skills to navigate the new platform effectively. Ongoing support and resources can further ease the transition and encourage user adoption.
Regulatory Compliance Issues
Regulatory compliance is a critical concern, particularly for businesses operating in heavily regulated industries such as healthcare, finance, and government sectors. Transitioning to SaaS can introduce new compliance challenges, as businesses must ensure that the SaaS provider adheres to all relevant regulations and standards. This includes data protection laws, industry-specific regulations, and international compliance requirements. Failure to comply can result in legal penalties, financial losses, and reputational damage. Businesses must conduct thorough due diligence on the SaaS provider’s compliance practices and ensure that adequate measures are in place to meet all regulatory obligations.
Conclusion
While the transition to SaaS offers many benefits, such as increased scalability, cost savings and enhanced operational efficiency, it also introduces a number of significant risks that should not be overlooked. Customisation and configuration limitations usually impact efficiency and user satisfaction. Integration challenges often lead to disruptions and additional costs. Data migration complexities are common and pose security and integrity hurdles. User resistance can introduce delays and internal issues. And regulatory compliance issues have the potential to result in severe penalties and reputational damage.
By proactively addressing these risks through thorough planning, stakeholder engagement, and robust risk management strategies, businesses can better navigate the complexities of SaaS adoption. This approach not only mitigates the potential pitfalls of such a move but also ensures that organisations can fully leverage the advantages of SaaS.
