Is SaaS a Horror or a Blessing?

Some see software-as-a-service (SaaS) as the golden ticket to digitalization. Others, however, shy away from this cloud solution like a cat from cold water. It’s time to take a look at the advantages and disadvantages of SaaS in business automation.

We speak of SaaS when a software application is made available in the cloud via a web application. The provider manages the data, servers, and application maintenance directly. This model represents an alternative to the classic on-premise solution, i.e., the purchase and installation of the software in a company’s own IT environment.

SaaS on the rise

In recent years, SaaS has experienced a sweeping triumph in the corporate world. According to Gartner, spendings on SaaS applications increased by 42 percent worldwide from 2020 to 2022. While CRM and project management programs such as Salesforce were successful with SaaS in the early days, this sales model has now reached all areas of IT infrastructure. Even complex solutions such as Workload Automation are available as cloud-based services. Application housekeeping, a central aspect in complex software, has thus been taken over by the provider.

Why do more and more companies trust SaaS?

The first reason is technical: fast and stable internet is now available everywhere in major cities and metropolitan areas, and is a basic prerequisite for SaaS. Conversely, this means that companies located in the broadband diaspora should not obtain important software applications via such a model.

More decisive for success, however, are the entrepreneurial advantages—and these are manifold.

The main argument is the scalability of the software. Most SaaS solutions are available in various scopes and licensing models. Small and medium-sized companies in particular obtain the software they need for their processes—and not a bloated all-in-one solution. Firstly, this is less expensive, and secondly, this makes it easier to use and operate. This is because the maintenance, monitoring, and backup tasks lie with the service provider; they are responsible for keeping the application running. In this way, SaaS is also an answer to the shortage of skilled workers in the IT sector. Companies no longer need their own staff for installation, maintenance, and monitoring. SaaS services also offer reporting and intelligence tools, meaning companies no longer have to worry about this either. In addition, the software setup is less expensive. The initial and ongoing costs are much lower—both technically and in terms of finances and personnel.

Technologically, SaaS solutions have now reached the stage where they can be integrated into existing systems, and collisions with other software occur only occasionally.

Avoid the SaaS trap

Why then do some companies shy away from the software model? Are they blind? Not necessarily, since SaaS does harbor some risks. These can be summarized under the terms “dependency” and “security”.

Let’s look at the dependencies: once you have decided on a solution, it is difficult to switch later on. The keyword here is vendor lock-in. In other words, the customer is so dependent on the provider’s software that switching to a competitor would not be economically viable—even if the SaaS provider were to increase software costs—because problems would ensue. What happens to the data? Is it possible to migrate to another system, or would destructive data chaos be the result?

There are further uncertainties: what happens if the provider discontinues its service, disappears from the market, or is taken over by a competitor? Complications often arise that were not previously on the radar. This happens even to major players. For example, Office365 was initially run by T-Systems, but then Microsoft terminated the partnership. As a result, customers incurred additional costs of 20 percent, and the data was no longer stored in compliance with the GDPR, i.e. the EU general data protection regulation.

Additionally, there are risks with updates. How long will updates be available, and does the IT department have to keep up with every update? Sometimes updates lead to problems with older applications because legacy interfaces no longer harmonize with the software. Or features that the company formerly relied on are removed after an update. In principle, you are giving control of your system to someone else; it is out of your hands.

Another point concerns complexity and the associated risks that come with it. Infrastructure is usually more complex with SaaS, since the integration of an external service runs across significantly more nodes. In addition, more approvals are required. For example, for firewalls. This creates more single points of failure (SPOF) for the overall system and becomes particularly visible during migrations.

In addition, in time-critical disaster scenarios, the possibilities for intervention are limited; there is no centralized control authority. Thus, the SaaS provider usually cannot accelerate the rescue. Contractually agreed solution times are either too long or are undermined. In general, SaaS applications often run slower than client solutions.

The topic of security concerns not only data security, but also trade secrets. Should important IT infrastructures truly be outsourced? Are companies putting valuable, even sensitive, information into the hands of third parties?

Better safe than sorry

As a rule of thumb, the more important the software application is for the company, the more carefully the company must scrutinize the use of SaaS and the SaaS provider.

This leads us to the topic of automation. Automation processes are often crucial for operations. If these are disrupted, orders cannot be processed, for example. Warehouse management no longer works, or invoices can no longer be issued. In the worst case, the entire operation comes to a standstill.

This not only affects how the applications run, but also the information behind them. if that information it is no longer shared and passed on in-house, it will lead to a loss sooner or later. The keyword here is brain drain. A company that is dependent on third-party knowledge for their core processes is vulnerable, and excludes itself from its own further developments. As a result, it may lose its competitive advantage.

Companies should not outsource their automation processes lightly. Those who nevertheless decide in favor of SaaS because the advantages far outweigh the disadvantages, or because they do not have the knowledge to operate it, should clarify questions on the topics of technology, service, compliance, and contracting in advance.

When it comes to technology, the focus is on questions about functionality. Does the software meet the desired requirements? Are there individualization options? What about interfaces, especially legacy interfaces? Where is the data stored, how is it secured, and who has access to it? These questions overlap with points about compliance and service such as, which party is allowed to do how much? What does the service provider do in terms of maintenance and development? What happens to the data after termination? How long is it preserved? This brings us to the contract. This is not only about costs, but also about duration, cancellation periods, and upgrades and downgrades.

Companies—especially smaller and medium-sized ones—cannot fully answer these questions in detail. For complex software applications, bringing independent consulting on board is essential.

As with all complicated things in life, when it comes to answering the question of whether SaaS is suitable for automation processes, there is no clear “yes” or “no”, but rather an “it depends.”