SaaS application risks and price traps

This article is a draft of CCID's "China Informatization" channel. The name of this article is "CIO is not confused by the attractive quotations from SaaS providers". Do not repost it on other media or websites.

SAAS (software as a service, software as a service) is a sales method of application software. Customers pay by time or usage. These applications are usually used on the Internet in the enterprise management software field. Generally, SAAS software is mainly used in enterprise management software such as CRM (Customer Relationship Management), HRM (Human Resource Management), SCM (supply chain), and ERP. Generally, SAAS is much cheaper than traditional enterprise management software. Therefore, enterprises may be confused when purchasing similar software. This article mainly discusses the possible problems and solutions of SAAS enterprise-level applications in terms of procurement, implementation, and service.

　　Supplier Selection

If you know yourself and know what you want, you can win a hundred battles. To purchase an SaaS ERP system, enterprises must first know which SaaS providers are available and the competitive cooperation between SaaS providers. Because SAAS is still a relatively new concept, most software vendors are cautious and dare not rush to adopt it. Many ERP vendors are reluctant to accept the Saas-based monthly payment option, because it reduces existing sales and is not good for themselves. What's more, the lessons learned from the past are painful: China's ASP model ended with a complete failure at the beginning of the 21st century. Most software developers who tried this model paid a lot of "tuition fees" for this ", therefore, in the face of this SaaS, which is very similar to ASP, Chinese software developers may not have any doubts. Of course, some large software companies in the world do not have much risk in developing SaaS because they have sufficient human and material resources. However, there are also some small companies in China who use SaaS to stir up the formal enterprise software market.

　　Price traps

It is true that the quotation for the ERP system of SaaS providers is indeed very attractive, but in fact this is likely to be a price trap, the cost of the enterprise's initial investment is low, with the gradual deepening of the implementation of the application, investment costs may increase.

Under normal circumstances, the SAAs software purchased by an enterprise may only have the most basic application services. To make a successful application within the enterprise, you still need to invest in implementation and service costs. The labor costs of SaaS providers in ERP implementation, services, and technical support are not much lower than those of traditional ERP software vendors.

The price strategy of SaaS providers is usually a small margin, because developers need to invest a considerable amount of money in the Development of servers, network hardware and ERP software in the early stage, only when the customer scale reaches a certain level can it be profitable. Otherwise, the maintenance costs in the later stage will become higher and higher, making SaaS developers unable to make ends of service failures, this results in losses to both the software provider and the enterprise customer.

　　Implementation difficulties

To successfully implement ERP in a large enterprise, SaaS providers need to make a lot of preparations, understand the needs of enterprise users, and help enterprises increase revenue and reduce costs in terms of effectiveness and efficiency, only by optimizing the asset configuration and improving the financial performance of the enterprise can ERP be successfully applied to the Enterprise.

Even if traditional ERP software vendors have a lot of uncertainties in the implementation process, the implementation of SAAS is even more troublesome. Because ERP applications are deployed on remote servers, if SaaS software must be integrated into other systems of enterprise customers and integrated with the original business system and desktop system of the enterprise, the related development work will become very difficult, it is almost impossible to integrate a slightly more complex internal enterprise application system with SaaS software.

On the contrary, because traditional ERP systems are built in the internal environment of enterprises, it is possible to integrate with the existing business systems of enterprises by performing secondary development, if the ERP system provides API development interfaces or web service interfaces, it may also complete the underlying data integration application, so as to perfectly integrate the ERP system into internal enterprise applications.

　　Do not overestimate the user's application level.

SAAS is a network application. SaaS providers are optimistic about the application level and network status of enterprise users. In fact, the application level of most Chinese users is extremely low, and many users will not access the Internet at all. According to surveys by financial software developers, at least 70% of Financial computers are not connected to the Internet for security reasons. Today, with the proliferation of network Trojans, if the computer used by the finance department is controlled by the trojan virus, the consequences are absolutely unimaginable. I believe most enterprise decision makers will not connect such an important computer to the network, let alone network applications like SAAS. In this way, the implementation of SAAS software is completely empty. The decision-making layer of an enterprise must make a decision to determine whether to implement SaaS software at the cost of enterprise network security. Is this worthwhile.

　　Risks of Business System Operation

Even if SaaS developers have worked hard to successfully implement SAAS in enterprises, there are still many problems to come, most importantly, the operation of SAAS systems. How to ensure the stability of the application system, how to ensure that the Network is normal, how to handle a large amount of concurrent and massive data, and how to back up data are all important considerations for developers.

Obviously, the key to investing a lot of maintenance costs to meet these requirements is who pays for these costs. To ensure that every key business application can reach 99.999% reliability, it is almost impossible for SaaS developers to use common network hardware devices. Therefore, the SAAs service price will need to be higher than the traditional ERP software service price, which has almost no other choice for enterprises.

Once an enterprise's Saas business system is fully operational, the fate of the enterprise is in the hands of SaaS providers. Enterprises must pay constantly to get continuous and stable services from Saas service providers, once the SAAs service provider encounters any problems or risks, it directly affects the operation of the enterprise's system, and the enterprise must be forced to accept the quotation from the ssss supplier. Therefore, when purchasing SaaS software in the early stage, enterprises should consider future risks and changes to price factors.

　　Data Security and Privacy Protection

The data security and importance of enterprise ERP systems are often crucial, especially financial data and customer information. These data are often the core secret of a software enterprise's sales department, putting these vital core data on a third-party server was unacceptable to most enterprises at the time. In particular, servers and networks sometimes encounter unpredictable faults. If an enterprise encounters these faults when conducting key services, such services will be questioned. Competent enterprises will consider the application modes of traditional ERP software: Purchasing software, purchasing servers, purchasing implementation and services. Even if the price may be high, the stability of some sensitive services can be guaranteed.

In foreign countries, even some large network companies cannot guarantee the absolute reliability of their enterprise systems, such as the Saas-based network software package recently launched by the international network giant Google, provides functions such as email, word processing, and workbooks to challenge Microsoft's desktop office tool. Although the region is large, it cannot be sold in the Chinese market. If Enterprise emails and documents are hosted on foreign servers, even common users can see huge risks: What if the mailbox system cannot be accessed, at present, access to the Gmail mail system from China will often be disconnected (of course, this is not the responsibility of the company, but there are other complicated factors ), if our business manager has an important email to send, but finds that he cannot access the Gmail mailbox, how can he use SaaS?

　　Conclusion

Saas-based applications may be innovative for certain enterprises. However, this application model is not suitable for all enterprises, and there are huge risks in the implementation, service and operation processes. Maybe SAAS is just a dream in enterprise ERP implementation. There are too many interference factors, so that the current SaaS cannot perfectly solve the actual application of enterprises.

Therefore, the problems faced by SaaS are much more complicated than we usually think. SaaS software can solve the current problems by not only slightly modifying the software architecture or interface. This is doomed to the current SaaS application market must be oriented to small enterprises and individual users. For medium and large enterprises to implement SaaS software, there must be various difficult problems and troubles. At present, SAAS vendors in China are not perfect, and there are still doubts about whether large software developers need to intervene. Many SaaS vendors are currently engaged by individuals who start their own businesses, these entrepreneurs have no resources, no channels, but technologies and enthusiasm. They can use the lowest cost to create SaaS software that is best suited to small businesses (some may add the false names of ERP or CRM ), we can also expand our influence through the virtual network, and get the company's attention through media hype. However, we should note that SAAS in the United States and other developed countries is only a stage of research and exploration. Mature applications in the domestic market are extremely unrealistic in the short term, what's more, traditional Chinese ERP developers are already fiercely competitive in the low-end market. If SaaS providers only want to rely on low-end pricing policies to obtain the share of this low-end market, I think SaaS's attempt will inevitably repeat the fate of ASP's failure.

Original article reprinted, please note: Reprinted from the moonlight blog [http://www.williamlong.info/]

Link: http://www.williamlong.info/archives/863.html

Http://www.williamlong.info/archives/863.html