How the SaaS (Software-As-A-Service) Model Affects Business Process Improvement

How the SaaS (Software-As-A-Service) Model Affects Business Process Improvement

An early question surrounding business process improvement (BPI) and the use of technology was:

Does the technology drive the processes?


Does the process drive the technology?

While many believe that the process should drive the technology because you only want to spend your limited technology budget on the most efficient process possible, an interesting change is occurring in the information technology (IT) environment with the increasing use of the Software-as-a-Service model.

The SaaS model is the next generation of software implementation models. Over the last decade, companies moved from the traditional software model (where the company provided the infrastructure to host the application, customized the solution to the company’s specific requirements, provided the necessary IT support, and dealt with major upgrades every three to five years) to the Application Service Provider, or ASP, model (where the vendor hosted a software application on their hardware and leased out a unique instance to a company, which allowed a certain degree of customization).

The ASP model did not require companies to purchase on-site hardware, and provided the opportunity for a less expensive and quicker software implementation. In moving to the ASP model, companies hoped to reduce the total cost of ownership for a technology implementation.

Today, the SaaS model is rapidly growing and quickly defining the way companies implement software applications. You can think of SaaS as the next generation ASP, with a key difference being that all customers reside on the same instance. In this model, the vendor has responsibility for increases in capacity and scalability. They continually perform research and development, thus enabling them to provide more frequent enhancements to customers without the need for major upgrades. SaaS sales increased from 2010 to 2011 by 21% and estimates indicate that sales will more than double by 2015.

While companies enjoy reducing their technology investment, they do not necessarily want to use the same exact product that their neighbor uses. The SaaS model though depends on application standardization to keep costs down, which means limited or no customization. So, how do companies balance the financial benefit of the SaaS model with the need for unique business processes since companies differentiate themselves from competitors by their business processes, among other things?

A company has to identify what truly differentiates the business from the competition. What are the core competencies of your company? Accept that not all business processes are created equal and focus resources on building (or improving) business processes around your differentiators. For example:

  • If research and development sets your company apart, focus on processes like idea generation, market research, and product development.
  • If service delivery differentiates you, focus on processes like order processing, order fulfillment, and customer support.
  • If retaining employees is critical, focus on employee-centric processes like recognition and succession planning.

Take advantage of the lower cost offered by the SaaS model for non-core business processes, but keep improving the business processes that differentiate you from your competition.

Copyright 2012 Susan Page