If you have a checking account with any of the (surviving) big banks like Bank of America, you're already using software as a service. Bank of America's online software allows customers to manage their budgeting, billing and statements over the Internet.
Software as a service – SaaS – is the software industry's attempt to convert as much software as they can from stuff you buy in a box at Staples into stuff you pay for every month, like Netflix.
SaaS supporters promote on-demand software as a less expensive alternative to buying a software license. When you hear the buzzword-du-jour "Cloud Computing," they're talking about better ways to use software as a service for your cell phone and laptop.
Customers can subscribe when they need a service and quit when they don't. The industry expects small businesses to use it more than big established companies.
Data backup services provide an exception to that trend, though. Both small technology companies and huge financial services companies use a kind of software as a service to back their computers up offsite and to allow remote data access.
H&R Block's online tax tool serves as a example. Tax filers can use HR Block's full software suite to do their federal taxes for about $20. The online tax software updates every year. Tax software for your computer at Office Depot probably can cost $50 to $100 and will need an upgrade every year.
Some areas shine under software as a service – collaboration software practically requires it. Think Skype, or Google Docs.
Accountants view SaaS and regular software purchases differently. SaaS costs are treated like an operational expense, and can be deducted immediately. But off-the-rack software requires depreciation over a period of years. So SaaS can be friendlier to your company's current finances.
Another benefit: on-demand software usually can be accessed from any Internet-capable computer. If your computers die, your data remains safe.
But long-term, SaaS carries some risks. Like any kind of leasing cost, you might end up paying more “renting” the software than you would have if you bought it outright. You need a reliable Internet connection to use on-demand software. You also run a risk of losing your business data if the service provider goes bankrupt or gets hacked. And on-demand software doesn't eliminate the risk of being locked into one company's products.
Some advice:
Your computer can stink, but your Internet connection needs to be bulletproof. If you're running business-critical processes over the Internet, then your Internet connection needs to be really reliable and you need hardcore antivirus and firewall protection. No exceptions – one breach and you're toast.
Back up your data. If you can avoid it, don't let your software service provider have the only copy of your business data. That only encourages catastrophe if something happens to your software vendor.
If you need custom software, you probably aren't in the SaaS market. The whole point of SaaS is to provide an inexpensive service to a mass market. Customization costs money and can thwart the whole cost-saving point of using online software tools.
SaaS is about cutting costs, not qualitative advantages. Again, SaaS is a mass-market approach to software. Unless you're the only person in your field using software at all, you're not going to have better software than the next guy if you're using SaaS. But you might have less expensive software. SaaS cuts costs.
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