Who saves more on SaaS: Enterprises or SMBs?

There are many variables to saving and value return, and they do differ based on the size of your organization. Below I focus on a few of the value and saving variables so you can make your own judgment.

1) System Administration. SMB often save here by not doing what should be done – so they end up with under-performance and under managed technology infrastructure. If SMB actually did invest in what needs to be done for server/network/platform maintenance the savings are huge for SaaS offerings. For larger enterprises the cost models become more complex – and are often more about core competencies / nimbleness / revenue per employee than about specific savings.
2) Scalability. If your SMB is growing rapidly scaling your systems is challenging. You need to add people or contractors – which is a lumpy / step expense. SMB also have trouble planning far ahead and are careful about when they add costs – so scaling costs either in expenditure or the impact of not having what you need when you need it. Larger enterprises have less impact from scaling – unless they are growing significantly and rapidly. At the same time – for some applications – larger enterprises may need to ability to scale for bursts of time. Turning on/off a significant increase in systems availability is much more cost efficient in a SaaS model.
3) Expertise. Many SaaS offerings leverage data centers and support organizations that have more and deeper expertise for all of the required support areas than even the largest organization would employee. SMB companies can have enterprise level infrastructure without the expense – although you could argue they don’t need that level of support as a SMB. Enterprise companies benefit from deep expertise across the board for the specific SaaS offering.
4) Budget and IT processes. This really affects larger enterprises more – since they usually have more structured budgeting cycles and combined pressures to manage cost and prioritize. SaaS moves significant amounts of your maintenance / replacement expense to a subscription which is factored into the standard budget – rather than dealing with funding / priority balancing. SMB budgeting decisions tend to be simpler and easier.
5) Customization and Product Extension. Some of the best SaaS applications are combinations of a service with the software solution. Payroll services were an early example of this – there are other services such as Avalara for sales tax management or a number of the eCommerce platforms that include merchant banking features. The ability to integrate and extend is available for many SaaS applications since that is where they live – on premise solutions often require significant additional investments to extend the enterprise systems. Customization can be more challenging in SaaS – so the level and type of customization and the value received can be a cost impact item.

This should get you started.

Bob Scarborough
www.tensoft.com