6 hidden liabilities of enterprise SaaS applications

‘Secret SaaS’ is only one of several limits that this business model is facing.

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Demand for Software-as-a-Service (SaaS)-based solutions is strong. No question about that, but less obvious are the limits and hidden liabilities of this popular business model.

The vendor data looks impressive. Last October, Microsoft announced commercial users of Office 365 had reached 120 million. Midway through last year, SaaS pioneer Salesforce said it had hit an annual run-rate of more than $10 billion USD. Analysts also confirm this big picture. Market intelligence firm IDC, for instance, expects SaaS to capture nearly two-thirds of the forecast $160 billion USD global public cloud services and infrastructure spend in 2018.

SaaS has transformed the way that businesses use software. It used to be corporate licenses and on-premises installations. Now a single business unit – or even end user – can get up and running with just a credit card and a browser. In our work with businesses looking to modernize, we find them almost uninterested in purchasing infrastructure or entering long-term contracts. Instead, if SaaS is an option, they’ll frequently take it as the preferred course. And if it doesn’t measure up, they’ll just change. For many enterprises, it can truly be that simple.

Simplicity and choice have made SaaS a winning combination. So – what’s the problem?

Actually, there are several issues requiring attention and management with the focus on SaaS. Some have arisen from the ease of use that has made SaaS so popular. Others stem from its out-of-box nature. Here are six concerns that enterprises should be aware of when this, relatively speaking, new consumption model is in play:

1. Visibility

Some software, such as Office 365, typically has the CIO’s full knowledge and support. But in other cases, SaaS may be completely off the corporate radar. A few years ago Cisco reported that large enterprises were using 15 times more cloud services than their CIOs were aware of, or had authorized. That disconnect continues. As my colleague Jeffrey Bannister has pointed out, our professional services team regularly generates data revealing large numbers of cloud services at businesses whose executives say they have yet to make any such commitments. The problem with “Secret SaaS” is straightforward: You cannot manage what you cannot directly observe.

2. Security, compliance and governance

Cloud service providers are investing heavily in security and are motivated to improve, but the challenge is not to be lulled into complacency. SaaS applications may simply not be aligned with corporate security. If a policy calls for multi-layer controls, then a business probably needs to take additional actions. And the more the generic the app, the less likely it is to comply with regulations or governance. A content management solution, for instance, could violate restrictions on insurance documents crossing state lines. Or collaboration tools could make it easy for end users to discuss confidential matters in an insecure and unapproved method.

3. Costs

Zero CapEx looks good, monthly SaaS fees may be low, and some introductory offers are even free. So why are costs a concern? One issue is feature creep. A low-cost service becomes more expensive as users tap into additional functionalities. The need to remedy security or regulatory breaches (see above) could drive significant additional costs. And then again, there is the challenge of visibility. If SaaS is part of a larger off-budget Shadow IT infrastructure, an enterprise may simply not know how much it is spending.

4. Efficiency and management

But even if spending is known, what is the return? Enterprises may subscribe to Office 365, but which apps are really being used? Tools that meter usage and eliminate unnecessary provisioning would help SaaS customers at large, as Gartner said last year. Otherwise, it’s hard to know or improve your ROI. And while vendors pitch SaaS as easy to switch on or off, automatic renewals and sticky user authorizations often make that difficult. If an app involves large data sets, migration becomes more challenging.

5. Customization

Most users like the good-to-go nature of SaaS apps, and providers are happy to deliver standard feature sets over multi-tenant architectures. But the more complex and mission critical their role, the more likely that some customers will want customization. Alongside the popularity of Salesforce, for instance, has arisen a parallel industry of consultants, with expensive fees and uneven expertise. As a “Rising Star” in SAP Services (so named by Information Services Group) we know the challenges of remaining current in enterprise software. It requires understanding not only a product’s legacy and cloud variants, but also how to integrate them within third-party systems.

6. Performance

The success of a SaaS app depends upon effective coordination between its distributed parts: browser, database, middleware, front end, etc. End users are not interested in the details, but without highly reliable internet connections, the performance of an app will be compromised. That’s one reason it makes sense for SaaS companies and their customers to work with service providers that have guaranteed, flexible connectivity and direct connects to leading cloud infrastructure providers.

SaaS will continue to dominate the massive and growing market for public cloud and operationalized consumption services. But awareness of its limits is on the rise. There are new SaaS management tools on the market, and service providers with application expertise are in demand. Whether turning to these tools or providers, enterprises deploying SaaS applications are going to need ways to ensure their visibility, security, cost-effectiveness, integration and performance.

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