By Odd Magne Vea, CSO in RamBase, finalist of the Best SaaS For Business Management, Best SaaS Product For Supply Chain/Warehouse Management, and Best SaaS Product For ERP/MRP categories at The SaaS Awards 2023

The last 10 years have given us a slew of new abbreviations, terms, and words to learn and try to understand. From ASP and remote hosting to the proliferation of cloud-related acronyms like SaaS, Paas, IaaS, or private cloud and private managed cloud. But do you need to know all of this, or should you need to master all these terms?

The importance of understanding software options

In this article, I will try to highlight some of the important things to consider around choosing professional software for your business.

I will use some mundane examples to clarify some differences. This will make it a bit easier for you when confronted with lists of potential software and vendors inundating you with technical terms and knowledge expectations.

Lastly, I will touch on one of the things I think is under communicated in the public discussions around business software – the role of standardization.

Exploring the Cloud

Let’s start with the easiest term: “The Cloud“. Some claim that “there is no cloud, it’s just someone else’s computer”. It is, of course, a bit more complicated than that, but running business software isn’t too difficult.

First, determine if you need to manage servers for running the software. If the answer is “yes”, then the next question is where it should be run.

Do you have your own server room, like in the good old times, or do you have access to your own (private) cloud environment provided by someone else? This can be dedicated to your needs. It can be a subscription service from one of the public cloud providers where you (or a trusted IT company) set up just what you need for the software you are buying.

The more you do yourself, the more responsibility you have for design, availability, and security. The same of course goes for the payment of the software itself. If it requires you to provide servers, then you also pay for it separately. If it’s included, then you still pay for it, but bundled into the software price.

Software as a Service (SaaS)

At the far end of the software designs, you find Software as a Service (SaaS). The meaning of the term is really straightforward: forget about the old hassle of buying, installing, and maintaining the software; let the vendor handle it all. For all intents and purposes, this is done in the public cloud or the vendor’s own private cloud. But, in theory, you can have SaaS on an old PC under the desk at your office. As long as you have a vendor willing to keep it running for you, secure the backups, handle updates and upgrades, etc.

For some of the huge system implementations like enterprise ERP systems, the vendors really package and maintain your instance of a cloud setup and wrap it in a service agreement, labeling it as SaaS. But for most others, SaaS is essentially centrally managed software run by the system vendor.

Multi-Tenancy vs. Single-Tenancy

Now, let’s navigate the multi-tenancy vs. single-tenancy debate. You have agreed that you want something in “the cloud” and you want a “SaaS” offering, but you encounter this dilemma: Which is better, a single-tenant or multi-tenant solution?

A single-tenant solution or a multi-tenant solution? Let’s draw an analogy from real life: Imagine you are renting an apartment. Would you prefer to rent in a large apartment building or a unique house? Multi-tenancy is easily compared with renting in a large building.

Lots of things are centrally managed; the façade of the building, the heating, the power, the elevator, and the parking garage.  The plus side is that all of it is handled. Although you have to pay something for it, might be cheaper due to the economics of scale.

The downside is that you cannot control everything. The tiles in the hallway are set, the exterior color, and maybe even the floorplan of the building. If the central heater is changed, it affects everyone. You cannot choose to have the old one. Maybe you get to choose the colors of the walls inside your apartment and the furniture, but you can not have an extension.

Nonetheless, you don’t need your own alarm system and security personnel. The owner handles all of that. If you have chosen a good building, you will see that they maintain it well, even upgrade it with new technology and better solutions for you, such as:

  • EV chargers in the garage
  • New electronic door locks
  • App-controlled heating and lighting

The role of process standardization

Lastly, let’s address the often-overlooked aspect of business software: process standardization. Some of the easiest SaaS offerings don’t have the configuration or extension possibilities to allow custom processes, but you can still choose to use the software in a different way than intended.

However, the real benefits of SaaS software come in the more complex use cases where your business processes are more complex and more vital for your success as a business. To get the best out of a software investment you should consider the processes they are offering and try to use as many as you can in the most standardized way possible.

If you think carefully, how many of your quirky processes have actually been established to really provide a unique competitive advantage? Not many, probably. Most of them have evolved, shaped by employee practices, errors, software limitations, and other factors. Moreover, most of them are likely to be “old” or outdated.

Vendor collaboration and challenges

If you manage to align with the vendor’s standardized or proposed processes, you will benefit much more from the software investment than if you struggle to keep your old processes or contort the new software to look as much as the old processes.

Most buyers say they want to do this, but few have good enough management involvement and process owners to really carry through. Moreover, in all honesty, most of the software vendors are not adept at showing the value of standardization either. Therefore, you might find yourself on your own.

Applying the apartment analogy

Let’s revisit the analogy. Suppose you have standardized your apartment and your rent contract is a pure apartment-as-a-service. The vendor will come in and update your appliances. One day you’ll find a new air fryer in your kitchen. Your old TV is one day switched with a new projector. After a notice period, you will also have your apartment remodeled because the owner found out it would be better with an en suite bathroom or a slightly bigger hallway. Again, we’re stretching the analogy here.

The benefits of standardization

To return to the software side, if you manage to standardize your processes, you will benefit from central improvements within those very processes. You will get better processes and avoid getting outdated. You will be able to use new functionality that builds on the same very processes.

This is when you really see the benefits of a multi-tenancy SaaS software offering. It’s not for everyone in all industries and situations, but when you find a viable alternative for your business in your industry, the upsides can be great. Over time, the value of your investment can grow as the software evolves in tandem with your needs.

To round off, the discussion about cloud and SaaS has often revolved around technology and cost models. However, the really important discussion is much more about processes and standardization.

The potential value of choosing the right software for your business can be huge and continuously growing. Choose the right solution and be ready for the always-changing future!