Often organisations are tasked with comparing the benefits of adapting to available software to developing a custom solution in-house, but how do you compare these when they can be such different solutions?

Large, in House, Bespoke Programming

In the early days of computing, large companies developed proprietaty sytems and maintained them in-house to get the features and functionality they wanted. Sometimes the company would use a basic product and adapt it, but often the solution was completely bespoke, with a focus on the intenral company procesess.

The major drawback of this was the cost of maintaining and futher devleoping system. Creating a new software is more difficult that modifying existing system to meet an organisation’s needs. Talent and staffing was a another issue - developers need to keep their skills sharp, and to do this is time consuming and expensive. THe range of skills needed in a success software package means a team of developers is a better solution than a single individual. This adds up to a lot of ongoing staff costs.

In many cases, the technical work was outsourced, as it tends to be a periodical or cystlical need. Investment could be high, and the development team of in-House systems couldn’t always keep up with the advancements made in vendor, off the shelf system, which were driven by sales target and ongoing investment and development.

Overtime, in house system began to fall behind the usablity and performance of Vendor products, making bespoke development less competative in real costs.

Most orgnaisation now use off the shelf software for the majority their business software.

Perpetual licence model

The perpetual licences models of the 90s made off the shelf software an expensive investment, with typical cost recovery over 5 or more years.

This was a disinsentive to small to medium businesses, who often found the implimentation costs too high to be effective in thier business. Implementation could take a long time, cost as much or more that the software itself, and there are a number of big projects that utimately failed t achieve their goals, making it a

Many companies stuggle to assess the software usablity and function, as they they couldn’t test out beforehand, and there was not real idea if they system would fit the company needs.

This was the other major drawback of a perpetual licecne model. Updates were usually not included, and if new legilation or other changes came in, the organisation may need to purchase the product again. In most cases, this mean that a reinvestment every 5-10 years to keep with functions available in newer software.

Enter the Software as a Service (SaaS) model. Software as a service has an ongoing fee, with comparitively little upfront investment. Othen there is a free verison you can trial, or limited implementation cots.

SaaS has made the use of off the shelf software more affordable, and removed the need for reinvestments. It’s often considered more cost effective, the SaaS model will charge a yearly or monthly fee for the service, which is predictable and allows orgnaisaitons to use the ongoing cashflow to cover the costs, rather than a large upfront investment.

SaaS models are also closly linked to Cloud systems, with many SaaS providers maintaining the newtworks and servers, while the user simply ‘logs in’. This can have a positive effect on the ITC infastructure investment as well. The organisation no longer sholders the cost the ITC infastucture (i.e. servers, maintenence, skilled ITC professionals, and even electficity). All these costs are factored into the SaaS fee.

Working hard for you

SaaS are also driven to keep their products current, and will release upgrades and new features wihtout additiaonal costs.

Sounds Great, but how do SaaS make money?

SaaS providers usually price their services for implementation and servive delivery on a monthly models. This is where the mult tiered pricing can be a huge benefit - you can onboard a relatively low cost and the upgrade as your needs change. The basic model for SaaS focuses on retention on clients. The ‘cost’ of delivery is portion out over time.

Many ecommerce SaaS have a sales compotent to the pricing - so the more money you make, the more money they make. This is a great way to encourage your software provider to update and create new features. The more effective the software, the better you sales, and the better their sales. This is a networked relationship, where the positive impacts on the client represent a positve impact on the vendor.

http://www.drams-software.com/avoid-the-hidden-costs-of-in-house-developed-systems https://virtualizationreview.com/articles/2012/06/13/in-house-or-saas-which-is-best-for-you.aspx http://www.digimantra.com/networking-2/saas-vs-self-hosted-which-way-should-you-go/ http://www.clydebuiltsolutions.com/wp-content/uploads/2012/05/Inhouse-VS-Off-the-Shelf-May.pdf