Software+as+a+Service

Big Ten Brew Assumptions: · Approximately 1000 employees · Corporate Headquarters located in State College, Pennsylvania · SaaS is multitenant, not single-tenant · Groundbreaking has begun in Ann Arbor, Michigan · Ambition to open 5 more offices in the U.S. within the next 5 years, and reach a total of 11 offices within the next 10 years

To the HR Executive Team:

It has been made clear to us that your company, Big Ten Brew, is looking to expand your operations over the next 5 years to approximately five new locations in the U.S. with the ambition to eventually span from as far east as State College, PA, to as far west as Iowa City, IA. With the addition of these new locations, your company will not only grow geographically, but you will also see tremendous growth in the number of employees. With this expanding employee base, HR becomes increasingly important.

It is for this reason that we are here today to discuss your company’s potential adoption and implementation of Software as a Service (SaaS). This report will identify the strengths, weaknesses of SaaS, as well as the past performance of this technology. We will further discuss the importance of SaaS to the future success of your company.

It is our belief that by adopting this technology for your HR applications, you will save money, increase your flexibility, and increase the quality of your service. However, there are some potential drawbacks and considerations to be made. These weaknesses include security, bandwidth, and availability (loss of control, not physically having them). The considerations include total cost of ownership, suitability of the available software, and the future needs of your company. Through careful analysis of these weaknesses and considerations, we firmly believe that the adoption and implementation of SaaS will be beneficial to achieving success and longevity with your company.

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Software as a Service offers you access to applications over the Internet rather than through traditional hardware-based, in-house servers (“What is SaaS?” 2009). Larger companies who use licensed software incur significant fixed costs by having to acquire and manage their information technology system (Bleicher 2006). For a smaller company like Big Ten Brew, through the use of SaaS, those costs can be shared by many customers, at a savings for all involved. When asked about the costs associated with traditional information systems, Rick Franklin, the corporate director of operations for Honda Komyo said, “Well, they’re okay systems, but they still require a lot of development and they have a fixed cost associated with them. And, we’ve got to buy the support, the servers, the maintenance, and any time we need to add customers or make changes it will require more development. It was well over $100,000 by the time it was said and done.” (Sowinski 2009). SaaS offers an “on-demand” model that virtually eliminates the need for IT staffing, hardware, and maintenance (“Why Software…” 2009). This comes as a savings to your company in the form of IT budget cuts and the decreased need for upfront capital investment.

Considering that the majority of your capital is currently invested i n the construction of your Ann Arbor facility, this is especially important at this point in time. Software as a Service can also save your company money with the speed in which it can be implemented. “SaaS-based BI vendors, with their multitenant data warehouses and industry – and application – specific data models, promise to get customers up and running within days or weeks.” (Henschen 2009). The Software as a Service m odel can deliver a fully functioning application in weeks as opposed to the traditional hardware model that, for the same application, would take months and often years (Sowinski 2009). With less down time, your company can focus on working towards your goals. One of the many reasons companies adopt SaaS is to address its more basic business processes, such as HR applications, so that they can focus more of their resources on custom processes that make the company who they are (Gruman 2007). With all aspects of implementation and deployment left up to the SaaS provider, customizing the service is where you truly come into the picture.

Leaving almost everything in the hands of the SaaS provider, the only thing that you have to do is tell them what you want. Flexibility and the ability to customize the service is one of the biggest benefits of SaaS. Under this model, vendors have the ability to take the best or what is around from various sources and incorporate them into a succinct package for businesses. This is especially important to businesses that are going through changes from year to year, such as Big Ten Brew. When adopting SaaS, you are never stuck with that decision. As your business changes, your needs change, and you can make changes to your service or even switch vendors altogether (“What is SaaS?” 2009). This is truly important when it comes to the world of technology because the next greatest thing is always just around the corner. Mark Woodward, CEO of E2Open recalls, “Five years ago, most companies tried to implement what I call ‘enterprise-class solutions’ that were entirely overrated. There were a lot of failed implementations and companies invested tens of millions of dollars in a solution that they spent years trying to deploy, and in the end they had to piece together solutions from multiple vendors because they couldn’t get exactly what they wanted.” (Sowinski 2009). With the flexibility of SaaS, you can get what you want and stay ahead of the curve on the issue of obsolescence.

Gary Roth, COO and CFO of United Capital Financial Advisers said, “We faced that decision of do we want to be a software developer and take the chance that it could just become a cost center, or not. We were more concerned with getting a best-of-breed application that we could configure, rather than building something that we would then have to maintain.” (Crosman 2008). He went on to say that his service provider has been extremely responsive to his company’s feedback, and has produced instant results (Crosman 2008). Roth makes a great point that can be applied directly to your company. You are a beer brewer and distributor, not a software developer. SaaS allows you to stick to what you know and let someone else handle everything else. The ability to customize your software is crucial to your business because you can tell the provider what you need and they will deliver it. In the meantime, you can be brewing up a batch of the latest, greatest Big Ten Brew.

This is all made possible by the transfer of power from the vendor to the customer, Big Ten Brew. The transfer of power gives your company leverage to get top notch customer service. If the vendor does not deliver, or for some reason you are not happy, you can simply go somewhere else. This position gives you tremendous power to get exactly what you want. You are not tied to millions of dollars worth of hardware and development. Once your contract is up, you are free to go elsewhere (“Software as…”2009). This being the case, the vendor is going to do everything in their power to keep you, the customer, happy. They know that if they do not do so, they are down a customer. As you know, word of mouth is incredibly important in the business world, so if they disappoint a customer, chances are that will not be the only customer they lose. In these tough economic times, the vendor has quite an incentive to keep you happy. Although Software as a Service may seem like the golden solution, there are some potential weaknesses in the idea. These include security, bandwidth limitations, and availability. With sensitive information flowing over the internet, security is an issue. If the vendor goes out of business or just is not committed to keeping the most updated virus protection, your information could get into the wrong hands or simply be erased (Bleicher 2006). To avoid this problem, investigate potential vendors’ security plans and make sure that they have a long standing history free from security breaches (Gruman 2007). Considering the fact that SaaS is run over the internet, bandwidth becomes a point of concern. If your company does not have a fast technology infrastructure, accessing your applications can be a slow and frustrating process (Schaffhauser 2009). However, if you do have a fast system, then this is not an issue. When it comes to availability, people like to possess things. With SaaS, there are no “digital belongings.” If the service goes down, you may lose access to your information for an extended period of time or all together (Schaffhauser 2009). This could have catastrophic consequences for your business. A potential solution to this issue is to structure your service-level agreement to have at least a 99.5% availability, which is a common minimum (Gruman 2007). Even with these potential weaknesses brought to light, we still feel that SaaS is the right direction for Big Ten Brew. When making this recommendation, we had the following issues to consider. The first consideration was the total cost of ownership (TOC). Many critics of SaaS say that the TOC ends up being more than the investment in on-site hardware. However, this is not the case. Ken Harris, CIO of health and beauty products maker Shaklee said that the annual subscription fees for SaaS are not much more than paying just the annual maintenance fees for on-site hardware (Henschen 2009). Another consideration we looked into was the suitability of the software being offered as it pertains to your company. As we said earlier, the flexibility and ease of customization make this a mute point. Lastly, we looked into the future needs of your company. As your company continues to grow and expand to new locations, your needs are going to change. At some point in the future, your company may be large enough to make it cost effective to bring the HR software in-house. With the growth of your company on the horizon, you are going to want to select a vendor who can support both options, either SaaS or in-house (Bleicher 2006).

Even though this is far less of an investment than in-house software, we are sure that you would like to know about the success of SaaS and what your return on investment may be. Daptiv, a provider of on-demand project management and collaboration solutions commissioned a study by Forrester Research. They evaluated the “Total Economic Impact (TEI) of Daptiv PPM (Project Portfolio Management).” The study found that the clients’ break-even point on their investment was less than two months. Even though the study was specific to the Daptiv application, the study concluded that there were productivity gains and dramatic cost savings simply through the implementation of the SaaS model in general (Levak 2009). On a smaller scale, getting back to your roots of entrepreneurship, The Wakeman Agency, a public relations firm, has also had amazing results with SaaS. Vanessa Wakeman, owner of the firm stated, “It requires a few thousand dollars per person to set up an office, as opposed to $10 with InfoStreet (her platform of choice).” She said that she invests approximately $2000 a year for her service and her business is booming (Donaldson 2009).

You can see that there is a history of success with SaaS. There is no reason for Big Ten Brew to miss out on the spoils. Not only will you save money, get exactly what you want, and gain flexibility, but your service will grow along with your business to meet your ever-changing needs. As you continue your expansion with the Ann Arbor plant, consider this simple fact. With Software as a Service, you can log on from any computer, anywhere in the world (“The Future…” 2007). That includes Columbus, Evanston, Urbana-Chapaign, Minneapolis, Bloomington, Iowa City, Madison, West Lafayette, and East Lansing. Think big and don’t limit yourself. Big Ten Brew has a bright future and we hope that our analysis and recommendations will be beneficial to your ongoing success.

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