The SaaS model tends to reduce the upfront costs because they do not demand upfront investments in licenses and infrastructure support as possible acquisitions or expansions to accommodate the new hardware system. Furthermore, SaaS will tend to remain more economical over time, since we observed that the traditional model constantly demands a significant upgrade (from version x to version y) and these upgrades often represent 30% to 40% the initial cost of purchasing software. There are no such upgrade costs in SaaS. Another point that favors the SaaS model is the support cost, since the model on-premise must be added to total costs, costs of the professionals that support the hardware and database.

The question that appears is, “Is really a SaaS system easier and faster to implement than an equivalent system on-premise?” With SaaS, you don’t need to spend time on installation and configuration of components and aggregates, as a new server. But a substantial part of the implementation time of an application system depends on your level of intervention in the processes of the business. At this stage there are no major differences between a SaaS and on-premise.

A another question is how to integrate SaaS with legacy systems, which operate in the mode on-premise. This is an important variable. Hardly a corporation of medium to large size will make a total migration to SaaS for one day to another, and I doubt if even able to make this transformation in the foreseeable future. Therefore, integrating SaaS and on-premise is a fundamental aspect of the SaaS strategy and should be viewed with extreme caution. Integration can be simple, with uploads and downloads to and from the cloud services via batch processing or real-time via Web services. This latter option may generate some performance issues since the transaction will travel over the Internet. But if the SLA permit any variations in performance caused by external and uncontrollable factor (Internet), fine.

In practice, as more and more concrete experiences with SaaS spread, fears tend to decrease and the model will spread more quickly. Moreover, IT managers should not remain oblivious to the entry of SaaS systems in enterprises. The ease with which it engages and operates a system in this model, business executives may be tempted to bypass the IT field and start using SaaS systems directly. But at some point the system will need to integrate SaaS with legacy systems.

2011 is going to get hot enough in terms of SaaS. Professionals and managers should be attuned to this motion. My recommendation to those for which even “the statement did not fall” is to stop being observers and start to lead their adoption in enterprises.