Features
Buy or rent?
Software as a service delivers a cost-effective option, particularly for small and mid-sized organizations.
by Sharma Anupindi and Anand Rajaram
Buy or rent? The question is pervasive in business and beyond. Should a commuter buy or lease a new car? Should an expanding company purchase or lease additional office space? In all cases, the right answer depends on those asking the question and their unique circumstances. The same is true when considering a business intelligence (BI) approach.
Organizations looking to improve decision making have a plethora of BI technologies to choose from but two main options for acquiring them: purchase the technology outright or adopt a software as a service (SaaS) model. To make the correct choice, business and IT executives must thoroughly examine the strengths and weaknesses of the options in relation to their specific needs. A logical, comprehensive evaluation process is essential.
The mission
No matter the approach—buy or rent—the ultimate ideal is universal. Enterprises strive for a system that guarantees a steady state in the information management life cycle in order to meet the high expectations of data consumers by providing timely and secure delivery of relevant, actionable, complete and accurate data to operate and grow the business. This is true regardless of one’s industry, geography or size.
To reach this ideal, BI initiatives traditionally involved the purchase of dedicated hardware for hosting business data, BI software and other associated infrastructure components. While this in itself represents a significant investment, the costs of implementation and maintenance can make it prohibitive for small and medium-sized companies. Additionally, dedicated resources are often required to develop, implement and support extract, transform and load (ETL) programs, reports, database administration and tuning, systems maintenance and monitoring, and operational analysis. Appointing a BI manager to oversee these resources, for example, can overburden budgets that are already stretched thin.
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SaaS advantage
SaaS offers a viable alternative, particularly for those organizations constrained by budget limitations, a lack of in-house expertise or a severe time crunch. The SaaS paradigm—rapidly gaining popularity among IT professionals and business users alike—represents a viable alternative to the traditional buy-and-build philosophy. When applied to BI, this paradigm yields value to the business.
By allowing companies to lease an enterprise BI solution instead of purchasing and implementing one, SaaS successfully addresses many enterprise computing needs. Priced on a pay-as-you-use basis, it is already frequently employed to provide collaborative work environments, application services and data storage. Its application to BI is a simple extension of this basic concept.
In a nutshell, SaaS BI is a subscription-based solution model used to deliver data and reports to subscribers. The underlying hardware and software are leased. This frees up capital from IT budgets, which is especially useful for organizations with significant BI needs but insufficient capital to fund them.
The underlying data is still owned by the organization. Typically, a SaaS BI service provider will offer professional services for the integration of data from the various organizational systems; design and implement the data repository structures for reporting; and deliver custom reports, portals or dashboards to users as required.
A SaaS BI solution delivers myriad business benefits, including reduced up-front and ongoing costs, faster implementation, and ongoing system maintenance and management. With SaaS, organizations can:
- Forgo the initial investment to purchase hardware and software tools
- Eliminate the need to recruit, retain and manage large teams for data warehousing, ETL, integration and reports development
- Right-size the solution based on whether reporting needs are departmental or enterprise-wide
- Start with small cash outlays and build on the solution to cover growth in scope and functions
- Add capacity and enhance the solution on demand by paying only for the hardware and software being used
- Often receive enhancements to existing reports and data warehouses as part of the offering from their service provider
- Abstain from hiring, training and retaining the skilled personnel needed for the BI initiative
- Fast-track implementation by skipping the mobilization phase of a project
- Enable users to focus on the core data to manage and grow their business
- Hand over the management and maintenance of the solution to a service provider
- Receive routine maintenance of the databases—archiving, purging, performance management—from a service provider’s certified database administrator
Evaluate the alternatives
While a compelling option, SaaS BI is not a one-size-fits-all solution. Organizations should carefully evaluate all of the factors involved in outsourcing their BI infrastructure and solution delivery before committing to this approach.
The factors fall into two primary categories:
- Affordability of a purchase-and-build solution (See table 1.)
- Complexity of the organizational IT and business ecosystem (See table 2.)
Complexity factors relate to an organization’s ability to partner with a SaaS BI provider effectively and efficiently. Data-related complexity factors, organizational (internal) factors and regulatory (external) factors can affect the overall utility and applicability of a SaaS BI approach. For example, data privacy and protection regulations may restrict an organization from effectively sharing data with a SaaS BI provider. Also, an organization’s corporate culture may resist allowing a third party to be entrusted with corporate information.
Affordability factors relate to an organization’s ability to go the traditional route of “buy, build and operate.” Higher affordability means the organization is inherently prone to this traditional approach and therefore might be better off purchasing a solution in the long run.
Both dimensions—affordability and complexity—must be assessed empirically when considering a SaaS BI solution. (See figure)
Constraints to consider
Like most technology initiatives, SaaS BI has some challenges that must be accepted or overcome. Typical issues include:
- Compromised flexibility. Most SaaS BI service providers cater to the demand for canned or standardized solution sets. Deviations from these can entail additional fees.
- Management overhead. While a project manager or account manager is provided by the SaaS partner, the implementing organization maintains oversight of the initiative. This, ultimately, places a burden on the company’s existing management resources.
- SLA definition and monitoring. Operations
must be carefully and constantly monitored to ensure the solution provides value to the data consumers. Third-party service providers often build in guarantees and penalties for missing defined service level agreements (SLAs). These SLAs must, therefore, be reviewed and adjusted to meet precise needs and demands. - Solution ownership. While the SaaS provider ensures smooth operation, the business still owns the solution and data. Specific roles, such as data stewards, are required to oversee the operations, the data and the process to ensure compliance with company objectives.
- Access to enterprise systems. Service providers will access internal enterprise systems and data content to fulfill their objectives. To address potential concerns, a secure and effective access mechanism with defined and monitored controls is necessary.
Choose wisely
With SaaS BI, organizations restricted by time, scope or expense now have a viable option to cost-effectively deliver BI benefits to business users. The advantages include reduced total cost of ownership and faster time to delivery of enterprise solutions.
But before they get started, IT executives and their business counterparts must consider many criteria—and not just cost—to ensure that SaaS BI is the right-sized, long-term solution for them. Through empirical analysis of the affordability and complexity factors, organizations are best able to determine whether the SaaS model is the right fit. If it is, the ideal adoption method is to start with departmental data marts and grow into large-scale enterprise data warehouses and reporting.
With proper evaluation and implementation, SaaS BI can be an efficient and flexible platform for delivering timely and actionable data to decision makers who need it to operate and grow their business.
Sharma Anupindi is the CTO of Hydus, Inc. He is responsible for the vision, direction and solutions in the company’s technology portfolio.
Anand Rajaram is the director of Delivery Centers at Hydus, Inc. He manages the global delivery organization and is responsible for the complete execution of all engagements from the professional services and product development groups.