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01934 424840
www.vivantioservicedesk.com
What is Software-as-a-Service?
A New Dimension in
Service Desk
Software
Page 2
Evaluating Service Desk Solutions: On-Site and Software-as-a-Service (SaaS)
The purpose of this article is to provide an aid for decision makers evaluating service desk solutions, and specifically
explores how the new Software-as-a-Service (SaaS) model compares to traditional on-site implementations.
ASP is not SaaS
Here at Vivantio we are particularly concerned with evidence from analysts, industry bodies and customers
regarding the misleading way in which some vendors are jumping on the bandwagon and presenting their offerings
as SaaS when in fact they are not. This article attempts to make clear the distinction between SaaS and other models
such as outsourced hosting and ASP.
Vivantio Service Desk is available for both on-site install and as a true SaaS service.
Single tenant vs Multi tenant
The first and most important distinction to make between the two models is that traditional on-site implementations
and ASP solutions are single-tenant whereas SaaS is multi-tenant.
A multi-tenant application has one shared interface and one instance of the application, with data securely
separated for each customer. This enables the vendor to leverage economies of scale by sharing the back-end
infrastructure, reducing support costs and upgrading all customers at once.
A single-tenant application has one implementation per customer. Back-end infrastructure is not entirely shared
amongst customers. Each customer has to be upgraded separately. This is true whether the application is installed on
the customer’s premises or at a data centre such as in an Application Service Provider (ASP) model.
ASP is not SaaS because it involves single-tenant applications and at least some of the back-end infrastructure is
dedicated to individual customers.
Both the Service Desk Institute and analysts at Gartner have warned customers to be wary of vendors branding their
solutions as SaaS when they are not multi-tenant.
Gartner define SaaS as “the delivery of multi-tenant service from a remote location over an internet protocol (IP)
network via a subscription-based outsourcing contract.” They also warn that it is important to note the differences
between SaaS and hosting or application outsourcing, observing that: “Because the SaaS/on-demand market is
‘hot’, many suppliers are rebranding their hosting or application management or application outsourcing
capabilities as SaaS/on-demand.”
The Service Desk Institute also commented in a recent report: “It is very important to define what SaaS is not,
particularly as many legacy vendors with Application Service Provider (ASP) models will try to persuade buyers that
they are offering SaaS products, when they aren't.”
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Comparing the models
Traditional on-site (single-tenant) Software-as-a-Service (multi-tenant)
Large upfront licence costs and annual support costs.
Recurring subscription fee, pay as you go.
Additional cost required to take advantage of major
new versions. Released infrequently.
All upgrades included and provided more frequently.
Bug fixes and updates applied separately to each
customer’s system, usually via periodic patches.
Bug fixes and updates applied to all customers at once
resulting in stable software and lower costs.
Increasing number of users increases the base cost
(e.g. hardware platform and related support)
Increasing number of users does not increase the base
cost (no hardware to maintain)
Licensing costs therefore not aligned directly with
usage.
Licensing costs therefore directly aligned with usage.
Requires hardware deployment, server licences,
backup and networking infrastructure.
Does not require server hardware. Uses existing internet
connection and web browser.
Physical and system security are mainly the
responsibility of the customer.
SaaS vendor provides security, typically at data centre
standard which are difficult to achieve on-site.
Customisation usually requires development input from
the vendor.
Customisation usually performed via API and/or
application configuration. Less input from vendor.
Total Cost of Ownership and Return on Investment
Both TCO and ROI are underpinned by the vendor’s business model, which differs significantly between on-site and
SaaS vendors, creating very different vendor/customer relationships.
A traditional software vendor charges a high upfront cost for the licences and consulting services, and a smaller
annual fee for support. After the initial sale, they won’t get much from the customer. So they rely on customers
upgrading every few years, or becoming dissatisfied with their existing vendor and switching.
Compare this to SaaS vendors. Because the business model is based on ongoing revenue and continual upgrades,
they can gradually introduce changes to their application to maintain compatibility with new platforms. They never
have to “encourage” customers to upgrade every few years. And because there are no inflated upfront costs, high
levels of customer service have to be central to what they do in order to retain customers.
The traditional model benefits from customer churn and relies on high upfront costs. The SaaS model relies on
customer satisfaction and steady subscription fees.
Getting back to our original issues of TCO and ROI, we can see that in the traditional model there are high upfront
licence fees for the customer and every 3 or 4 years they will be forced to purchase an upgrade or replace the
system.
In addition, studies have shown that the cost of the software is typically a small proportion of the total cost of running
and maintaining on-premise systems.
Gartner estimates that more than 75% of the IT budget is spent maintaining and running existing systems and
software infrastructure.
Both Gartner and IDC found that customers spend up to four times the cost of their software licence per ye
and manage their applications.
The chart below indicates what studies typically find when comparing traditional and SaaS implementations.
As the chart shows, the initial outlay is significantly higher for on
over the first few years but whenever on
another jump. By comparison, SaaS costs are smooth over time even when a customer switches from one SaaS
provider to another.
While there is wide variation in the actual figures, the principle seems to hold true and the TCO of on
the same or higher than equivalent SaaS implementations.
These results also indicate that positive return on the investment is re
there is very little upfront outlay.
from customer churn and relies on high upfront costs. The SaaS model relies on
customer satisfaction and steady subscription fees.
Getting back to our original issues of TCO and ROI, we can see that in the traditional model there are high upfront
fees for the customer and every 3 or 4 years they will be forced to purchase an upgrade or replace the
In addition, studies have shown that the cost of the software is typically a small proportion of the total cost of running
Gartner estimates that more than 75% of the IT budget is spent maintaining and running existing systems and
Both Gartner and IDC found that customers spend up to four times the cost of their software licence per ye
The chart below indicates what studies typically find when comparing traditional and SaaS implementations.
As the chart shows, the initial outlay is significantly higher for on-site implementations; SaaS then
over the first few years but whenever on-site systems or the underlying platform get replaced or upgraded there is
another jump. By comparison, SaaS costs are smooth over time even when a customer switches from one SaaS
While there is wide variation in the actual figures, the principle seems to hold true and the TCO of on
the same or higher than equivalent SaaS implementations.
These results also indicate that positive return on the investment is realised more quickly in the SaaS model because
Page 4
from customer churn and relies on high upfront costs. The SaaS model relies on
Getting back to our original issues of TCO and ROI, we can see that in the traditional model there are high upfront
fees for the customer and every 3 or 4 years they will be forced to purchase an upgrade or replace the
In addition, studies have shown that the cost of the software is typically a small proportion of the total cost of running
Gartner estimates that more than 75% of the IT budget is spent maintaining and running existing systems and
Both Gartner and IDC found that customers spend up to four times the cost of their software licence per year to own
The chart below indicates what studies typically find when comparing traditional and SaaS implementations.
site implementations; SaaS then catches up a little
site systems or the underlying platform get replaced or upgraded there is
another jump. By comparison, SaaS costs are smooth over time even when a customer switches from one SaaS
While there is wide variation in the actual figures, the principle seems to hold true and the TCO of on-site systems is
alised more quickly in the SaaS model because
Page 5
Is SaaS Here to Stay?
It is tempting to think that SaaS is just another marketing trick but the evidence clearly indicates otherwise.
The Software and Information Industry Association (SIIA) predicts that 10 million companies will be using SaaS in the
next 3 years.
Gartner have said that the SaaS market will more than double, reaching $14.8 billion in 2012, and 25% of all business
software will be delivered under a SaaS model by 2011.
A recent Gartner survey also found that 9 out of 10 companies will be increasing their use of SaaS in 2009, citing cost
effectiveness and ease of deployment as primary reasons.
IDC expects SaaS growth to rise by more than 40% in 2009.
Vivantio’s own sales figures also make interesting reading. We offer our service desk system for both on-site install and
as a SaaS service, with software costs (not TCO) breaking even over 3 years. We let customers decide which model
suits them best and so far over 80% have chosen the SaaS model, again for reasons of cost and ease of deployment.
Conclusions
Software-as-a-Service is a viable and proven model which has sustainable benefits and there are some tangible
differences which enable decision makers to objectively determine which model is most appropriate in a given
situation.
In the service desk market, legacy vendors are confusing the issue by touting ASP and other models as SaaS.
Customers should be careful to establish whether a vendor is offering a true multi-tenant SaaS solution, or risk missing
out on some of the real benefits of the SaaS model.
Sources
Gartner
www.gartner.com
Service Desk Institute (SDI)
www.sdi-e.com
The Software and Information Industry Association (SIIA)
www.siia.net
IDC
www.idc.com
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:: Vivantio Ltd.
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A New Dimension in
Service Desk Software
