Adopting SaaS technology for your organisation can have numerous benefits, but taking a mixed-stack approach to SaaS could see organisations not gaining the full benefits of moving away from an own/operate model to a pure consumption approach.
Software as a Service (SaaS) is rapidly displacing on-premise and hosted applications as organisations recognise the profound operational changes the technology is powering. The consumption-based software technology is scalable, secure, and removes a great deal of pressure from in-house IT teams to keep pace with business needs and match them to both technological advances and modern cyber security obligations.
By moving to SaaS companies are released from admin and technical work such as patching and upgrading, and the resource-intensive burden of cyber security, which frees IT resources to focus on internal projects.
This benefit is translating into sizable gains in the total cost of ownership of the software, as well as the hardware and staff resources required to keep it operating.
But even bigger gains are being realised in direct productivity improvements in the business units powered by the changed technology.
The economic benefits of SaaS
According to new research from IBRS and Insight Economics, Australia stands to gain $252 billion in savings over the next decade if major industries were to transition to SaaS. The majority of the benefits come from total cost of operations (TCO) savings.
Organisations can expect 32 per cent TCO savings on average, and a significant increase in labour force productivity, which accounts for a further 54 per cent of the benefit potential, the research outlines.
Whilst the benefits of SaaS are waiting to be unlocked, the research from IBRS and Insight Economics found that there were competing approaches to implementing SaaS technology – a single stack approach and a mixed-stack approach.
The research found a single stack or integrated model for core business systems delivered measurably higher savings while some of the benefits that are powering business process transformation were diluted in a multi-stack approach.
Single stack vs mixed stack: What’s the difference?
The research from IBRS and Insight Economics outlines that a mixed stack approach to SaaS is when organisations procure a variety of different core solutions from different vendors, and then use integration technologies to link them together.
“While most organisations using SaaS will have solutions from multiple vendors and have some degree of integration, the mixed stack approach has no emphasis on adopting larger core solutions that have pre-integrated modules. Instead, every business function is viewed as a separate system that will be integrated. A great deal of ICT focus is on integration,” the report outlined.
The single-stack approach is when an organisation procures a small number of enterprise SaaS solutions, typically all from the same vendor, which provide pre-integrated business functions. The single-stack approach requires far less investment into integration technologies and services.
Why should companies opt for a single stack approach?
Dr Joseph Sweeney, one of the report’s authors who holds a PhD in Education Technology, said that organisations adopted the mixed stack approach for a variety of reasons. These range from different business units wanting their own applications, to the personal preferences of the individuals responsible for procurement. However, the result was often an increasingly more complicated environment, diminished flexibility and increased operating risk.
By moving to SaaS, organisations are seeking simplicity and stability in the applications by moving away from an own/operate model to a consumption-based model. By doing so, the administration and technology burden is relieved, as the SaaS provider is responsible for maintaining the software.
However, in a mixed stack approach, there are numerous SaaS applications being integrated. These integrations and the internal resources required to maintain them are significant and require more resources from the in-house IT team. Therefore, the integration of multiple SaaS products erodes one of the key benefits to organisations from moving away from on-premise.
Furthermore, the integrations create both an on-going cost and a point of fragility. As apps are upgraded, the integrations may need to be modified, or at the very least tested. With natively integrated ERP, this is not the case.
Automation of processes skyrockets in a single-stack model
“During our research, we found that the most benefits were realised when the core systems were unified,” Dr Sweeney explained to TechnologyOne. “When organisations had a holistic view of their SaaS technology, the cost of operations plummeted.
“This came from a significant uptick in productivity, and further savings were found because there was no overlap in licences. The more of your environment that you can pre-integrate, that’s where the biggest gains were realised.”
Furthermore, Dr Sweeney found that in a single-stack SaaS model, the automation of processes, namely small, high volume or repetitive transactions and processes that collectively represent a large cost, was much more efficient and led to savings of seven to 10-fold more than that achieved in multi-stack environments.
This is because of the relative simplicity of building new configurations in integrated core systems, combined with the way the new technologies gave business units more power over the deployment and evolution of the software applications supporting their activities.
Consumption-based SaaS systems are managed at the edge of the system where users are and transactions are occurring, rather than managed centrally by an IT team that is trying to build the capability on behalf of business units.
In a mixed-stack model, when there are multiple apps integrated in the core system, trying to automate these digital processes often requires a larger ICT project to manage the implementation across multiple applications that may be called upon, therefore making process automation slower and more expensive. Some of the advantages of “liberating” systems from central IT management are lost.
For more information on the economic benefits of SaaS, download the research from IBRS and Insight Economics, commissioned by TechnologyOne.