A Guide to Pricing, Terms & Savings (Part 1)

Spend Matters is pleased to continue this ongoing series of posts with partner NPI Financial on a range of topical procurement and spend management/supply chain issues.

There is no shortage of information when it comes to SaaS. For years, its praises have been sung and its critics have spoken. But, there is one aspect of SaaS that has yet to be fully understood -- the costing and contracting pitfalls that often impedes, even negates, the benefits that SaaS delivers.

Software as a Service (SaaS) is a software delivery model where functionality is delivered remotely to the user through a subscription-based pay-per-user, pay-per-usage or pay-per-use model. The buyer does not take ownership of the software. Rather, it is owned, delivered and managed remotely by the vendor/software provider.

The benefits of SaaS have long attracted corporate IT and executives. First and foremost, SaaS enables companies to keep up with the rapid pace of software's technological advancements in a cost-effective way. The speed of deployment and time to market for SaaS solutions are substantially faster than the traditional software model, giving both the vendor and customers a technological and market advantage. On the client side, there is no need to go through a cumbersome software upgrade every time a new feature is added, or a new patch installation each time a specific vulnerability is uncovered, as the vendor maintains the software off-premise. Additionally, because the software is not stored or maintained in-house, SaaS requires fewer IT resources for support.

On the surface, SaaS sounds perfect ... and, for many companies, the decision is a no-brainer. For others, the value of SaaS is harder to determine. However, the decision to use a SaaS application and the vendor selection process involves more than just evaluating benefits. Most companies are unaware of the precautions they should take as they select and contract with SaaS vendors. This series of posts aims to arm companies with the insight that will help them understand long-term cost and benefit comparisons between SaaS and traditional software delivery models, as well as insight that will navigate buyers around costing and contract pitfalls.

Stay tuned for the next post in this series from NPI Financial, where we'll discuss an inside look of SaaS versus traditional software model pricing, contracts and delivery.

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