Programs that use your web browser as the primary interface have been with us for years, but only recently have these apps begun to flourish and become genuine alternatives to mainstream small business and enterprise software. In this article, I’m not going to delve into the nitty-gritty of why or how this has happened, but rather focus on why it is fantastic news for small business owners.

Looking at traditional approaches to business software, the choices were not all that advantageous for small business. Basically, you use a program that you install on a single computer, such as a laptop or desktop computer in your office. Data is only available there, and any sort of software or hardware problem meant costs for IT maintenance, reliance on backups if you were diligent enough to maintain them, and potential downtime for your business.

If your business became large enough to afford it, the next step beyond that was to transition (often at great expense) to a multi-user client/server model, which used a dedicated server, with redundant storage and automated backups. That alleviated the issues of downtime and sharing data among multiple users, but called for more expensive hardware, software, setup, and maintenance costs. To bring a level of predictability to this scenario, a company would normally sign up for a service contract, where a third-party provider would assist with installation, setup, maintenance, updates, backups, etc. This is an effective, but expensive approach. Moving a significant business to a major enterprise software package could result in up-front costs easily into 5 figures and often six, and that’s not including the obligatory annual licensing and monthly maintenance contracts. Ok for a large enterprise, but a giant leap for a developing small business. Open source is a third option, which I’ll touch on in a future article.

Enter SaaS. Picture the above scenario, with redundant servers and storage, backups, updates, security, backup power, and maintenance, all scaled up to a much larger size and shared among thousands of users. From your end, you simply access through a web browser– any web browser, from home, work or even your mobile phone. No up-front cost for hardware or software, just a flat monthly fee based on your requirements.

Apropos of this website, I like to think of SaaS as “fractional enterprise software”. With the SaaS approach, you are effectively getting highly featured software, and associated support, maintenance, and backups, on a fractional basis.

Certainly there are downsides to SaaS. The greatest of these is that they lack the level of flexibility that accompanies a high-end enterprise product. That said, most offer some level of customization, and for some vertical markets there are niche products specifically tailored to the way those businesses work. A second downside is that packages lack truly high-end features because they are designed for simplicity. That is rapidly changing however; SaaS providers are quickly adding features, and even integrating with each other, making it possible to share data from one provider to another, across functions or even to and from more sophisticated packages. With the cost of adding features amortized among thousands of users, it comes as no surprise how quickly these offerings are developing.

Imagine you operate a company called “Short Cut Lawn Care”, a hypothetical company offering landscaping services. A potential customer, Betty Smith, visits your website, hosted on a service providing hosting for $10/month. They request information via a web form, which feeds the information directly to your Customer Relationship Management SaaS provider, which costs $10/month. Later that month, they receive your company newsletter, sent via an email marketing SaaS package that costs you about $15/month. A few days later, the sales person assigned to them notices that they’ve read the email and clicked on a link back to your web site. They make a phone call to the potential client, and offer them a special, bingo, you have a signup. The sales person then uses a free online booking tool integrated with your website to schedule the appointment. With one click, you transfer the person to your online accounting package ($29/month). Your labourer attends the person’s address, does the work, then records the time directly into your accounting system through his/her iphone. At the end of the month, a few clicks and they’ve received an invoice via email. Another call from the sales person as a follow-up to the service, and they agree to an annual lawn-care contract. Your online scheduling system and accounting packages allow the scheduling, invoicing and accounting to be almost completely automated.

Monthly cost: $64.
Up-front cost: $0.
Maintenance, backup, and IT expenses: $0.

That’s $768/year. You could spend that on an annual license for ONE software package, let alone the associated costs for everything else.

In future articles, I’m going to take an in-depth look at some popular business functions where great SaaS solutions are available.

-Gord.