Software-as-a-service (SaaS) is touted as a way to bring cost savings to companies, but without a well-thought-out cloud migration roadmap, it could also result in reduced savings due to hidden costs and other complexities, analysts warn.
Saurabh Sharma, senior analyst of IT solutions at Ovum, observed that many enterprises leap toward a SaaS delivery model without first having a specific, well-thought cloud strategy in place.
"Embracing SaaS without understanding the attached [consequences] definitely increases the risk of creating a sinkhole, be it [in terms of] efficient utilization of operational budgets or governance," he said.
So while the SaaS model has the potential to deliver cost savings and benefits such as greater IT agility and flexibility, the migration roadmap must be well-planned to take care of issues such as integration and expected savings, the Ovum analyst said.
Sharma added that on average, SaaS applications provide total cost of ownership (TCO) savings over three to five years before "diminishing" in the following years. Companies should thus plan their cloud spend based on this timeframe, he said.
Yanna Dharmasthira, research director at Gartner, added that companies need to conduct a proper TCO analysis to avoid potential cost overruns and suggested a five-year model is typically appropriate.
She also called on them to do proper evaluations and assessments to understand the organizations' needs, which is necessary to negotiate for specific service level agreements (SLAs) and have clauses tailored to meet these needs.
The analysts highlighted 5 key issues regarding SaaS implementation that may potentially cause migrating to cloud services appear more of a hassle than what it promised to be.
When integration between the cloud software and other systems becomes too complex, companies would require extra processes or additional customization to the program in order to facilitate the deployment, noted Dharmasthira.
This is an area that IT leaders generally overlook and do no provision for when considering for the integration of SaaS and on-premise applications, Sharma added. The lack of an integration plan is often one of the biggest reasons for time and cost overruns.
"This oversight leads to disappointment and one is forced to believe that the shift to SaaS was not the correct decision. Most SaaS apps are sold on the promise that their integration with on-premise and other SaaS apps will be easy, but organizations find out such projects often turn into complex messy affairs," the Ovum analyst said.
2. Vendor lock-in
Sharma also reminded companies that service degradation is a "truth of life" and they will inevitably look for other services in the market when standards of the existing software begin to fall. However, given the amount of time and money put in to integrate the program initially, switching vendors might pose a challenge for these companies, he said.
At the same time, not all cloud apps are interoperable and this is another point of risk for vendor lock-in, he added.
3. Limited flexibility, customization
Organizations that are dynamic and fast-growing would also come to recognize limitations in terms of customization, and hence flexibility, of cloud-based software, Dharmasthira pointed out. This is because the new functionalities and processes customers need cannot be accommodated quickly enough by SaaS vendors.
Most SaaS products are mostly for general purpose use and might not be comprehensive enough for complex business operations compared with on-premise software too, she said. An example of this would the integration and automation of business processes involving several business units or departments, the analyst elaborated.
4. Hidden costs
There are hidden costs that companies fail to consider too, Sharma said. For example, they might not be aware of the premium charges associated with having additional computing resources to support greater loads during peak times.
They also do not consider the substitution costs related with the add-on coding to ensure on-premise apps are compatible for the cloud environment and there is proper interaction between cloud and on-premise software, the Ovum analyst stated.
5. Network instability
Dharmasthira identified latency issues as another issue that often hampers SaaS deployments, and isolating the root of the network problem is challenging given most companies' complex and multiple endpoint environment.