Software as a Service vs. Software as a Product
Which Option Should You Choose?
When looking to acquire new software solutions for your business, one of the most basic decisions is deciding between software as a product and software as a service. The long-established industry standard has been ‘enterprise software’, also known as software as a product. However, in recent years software as a service has seen exponential growth across most industries. In fact, the SaaS market share is projected to grow from $158 billion in 2020 to an incredible $307 billion by 2026, according to Valuates Reports. So, which option is best for you and your business? Join us as we highlight examples of each while weighing their advantages and drawbacks.
Software as a Product (SaaP)
Software as a product functions much like buying any other product. The customer pays a one-time fee and then downloads, installs, and hosts the latest software version on their own servers. Some classic examples of this include Microsoft Office or Adobe Photoshop, which have traditionally been distributed via CD-ROM or downloaded online. You buy it, install it, and it now belongs to you. This means there are no monthly or yearly subscription fees, but the upfront cost to acquire the software is substantially higher as a result. It also means the software will function without an online connection in the event of a network disruption. Ultimately, the owner has full control over the tool’s functionality and can adjust it as needed.
This level of control and independence does not come without its own downsides. When purchasing a software package, you’ll get the latest available version of the software but no future updates. If your business needs features available only on versions of the software released after you bought it, they will need to be purchased separately. The fees associated with upgrading your software packages to the latest version are typically much less expensive than the first-time cost of buying it outright. However, most software is updated frequently as technology and devices advance rapidly. This means the cost of regularly updating your SaaP can add up significantly over the course of years.
As the needs of your business grow and change over time, SaaP tends to have more challenges with scalability than SaaS. Your business will be responsible for planning server capacities, acquiring the new servers, buying the right amount of software packages, as well as installing and configuring each package to the same settings. If your business has multiple separate teams working and collaborating on projects together, keeping all versions uniform across teams can be a challenge.
Benefits of SaaP:
- One time fee to own it.
- Offline functionality.
- Improved security.
- High degree of control means you don’t have to deal with third-party meddling.
Drawbacks of SaaP:
- Keeping software packages up-to-date can become very expensive over time.
- Can cause workflow problems if not everyone is on the same version.
- Hosting and maintaining the software becomes the businesses’ responsibility.
- Less flexibility and scalability than SaaS.
Software as a Service (SaaS)
Software as a service functions as a monthly or yearly subscription-based alternative. Unlike SaaP, software as a service is stored remotely on cloud servers maintained by the software provider themselves. Rather than buying the software outright with a single expensive purchase, the customer instead subscribes to the software on a monthly or yearly basis at a lower cost. The software provider is then responsible for providing data security, server availability, and the agreed upon performance standards. All the customer needs is a stable internet connection in order to access their software service.
A common example of SaaS is Microsoft Office 365. Rather than outright purchasing regular Office for a single computer, subscribing to Office 365 grants access to a large number of productivity apps and collaborative work tools. Subscription plans range from home and personal use to small, medium, and corporate business plans that grant scaling access to a larger number of computers. Office 365 and other SaaS like it include frequent updates, feature additions, bug fixes, security improvements, and robust tech support. Because SaaS is a relative newcomer in the software world compared to SaaP, the ecosystem isn’t quite as developed. Given a few years, it is quite likely SaaP will dominate the market with a vast array of available products.
SaaS options come in a wide variety of shapes and sizes, making them particularly good at scaling and integrating with your business as it grows. All it takes is a bit of planning to make sure your SaaS package integrates well with the technology your business has or plans to acquire. When comparing Saas to the traditional model, there’s no need to buy servers or extra software packages. Instead, your business only needs to enable the new SaaS features which leaves the responsibility of scaling server capacity with the software providers. This gives your business the ability to easily scale your SaaS packages up and down in order to meet the demands of your clients.
Benefits of SaaS:
- Automatic version updates are included in the subscription.
- No need for any extra hardware or servers.
- Completely futureproof.
- Fully scalable with your business operations.
- Seamlessly integrates with existing systems for minimal workflow disruption.
Drawbacks of SaaS:
- Lack of control over versions and features.
- Connectivity requirements.
- Potential data and security risks.
- Limited range of available SaaS applications.
Choosing between SaaS or SaaP for your business is an important and nuanced decision as each option has its own strengths and weaknesses. When trying to determine which is objectively better, it is difficult to outright choose one over the other. Given the way the markets have been trending, there is a very solid chance that SaaS will overtake SaaP as the dominant industry standard. Until then, both options remain competitive and viable. We hope this comparison helps businesses make better-informed decisions when it comes to acquiring new software packages.
At Lithios we value outside opinions. This blog was written by one of our guest bloggers, Jonathan Baker, with feedback from the Lithios team.