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SaaS: Big-Company Processes on a Small-Company Budget

02/08/11

By Jack Sinclair

As a new business begins to generate more revenue and hire people, it tends to also start to produce mountains of data. To deal with that mountain of data, it’s helpful to establish solid business processes that are automated and scalable. Software as a service, or SaaS, applications are a great way to help you do this in a secure and cost-effective way. This is also often referred to as “cloud computing” because the information is stored on servers external to the business, as opposed to onsite or in a dedicated data warehouse.

Because building and delivering a SaaS business is relatively inexpensive there are more options than ever for using software to help manage a business. Salesforce.com has certainly shown the way in delivering SaaS, but there are thousands of choices today and in functions that were not accessible to smaller companies even just a few years ago. At Return Path we made the decision almost three years ago to move as much internal software as possible to the cloud. We felt that we could not only save money on servicing software but also be able to use software in a scalable way in many more functions of the organization.

One huge advantage of SaaS is that your business can stay up to date with the latest version of the software without an IT team involved in the install and maintenance of the software. Additionally most of the SaaS vendors play well with each other, enabling you to share data across applications rather than create data silos. This can enable you to create a very powerful network of applications that easily and cost efficiently scale as you grow.

The big tradeoff of using SaaS is control. A third-party is now holding your data and your software destiny. If you become dependent on a piece of software you are hostage to the partner’s prices and service levels. There are generally multiple options for all services, but changing out SaaS vendors, although easier than with installed software, can be difficult and expensive. You need to have a backup plan to be able to make a change if circumstances demand it, but the benefits outweigh the cons.

Below are the areas we are using SaaS applications to help us manage the company. Some of the functions are not inherently better as SaaS but we would need a much bigger and more complex IT department if we tried to service and integrate this many software applications into our company.

CRM: I am huge fan of using SaaS for CRM. We are long-time Salesforce.com users but there are less expensive options. You want to ensure that the choice you make can scale as your business grows and becomes more complex and that the CRM software can play well with other pieces of software. For example, today you may just be selling to one vertical with a direct sales force. But can your CRM handle it if you end up selling via a channel, or in different verticals, or if you want to start using it to manage relationships with partners? The data inside of the CRM is critical to help you make good decisions growing the business and the processes built with your CRM typically impacts most parts of the business. Additionally we use Salesforce.com as a platform for other SaaS vendors as well as helping us consolidate and normalize operating data in the company. For example we have our third party electronic signature and commission applications built into the Salesforce.com platform.

Accounting: There are many benefits of keeping your general ledger software in the cloud. You reduce IT costs by not having to support the software and not having to build backup and disaster recovery solutions for some of your most important data. Additionally you can also get a huge head start on Sarbanes-Oxley compliance if necessary. Because of the sensitive and critical nature of your accounting data, you will want to ensure that any vendor you use is SAS 70 Type II certified, has a great uptime track record, and has a data center solution you have complete confidence in. You want this with any SaaS vendor, but an absolute requirement for your accounting software.

Marketing Email: Many small companies start by installing a local instance of postfix, sendmail or other open source MTA software in order to send email. But email service providers have increasingly started to provide more cloud based services that, although not free like an open source MTA, probably make up for the time configuring and servicing a local instance of a MTA.

Email Filtering and Anti-virus: Email filtering and anti-virus is a critical part of any company’s IT department and using a SaaS vendor can ensure that most recent versions and definitions are being used by your company.

Sales Commission Tracking: If you are using a SaaS solution for your CRM then you probably are going to use SaaS for sales commission tracking. Moving from black-box-like spreadsheets to calculate and communicate commission amounts to software greatly enhances visibility and comprehension for your sales force. And by integrating it with your CRM, much of it becomes automated.

HR Systems: This can include payroll management, performance management, and training. Moving our performance reviews and development plans off of Word documents and onto a SaaS platform has enabled the process to be much more scalable, objective, timely and effective.

Recruiting: If you are hiring 50 or more people in a year, the basic effort to just schedule, manage and communicate to candidates can be overwhelming. Software helps you manage the process and make the best use of people’s time.

Cloud Integration Software: In order to ensure you don’t have data in silos you will want to make sure that the applications talk well to each other. Many of the applications have built in hooks via APIs to enable connections, but not always. This is when you want to look at cloud integration software, and even that can be in the cloud!

In addition to the above areas we also use SaaS applications for our Corporate Social Network our Corporate Wiki, our Marketing Automation, Equity Management, Agile Development Project management, and MS Exchange backup and disaster recovery. Of course, Return Path is a SaaS company ourselves, delivering tools and services via a web-based user interface for certifying email and monitoring reputation and inbox placement metrics.

When you research SaaS vendors you will find typically a clear market leader followed by a handful of challengers. There’s no right answer for which way you should lean. We have gone in both directions; the billion dollar public company and the startup. Either can work provided you do your homework and have a plan B if the vendor raises your rates 50 percent or the startup gets bought and the service is being changed in a way you don’t want. One of the great benefits of SaaS applications is that most implementations are not horribly expensive or time consuming, especially if you are moving from one software solution to another. You should expect some small price increases (5 percent is typical) year over year, but in return you will typically receive continual, real-time improvements in the software.

About the Author: Jack Sinclair is the CFO of email deliverability and security firm Return Path. He writes the Online Entrepreneur with his colleagues Matt Blumberg and George Bilbrey. Together they cover how to approach the business of email marketing, thoughts on the future of email and other digital technologies, and more general articles on company-building in the online industry – all from the perspective of an entrepreneur.

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