Custom Application Versus SaaS
By Eric Middleton, 1Rivet
The lure of quick deployment coupled with promises of thoughtful business process automation and continual upgrades based on user needs make SaaS application appealing. So, it’s no surprise that corporate leaders want to bite when SaaS applications are pitched as quick, complete solutions to business challenges.
But in reality, you’re rarely going to be 100 percent on a SaaS unless your business model truly fits the solution. And the chances that you’ll use 100 percent of the features, or that the system will 100 percent match your company’s needs? Probably close to, but not zero.
Walking leadership through the options — custom app versus SaaS versus combination of the two — can help them make the right choice for today and the future.
How Unique Is Your Business?
Most SaaS applications tackle a single business problem or a set of problems within a function. For example, a human resources information system handles tasks common to most companies: payroll, record storage, ranking/rating, writing job descriptions, posting jobs, etc. Full HR systems, like Workday and others, do pretty much everything an HR division could want, but there always seems to be one process or small application that must live outside of the solution.
Sometimes, those processes arise from industry specialization. A large utility company that sends employees to help other utilities after storms, or a healthcare company that hires traveling nurses from other countries, might need to customize the standard HR system to make it capable of handling more complex HR issues.
To customize an app, you have two choices: Make changes within the app or do the tasks outside the system and pass the data back and forth to stay within the parameters of the application.
The choice is yours, but either way, customization has not only an up-front cost but continued costs. You can’t just take the next upgrade and apply it. The adaptations you made will have to be properly tested as part of the upgrade. Be sure to include those costs when calculating the cost of a custom app versus SaaS. The question always comes down to how much you can configure the SaaS application and how much your business is willing to change its business processes to match the solution.
How Business Process Plays Out In Custom Apps
Current business processes are another important consideration when evaluating how well a SaaS application suits your needs. Will users be willing to change their business processes to match the way the application is set up?
Are there industry regulations to consider because they require your employees to perform a task or transaction in a particular way? People sometimes want to create unique business practices and a SaaS application may, or may not, give them the ability to do that.
Sometimes your business processes put you ahead of your competition. A simplistic example of this is Lyft versus Uber. Both ride-sharing applications hire and manage drivers and collect fares from passengers. Lyft grew in popularity once it gave riders the option to tip drivers.
Lyft’s success came about in part because it took basic business processes and tweaked them in a way that appealed to customers and drivers who wanted the system to incorporate tips.
Marketing Differentiators
Suppose you’re selling cookies in a way that’s different from the way the bakery down the street and the way Nabisco sells cookies. A SaaS application will only go so far, while a custom application would allow you to market your cookies differently than the bakery selling to walk-in customers or Nabisco selling through Amazon and grocery stores.
That’s a simple example, but when you’re looking at an off-the-shelf product, especially an industry-focused product, it’s essential to consider what makes your company different from competitors. Will the SaaS application allow those differentiators to shine through?
In some cases, the differentiators aren’t a factor because the tasks performed by the application are somewhat standard processes, like with HR or Accounting platforms.
In other cases, the differentiators are critical.
When your sales force is in front of customers using the same application as your competitors, clients may view your product or service as a commodity. When everyone is selling the same thing, and you look like everyone else, how do your customers differentiate you from the competition?
Look at all the disrupting companies out there today. I find it hard to believe Uber used a SaaS application to take over the market. Uber might use a SaaS HR application on the backend, but when your disruptive idea affects the end consumer, chances are it requires a custom application.
Consider creating a custom application that runs outside the SaaS application that adds a set of features or functions, which can help you stand out from competitors. Sometimes making yourself look different, perhaps by adding an infographic dashboard to a SaaS app, can make a huge difference in sales.
SaaS Shares Your Great Ideas With Competitors
One of the great promises of SaaS is the ability to upgrade to accommodate change based on input from users. But when you have a competitive advantage or business process update, there’s a point at which you may not want to share that information with your SaaS provider because you don’t want the improvement included in updates going to competitors. Remember your competitors want cool and new functions and features, too, and why not since it is part of the annual fees?
At this point, a custom application or a custom workaround becomes a necessity. You can’t disrupt an industry by letting the whole industry immediately use your great idea.
There are great opportunities with the SaaS model, as long as it fits your business processes and marketing model and you deploy it at the right place within your business. But when your business processes, marketing pitch or industry challenges are unique, a custom application or SaaS model workarounds are often a more efficient answer.
About The Author
Eric Middleton is Managing Partner and CEO of 1Rivet with over 20 years of experience delivering complex systems and business integration programs and in-depth knowledge of program management, marketing and technology consulting experience.