Hype around the SaaS operating model has been intensifying spectacularly in the last 15 years. The then revolutionary approach, first taken on a global scale by Salesforce[1], has grown at double digit rates between 2015 and 2019[2]. The referenced whitepaper from Cisco further states that by 2020, 74% of application workloads will be SaaS-based.
It seems so, that SaaS cannot and should not be omitted by firms, and in particular by financial institutions who are heavily reliant on cutting edge, cost effective and secure information technology solutions. And consequently, technology vendors shall not postpone investments in converting their offerings to SaaS (and other XaaS frameworks) either, unless they want to find themselves out of business in the short to medium run.
Before diving deep into the SaaS realms, let us unravel a little bit, this XaaS and other similar, sometimes perplexing concepts. Anyting as a service (XaaS) is an umbrella term for all service delivery models out there, other than the good old on-premise implementation. A great illustration for bringing the general idea from the IT clouds down to Earth is the widespread Pizza as a service infographics[3];
From left to right, the delivery models require lesser technical involvement from the client organization using the software in terms of i.e. hardware, operating system, application scaling, and the business functions. At the pinnacle of the XaaS range, stands the Software as a Service (SaaS) model where the client organization has no other duty but to simply login to the application, do the configuration and start using it.
Google Mail is an easily accessible example of a B2C SaaS application, where configuration merely spans from creating an e-mail address to optionally setting up a mailbox folder structure and a cover photo, after which the user is all set to go. However, SaaS applicability does not stop there. Major B2B systems can be, and are increasingly implemented this way. For example JIRA, an internal ticketing system widely used by software development companies, powered by Atlassian. Robust, multi-functional systems may require a little more configuration effort as well as continuous data imports to extract the highest possible value added.
Speaking of value added, here stand some of the most important benefits of the SaaS business model over the traditional on-premise implementation approach.
- Security: The majority of SaaS setups are known for their so called enterprise-level security, which is a more comprehensive approach to security than what most of the on-premise implementations have on offer. Cloud providers have rigorous disaster recovery protocols in place, therefore running a SaaS architecture in cloud, yields best-in-class protection against system failures.
- Up-front cost savings: The potential savings for the client organization are compelling compared to a full-scale on-premise implementation.
First, there is no need to purchase and maintain the hardware infrastructure associated with running the system, including the necessary manpower. Secondly, there is no need to undertake a notable capital expenditure (implementation fee, internal resources used etc.) up-front, before even the first keystroke is done in the system. Thirdly, should the client organization decide to opt out from using the solution, it can easily cancel the subscription without further do.
- Version updates: Version changes are automatic and virtually unnoticeable by the client organization. Several tasks associated with updates under the on-premise regime are made superfluous, i.e.: deployment & installation and lengthy UAT testing, to mention the most commonplace activities only.
- Accessibility and availability: The SaaS model is undoubtedly among the few, truly major paradigm shifts in the history of IT since the Millennium. It is a relatively new phenomena, utilizing the latest technology that responds to even the highest expectations of client organizations. Consequently, the vast majority of vendors offer platform-agnostic solutions, which are capable of empowering the omni-channel customer service models of today’s leading financial institutions. Accessible 24/7 from everywhere, on any device. Provided, that the internet connection is uninterrupted.
- Scalability and flexible payment schemes: A slogan for the SaaS model could be: “Start small and upgrade your suite as you grow”. An easily scalable ecosystem offers all the flexibility client organizations need in terms of functions used, number of users & end clients served, runtime, etc. Even the size of the database serving the application plus the number of queries used to access it, may be operated on a pay-as-you-go basis. The lead times between subscribing to a new module and being granted the access rights can be virtually zero, making it a truly seamless experience for client organizations as a whole and end users alike.
Despite the many proven benefits, according to Dorsum’s experience, a number of client organizations still have a deep aversion against the XaaS models, regardless of whether the application server and underlying database are located on in-house physical servers of the vendor, or in the cloud. This, on one hand, represents a strong familiarity bias against the unknown, and in support of the old technology. On the other hand there is a valid fear; as long as there is no accurate and clear jurisdictional guidelines and practices in place, financial institutions are running a high potential legal risk.
The EU is well aware of this ambiguity, therefore they have reassured the market with a May, 2019 update on their cloud strategy[4], where it is stated: “The European Commission has promoted Cloud Computing towards companies and public administrations alike since the adoption of the first European Cloud Computing Strategy in 2012”. The EC puts forward several corporate governance and security management considerations regarding cloud computing, especially in the areas of; IT security, the free-competition among public cloud providers, the energy efficiency of cloud-based solutions, and promoting the hybrid (public and private) cloud approach within the Community.
Member States are required to set up their own laws governing cloud solution implementations, in alignment with the corresponding EU-level directives.
As local governmental level and EU-level authorities finalize the rules governing the playing field for cloud providers, financial institutions and end users, we can be sure that all rational excuses against the XaaS operating models will be diminished. From then on, this question will boil down to merely whether decision makers are willing to undergo a much needed mindset-change or will try to hold on to the technology of the past. A brave new world is on the verge, completely reshaping the IT services industry from East to West, from SMEs to large multinationals.
A high-level quantitative sneak-peak into the near future of the public cloud-based XaaS industry, provided by Gartner[5];
Based on the above projections, the public cloud-based XaaS industry as a whole will have grown at a rate of 13% annually, from USD 182 to 331 billion between 2018 and 2022. SaaS carves out the largest stake from the pie (44% on average) but is suspected to grow “just” at 12% compared to IaaS, where a confident 20% annual revenue increment is expected.
The global software industry is expected to grow at a stable rate of close to 3%[6], meaning that the cloud-based operating models have an increasing penetration, growing five times faster than the broad market, eating into the revenue generated by traditional service delivery models.
The opportunities offered by XaaS and in particular by SaaS, are clearly more than convincing both for client organizations and technology vendors. There is just one question still remaining: are you ready for embarking on your SaaS expedition?
Because we are! At Dorsum we are building something big. Being one of the leading investment software providers in the CEE region, we are dedicated to always be at the forefront of innovation. Our next leap forward is moving Dorsum’s award-winning wealth management ecosystem to the SaaS operating model. We strongly believe that our solutions will empower small-to-medium investment management firms, insurance companies and even challenger banks to take the next step in their wealth management digitalization journey.
For further information on our current solution line-up, check out the Products & Solutions.
