There are numerous ways that partnering with a service provider can be advantageous for SaaS companies. Companies choose outsourcing over in-house management in order to:
Take advantage of lower costs due to economies of scale
The most obvious reason to choose a service provider is to take advantage of lower costs due to economies of scale. Given the complex technical requirements of web application delivery, in many cases it is simply not financially feasible for a company to invest in building the infrastructure that supports the application. Companies that do have existing infrastructures to leverage may find that, over time, the costs of upgrades and scalability issues make it difficult to continue to justify in-house management.
Enhance ability to focus on strategic objectives
One benefit made possible by outsourcing is the ability to focus more resources on strategic objectives. The problem with web application delivery is that it requires companies to become proficient in operational disciplines that lie outside the core competency of most software providers: networking and connectivity, security, disaster recovery, etc. By freeing themselves from the burden of infrastructure deployment and management, companies delivering software on-demand can focus on developing, marketing, and selling their applications.
Offer better services to end users
Working with a third party can also enable companies to offer better services to their end users. For example, on its own a web application provider might not be able to staff and operate an around-the-clock call center, but through an outsourcing relationship, 24x7 technical support becomes possible. Oftentimes, by leveraging an outsourcing relationship, a more robust level of service can be achieved. Closely related to this is the fact that the service provider’s focus and expertise is generally going to result in a higher quality of service in that particular area (e.g. managed security).
SaaS companies that have already invested in building an infrastructure to support software on-demand may still find it beneficial to work with a service provider as the application grows and becomes more difficult and costly to manage in-house.
Companies like SAP, Adobe and others have taken this route.
Accelerate implementation time
Companies that choose in-house management may find that it takes months to procure equipment, hire and train staff, etc. – which can seriously hamper competitiveness. With a service provider, implementation times can be reduced significantly; depending on technical requirements, a company could be offering its application to end users in as little as 72 hours.
Guarantee application performance and availability
Service providers typically offer SLAs to guarantee performance and availability levels (such as 100% uptime).
Significantly reduce staffing requirements and take advantage of expertise
To successfully deliver applications over the web, companies must hire, train, and manage staff such as systems administrators, network administrators, security experts, technical support, etc. It can be challenging for companies to build the internal redundancy necessary to achieve the availability, performance, and security levels that end users expect on a 24x7x365 basis. Relying on one or more key employees to keep an on-demand application up and running is not a scalable strategy.
Increase flexibility to meet changing business conditions
A company that outsources the management of its SaaS delivery infrastructure will likely be better prepared to handle growth and/or unexpected spikes in usage. Conversely, by avoiding costly investments in infrastructure, companies can be better positioned to deal with adverse business circumstances.
Mitigate the risk of web application delivery
The investment required to build an infrastructure that supports an on-demand application is significant. By working with a service provider, a company can lessen risk and position itself more effectively to capitalize on new business opportunities.
Acquire innovative ideas and access to partner ecosystem
Because service providers work with many other companies, they can often share valuable information and expertise that can help solve challenges, improve applications, and deliver the highest quality service. Service providers can also help connect companies that may have complementary products, thereby facilitating shared business opportunities
Turn capital purchases into expenses
No more spending money on buying and maintaining equipment.
Ensure rapid recoverability in the event of a disaster
It’s essential that companies delivering applications over the web implement a sound disaster recovery strategy to ensure the availability and security of customer data. Data must be backed up regularly and stored offsite; and most importantly, data that has been backed up must be quickly retrievable if there is an outage or loss. This is an area that is particularly well-suited to outsourcing.