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The Trade-Offs of Traditional On-Premise Technology Products
For years, organizations have relied on traditional, on-premise IT products to help them automate their work processes and improve their productivity. Many companies have grown accustomed to evaluating various product alternatives to meet their needs. They've become adept at implementing, maintaining and managing these technologies to ensure they are getting the optimal value from their investment. These companies prefer the control that comes with owning and operating their own IT equipment, as well as the opportunity to customize their hardware and software to meet their specific business needs.
However, the essential networking technologies needed for communicating with dispersed workforces, customers and partners have become increasingly complex and costly. Implementing remote access, voice and web conferencing, and activity tracking systems can require integrating and managing a combination of expensive hardware and software products and services.
Deploying and maintaining on-premise hardware and software can also create challenges for many companies. It requires a significant upfront capital investment, substantial inhouse staff skills and a close working relationship with a variety of technology suppliers and service providers. It can also mean making additional investments in redundant systems, technical training and vendor support services.
As a result, IT often becomes a distraction for many companies with straightforward technology requirements, who would prefer to focus on achieving corporate objectives. For these companies, a new generation of on-demand solutions is available.
The Advantages of On-Demand Solutions
THINKstrategies has found a growing number of companies would prefer not to deal with the capital costs and ongoing hassles of owning and operating their own hardware and software to support relatively straightforward business functions. Rather than perform these functions themselves, they are contracting with specialized service providers who can do them more effectively at a lower cost. This allows the company to focus on its core business. THINKstrategies refers to this sourcing strategy as 'out-tasking.'
The most obvious example of this approach is payroll services from providers such as ADP. Rather than buy the hardware and software, and dedicating the staff to handle this routine business task, most companies are very comfortable contracting with a specialized service provider, like ADP, to satisfy their needs.
Many service providers are offering a new generation of 'on-demand,' or Software-as-a- Service (SaaS) solutions to meet companies' business and IT requirements. These turn-key solutions can be acquired on an as-needed basis for a subscription fee based on the number of users or service level required. The service provider makes the capital investments, handles the technology management issues and supplies the technical support necessary to meet its customers' needs.
These on-demand, SaaS solutions are often more reliable and cost-effective than hardware and software that companies purchase and manage themselves. AMR Research has found that it often takes companies twice as long and costs them twice as much to deploy technology as they originally expected. Ongoing maintenance and support costs can also exceed ten times the original purchase cost. AMR Research has also found that many companies only utilize a fraction of their hardware and software capacity because they misjudge their requirements or poorly configure their systems. As a result, companies generate less of a return on investment (ROI) from their IT than they planned and must withstand a higher total cost of ownership (TCO).
Compounding these challenges is an ever-increasing number of security threats. Computer hackers and Internet viruses can disrupt business operations and usurp sensitive corporate data. This is leading a growing number of companies to recognize they don't have the inhouse skills to contend with these security challenges.
Because of these challenges, many research reports have found that most companies' inhouse IT staff will spend 80-90% of their time just trying to keep their hardware and software up and running. This leaves little time for the IT staff to support the strategic needs of the company or help the company innovate.
Just as an assortment of consumer-oriented web-based services-like online banking and on-demand entertainment services-have made our personal lives easier, new SaaS solutions are enabling business users to better communicate, coordinate and collaborate internally and externally to achieve their corporate objectives.
The beauty of on-demand, SaaS solutions is that businesses don't have to buy, install and maintain complex hardware and software products to take advantage of the latest communications and collaboration technology.
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