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Whether you call it Software as a Service (SaaS), Managed Service Provider (MSP) or On-Demand Services, your organization uses the service running “in the cloud”. This blog will discuss these services, their benefits, drawbacks and operations. Are we biased? Yes. We believe that some services make sense for most organizations. Email security is one of those. However as Mark Twain said, “All generalizations are false, even this one.” Each Tuesday we will post information and questions about Software as a Service. Occasionally, we will have a "Guest Post" from either a consultant or vendor posting her/his thoughts on Managed Services generally as well as some degree of specificity based on her/his unique perspective. We encourage your insights, comments and feedback. Welcome.

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When Is SaaS “Outsourcing”?


This is likely a question that has been put forth quite often: when is Software-as-a-Service, or SaaS, outsourcing? Before we try to answer that question, let’s take a look at the general definitions of both SaaS and outsourcing.

Firstly, what is outsourcing? Well, it’s a contract arrangement — a company contracts out its non-core, non-revenue producing activities to specialists in particular areas. While the activities are contracted out, outsourcing differs from contracting in that outsourcing is a tool. Outsourcing usually involves a strategic restructuring of an organization to bring full focus to the business core competencies.

Outsourcing providers offer two common types of outsourcing: ITO and BPO . ITO is a company’s outsourcing of computer or Internet related work, such as programming or on-premises network administration, to other companies.

SaaS, on the other hand, is software deployment model whose features include a hosted application, providing a service to customers across the Internet. By eliminating the need to install and run the application on the customer’s own systems, SaaS alleviates the financial and organizational burden of software maintenance, ongoing operation, and technical support.

Due to the pressures brought to bear by globalization and competition, the traditional outsourcing business has looked to establishing alliances with SaaS providers, blurring the line between outsourcing and SaaS. That being said, when is SaaS considered outsourcing? In essence, utilizing a SaaS solution can mean that a company is outsourcing entire applications, services, or processes, and can even cherry-pick, mixing and matching processes to meet their needs.

It’s important to keep in mind that, while SaaS can be considered outsourcing, the flexibility and substitutability of SaaS allows for it to offer both horizontal outsourced process solutions as well as vertical outsourced process solutions.

The ease of distribution, the global availability, the level of agility, as well as the inherent flexibility of SaaS makes it a more powerful solution when it comes to aligning business and operational needs. SaaS is more powerful than traditional outsourcing when it comes to providing a strategy for protecting, managing and assuring a company’s network and IT infrastructure — empowering you to exceed your customers’ expectations.

It’s for these reasons that an analyst at Gartner Research, a leading information technology research and advisory firm, states:

We’re finding that many companies are looking to SaaS options to minimize the customization that traditional outsourcing vendors and projects typically require. They’re testing and adopting it in areas that don’t conflict with other core architecture areas.

Gartner isn’t the only analyst firm to note a possible shift from some traditional outsourcing models to a SaaS-enabled “direct sourcing” model.

“Very high productivity server farms can replace at least some human outsourced resources,” said Richard Sykes, chair of the Outsourcing Group at the IT trade association known as Intellect.

While there are parallels between the traditional outsourcing and SaaS markets, SaaS is — and isn’t — necessarily outsourcing. There are many SaaS offerings that may be considered outsourcing but it has not yet replaced traditional outsourcing (or even off-shoring) as offerings such as software programming. It’s likely for this reason that Gartner remains bullish on the short-term prospects for outsourcing. Gartner predicts that global spending on outsourcing will grow to $441 billion this year, up from $408 billion in 2007. What will be interesting to see is if the customer views SaaS as outsourcing, and if a large chunk of that spending goes to implementing SaaS offerings as their outsourcing solution.

Next blog topic: Wrapped Apps Unveils SaaS for the Masses

Posted on : Jul 22 2008
Tags: , ,
Posted under Desktop Apps, Managed Services, On-line backup, Outsourcing, SaaS |

2 People have left comments on this post

Feb 4, 2010 - 09:02:08
inbound call centers said:

Indeed, outsourcing is a growing industry today and we hope that it can have many more services provided.

{ Apr 28, 2018 - 10:04:39 } Gilma Vanclief


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