Limitations of Software as a Service (SaaS)Products

In the vastly expanding SaaS market, a little problem becoming an uphill battle isn’t a rarity. While adopting software as a service, challenges are an inevitability as well. 

Software as a Service providers find themselves scratching their heads when varied organisational arrangements make the same feature a disadvantage for some and a blessing for others.
 

The most disrupting implication of SaaS in shaping the future is that it is changing the relationship of a buyer and a seller. 

Are there any risks and limitations associated with the SaaS model for computing, which can put your business in jeopardy? I will look into that in this essay.

If we look into the past, most software was distributed through CD’s and floppies even before that. Once a user bought that CD, it was unlikely to receive software updates. Internet bandwidth wasn’t sufficient for that. New mindset in the past decade and half has been to rent out software on the subscription model so that updates could be rapid, matching the ever progressing needs of the market.

But that is not all, advancement in computing technologies and massive increase in internet bandwidths have propelled us towards relying on computing over the networks. Software are now modular in design and provide custom composition by breaking down features and letting users have their own pick.
 

Variable Cost

When a business requests a service from SaaS provider, the initial cost is not much, but sequential payments adds up to a lot. It’s quite different from traditional licence purchases, where buying software licence or developing it is expensive but the variable cost of sale is negligible. 

Challenging Contract Management in SaaS

When dealing with Software as a Service providers, contracts need to be renewed with extreme care. Technical and legal knowledge is paramount in renewing the contracts in order to not get pinched financially. A user has to be vigilant about current contract expiration dates, so that renewal process could be analysed proactively. To set alerts for renewal is a highly recommended approach suggested by professionals. Some experts recommend setting up alerts for 90 days prior to contract renewals. 

Problematic contract renewal agreements by the providers can put the user in a predicament, whether to abandon the service and start over with a new provider or pay and accept the disagreeable terms. If a user is prepared in advance and lock the renewal terms in advance, it could be avoided.

Less Competition-Expensive Services

In the very niche markets of SaaS, the competition is low and hence the possibility for a couple of firms to capture the whole market in that niche is very high. In this case, costs for acquiring such services will be high. Transaction cost theory by Oliver Williamson has one key suggestion that the higher specificity of tasks would require a firm to do that task, or manufacture that product in-house. Any other task should be outsourced so that higher efficiency could be achieved. In this way, very niche requirements and tasks should be done in-house, otherwise a less competitive market will take advantage of you.
 

Hidden Fees

A hidden fee in the SaaS can be a detestable surprise. Probe your contract agreements extensively to avoid that. A software licence purchased as SaaS might be priced alongside the storage fee, hosting expenses and other surcharges. If the contract duration is long, hidden charges often accumulate to hefty amounts before you take notice of the problem.

Reliability and long term sustainability of SaaS providers

Although cloud computing and software subscriptions are extremely reliable currently, yet the risk associated with reliability of service is quite different from traditional on-premise operations. In the case of the reliability failure in SaaS, ambiguity regarding the severity of the problem is often paralysing for businesses. It might be a routine upgrade or an external attack by a malicious actor, you have to just believe the word of the service provider. Reliability failure in outsourced service can put a sudden halt to the whole business of the user.

Lack of Technical Expertise and Experience

SaaS industry has not completely diffused into the business and society in general and thus, a lack of common knowledge about routine workings of such technologies hasn’t developed yet.

Difficulty to Switch Between Providers

SaaS can create a hostage like situation for a user by creating dependency on the service, and unique way of handling the user data. That makes it difficult for a user to switch from one provider to another. 

A user is locked in, extremely frustrated and overwhelmed to leave.

 Even an online note-taking application can use an obscure file format which is not readable by any other application, in this way, the user is unable to leave without sacrificing their previous work. Although this is not particular to SaaS applications, traditional software tends to follow such practices as well.

Other Limitations

• It’s hard to integrate SaaS products made by different SaaS developers. If you try to build an Information System by the amalgamation of different SaaS products, it will be nothing less than a Frankenstein monster. That is why researchers are recommending to produce SaaS products in bundles so that a firm/user can benefit from the full potential of such technology.

• Customisation Options are often lacking in SaaS products. These are not tailor-made so the option to customise is a feature that users find lacking.

• Sometimes SaaS products help develop other SaaS products, in this way, unrelenting competition in every niche of a technology rises. In theory that should quicken the innovation but often it is missing. Everything is the same with a different user interface and same core service provider underneath.

• SaaS products are the result of the mindset that each customer/user is a unit of volume sold instead of copies of software. Now copies of code/IP is not the idea behind calculating sales, the ownership of the software is somehow eliminated as a concept. Users rent the software instead of owning it, which is less appealing to individuals who would rather own and pay once instead of subscribing. Payments are made once and upfront. When the software is majorly updated, licence needs to be renewed and payments are required again in the traditional licensing but the frequency of payments is benign in comparison to SaaS model.

• IT teams are needed to install, implement and maintain a software or technology in a traditional licensing system, on the other hand, no IT team is needed in the SaaS model. Everything is readymade, a user just has to subscribe to the service and use it. This leads to limited control for Users in system requirement determination.