June 2010 | How-To | Ten Tips

Choosing Between Hosted And On-Demand Technology

Tags: Software-as-a-Service (SaaS)

Software-as-a-service (SaaS), otherwise known as on-demand, is becoming increasingly popular among logistics professionals. For some companies, however, a hosted managed service may still be a viable solution. Learn to differentiate between the two and determine which is right for your business with these tips from Sterling Commerce's Peter Wharton, manager, applications product marketing.

1. Understand the difference. An on-demand solution allows many users to share a single instance or copy of the software, resulting in lower subscription costs. A hosted service requires one software instance for each user, but the user typically owns it, which reduces long-term costs.

2. Check out your in-house IT situation. Both on-demand and hosted solutions appeal to companies that lack the IT resources to implement and support the solution. Leveraging the software vendor's expertise and/or infrastructure removes the need to invest in people and technology.

3. Decide if you want a low upfront investment. On-demand appeals to companies that require a faster time to value. Configuring instead of customizing software cuts implementation time, often making companies rethink their processes and adopt industry best practices.

4. Evaluate the level of control you need. A hosted solution provides more control over when upgrades and fixes are applied. For companies that require control due to corporate constraints regarding data security and availability, a hosted solution would be the best option.

5. Consider flexibility. Your company's business requirements can change rapidly due to market conditions or corporate strategies around acquisitions. Look for a vendor that offers deployment, consumption, and payment options.

6. Select a vendor with a variety of customers. A large, established customer community indicates a vendor who provides a strong solution with good service, backed by the required expertise. On-demand solutions offer the additional benefit of leveraging benchmarks on performance across the whole customer network.

7. Check out your 3PL's solution—but be wary. If you are outsourcing your business to a third-party logistics provider, consider using your partner's solution, but ensure the benefits apply to both parties. Implementing your own hosted solution provides the independence and opportunity to select the best solution for your needs.

8. Insist on a service-level agreement with your contract. Before outsourcing your mission-critical solutions, assess the risk to your business if the on-demand solution becomes unavailable. As you negotiate your contract, insist on a service-level agreement that provides commitments for availability, reliability, response time, security, and disaster recovery.

9. Factor in the complexity of integration. When companies choose on-demand solutions, they often overlook the complexities of integration. Look for a solution with strong integration capabilities and a vendor with expertise in managing integration into your ERP systems.

10. Have an exit strategy. At some point the relationship will come to an end. Before you sign the contract for a SaaS solution, establish an exit plan. Ensure that your selected vendor can export your data and offer migration services at agreed rates.