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Email Hosting: The Cost Benefits of Software as a Service

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April 23, 2012

Email Hosting: The Cost Benefits of Software as a Service

By Erin Harrison, Executive Editor, Cloud Computing


Most hosted services reduce operational costs and minimize risk, while eliminating many up-front costs. Whether it be Software-as-a-Service (SaaS (News - Alert)) applications or hosted infrastructures and networks, these on-demand services deliver immediate business benefits and a compelling value proposition, particularly during the global economic uncertainty that has dominated the past few years.


In today’s economic climate, the case for SaaS can be seen among small and medium-sized businesses and enterprises alike, which are looking to achieve a similar goal: cost savings. In addition to the affordability factor, SaaS deployments also save companies time and improve productivity by providing businesses with the best of both worlds – the ability to limit development time and deployment costs while still offering the flexibility to craft a custom solution.

SaaS solutions are grounded on the premise that sharing resources is more cost-effective and yields better results since you essentially lease the software infrastructure instead of having to outright pay for it all. While SaaS is often inexpensive compared to an on-premise solutions, the application is also customizable to fit a business’ needs.

Software as a service is intriguing especially to the SMB sector, which typically has fewer internal IT resources and are limited by small budgets. SaaS solutions are often offered free in 30-day trial periods, allowing companies to get a sampling of the software capabilities before they buy, as opposed to purchasing software and later discovering it won’t be used.

In addition, since SaaS is essentially “renting” software, companies can benefit from this “pay-as-you-go” model that allows them to not only pay incrementally, but to also only pay for what was actually used.

“This represents a cost savings over having to pay upfront for a perpetual software license that may not be utilized right away because of long deployment cycles or slow user adoption,” Small Business Computing recently pointed out in this report.

Internet-hosted software companies, called software-as-a-service providers, have greater initial cash requirements than traditional software firms so they can build up the information-technology infrastructure needed to offer their applications through the Internet and generate cash flow on a periodic basis instead all at once at the purchase, according to Dave Key, owner of Cloud Strategies, a software-as-a-service consulting firm.

“Customers are choosing software-as-a-service because it lowers the total cost of ownership and they can access their data anytime, anywhere,” Key said during a recent industry event.

Technology industry analysts estimate that the software-as-a-service market will grow from about $12 billion in sales last year at a compound annual rate of between 21 percent and 28.5 percent during the next several years, he said.










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