In the past, upgrading your technological infrastructure required a lot of up-front capital, reducing the spending power of new or growing businesses. With SaaS, however, C-suite executives now have a new option: shifting these upfront costs (CapEx) to monthly operating costs (OpEx) through SaaS. This new approach has changed how CFOs can approach technological expenditures in ways that can open up new options for your business.
The ultimate goal for any CFO is to maximize the ROI on every euro spent. When it comes to investing into technological infrastructure, this requires a careful balancing act of making sure that you have exactly what your business needs, not only now, but also several years into the future. Unfortunately, it can be quite challenging to predict the future needs of your business when technology and business models are evolving so quickly — and mistakes in these calculations can be quite costly. Under the current CapEx investment model, these decisions take a lot of time, research, and layers of approval because of how permanent internal infrastructure investments can be. No one wants to find out that the infrastructure that was supposed to last you five years has become effectively irrelevant after only two or three.
This is why SaaS solutions have started to become very appealing to CFOs around the world. With SaaS, your investment doesn’t have to be made entirely upfront, which can relieve some of the pressure on your cashflow. This freed-up capital can be utilized in other areas, perhaps delivering an even better ROI than if just sunk into up-front infrastructure investment. Also, depending on what country you’re doing business in, there may even be some tax advantages to having your technological expenditure as an ongoing operating cost as opposed to the one-time potential write-off that comes with the CapEx approach.
But where the pay-as-you-go OpEx model really shines is the incredible level of flexibility that it can provide. It takes a lot of the pressure off needing to predict market conditions several years down the road. With most SaaS products, you can simply scale your technical infrastructure needs as simply as changing your company’s phone plan. This allows you to try out new solutions, even if you may need to change them at a later date. You’ll also see advantages if your business has predictable seasonal spikes — you can just scale up your usage when you need it instead of investing in a system which can (unnecessarily) handle peak volumes all year long. This gives CFOs unparalleled flexibility in utilizing his or her resources in the most effective way.
By using SaaS products, CFOs can outsource a lot of the technological knowledge usually contained in their internal IT team or CIO. This allows CFOs to be able to make decisions more confidently regarding how vital resources will be allocated, because a lot of the potential risks and maintenance costs will fall under the responsibility of third-party vendors. However, in some situations, CFOs should be careful not to encroach too far into the CIO’s turf. He or she will typically have a pretty vast amount of knowledge on the what technological solutions are needed and available on the market — so even though SaaS can empower CFOs more than ever before, it’s still important to make sure your technical experts have a chance to evaluate the claims made by your SaaS vendors to ensure they aren’t overselling their value to your company.
As with anything else, there is a possibility of too much of a good thing. This can apply to SaaS as well. As anyone responsible for a budget knows, you have to keep a close eye on monthly expenses to make sure that the overall value of the service is appropriate for the aggregate cost. It is possible for a company to go overboard in leasing software from multiple vendors, with costs slowly spiraling out of control. This is colloquially known as “SaaS Sprawl.”
You can avoid SaaS Sprawl, and get the most out of your investment, by following a few simple rules. First, it’s important to make sure your accountants categorize monthly SaaS subscription payments as a technology expense — this way you’ll have a clear assessment of costs. Second, It’s also helpful to designate a specific administrator to train your team and set up internal processes for using the SaaS. Some vendors have good training materials already created. For some others, your managers may need to do the training themselves. Lastly, it’s helpful to finetune your internal processes first, and then find the right SaaS solutions that perfectly integrates into your business operations — going in the other direction may lead to problems down the road.
In summary, SaaS opens up a lot of new options for the modern CFO to consider. They may not be right for every company, but it does seem that the SaaS business model appears to be the future of business technology. It’s definitely something worth considering the next time your company is considering investing into your tech infrastructure.