Difference Between Product And Product As a Service – Advantages Will Surprise You

Have you ever been caught in a pickle with products developed by IT service providers or felt let down and helpless with service teams at least a day away? We sure have. Businesses often face problems with products developed by IT service providers. These problems can result in downtime or significant loss of business to these companies.

However, there is still hope! Many enterprise-grade providers now offer a solution to these problems by offering Software as a Service or Products as a Service. With their requirements being as little configuration information and a web browser, these cloud-based, low-to-medium cost solutions can help you get up and running in seconds.

See also: 

• SaaS Examples
• SaaS Product Ideas
• SaaS Business Model

Read on to learn more about Products as a Service or Software as a Service and how these solutions can help you achieve your business goals.

So are you ready, pumped up and excited to read this article full of information and golden nuggets?  Here we go!

The IT industry today is going through a revolution. A revolution that has begun to disrupt the traditional billing model of most IT companies and has taken the forefront when it comes to IT-enabled solutions – the Service model.

What are the problems which every business/enterprise faces while getting the product done from IT service providers?

Traditionally, IT companies would ideate and create a niche product that they would offer to their customers. These products were usually offered as a perpetual license, with an option to upgrade to newer versions as they were released. Enterprise products also include product maintenance plans that would offer customer service and a free upgrade to the next version during the calendar year. Proprietary file formats, prohibitive licensing costs and problems porting to a new vendor kept customers hanging on to the same service providers for years, and sometimes even decades to ensure that their overall cost of ownership was lowered to ensure the viability of using the product.

The good part for customers was that they were used to the services of the provider and that the product was licensed to them perpetually, ensuring that even if they did not upgrade, they could still use the product as long as it was supported on the hardware they owned. The downside of this approach was major.

As operating systems and underlying platforms were enhanced, improving employee productivity and of the company as a whole, sticking to an older version of a software proved to be problematic as this software would either not run or install, or have a magnitude of problems on newer machines and operating systems due to compatibility issues. This would impose a high procurement cost on the customer as they would have to upgrade to the latest version of the software that supported the new architecture, or move to a different provider altogether, which would mean repeating the same cycle. Purchasing maintenance plans were also not a cost-effective solution as they failed to deliver value to the end user.

So what is the solution to these problems and how it is benefiting the small businesses and enterprises?

An intermediary solution to this problem was to offer the customer the product as a subscription, also considered as a Product as a Service. This ensured that the customer would be able to use the software for a fixed monthly fee, but always had access to the latest version at all times, as long as they paid the subscription fee and downloaded and installed the newest version available. This posed a high IT overhead for companies that were using software that needed to be physically installed, costing many man-hours of work for the uninstallation and reinstallation of this software.

Another major problem faced by smaller companies was integration. Many enterprise-grade software solutions had complex requirements that ranged from high-end servers to complex database systems that required a dedicated IT and Database administration team to manage, creating an overhead that cost a lot. Multiple instances of these had similar requirements, causing costs to spiral. Smaller companies that could not afford such solutions were forced to either run their processes manually or to outsource them to a service provider, giving rise to the large outsourcing market, but at the cost of making their data available to a third-party.

The solution, however, lay in the reduction of bandwidth costs and the availability of the internet to nearly every user, along with modern hand-held devices that rival entry-level computers in processing power. The advent of service-based platforms and solutions have opened up new avenues for smaller and medium-sized companies alike. Software-as-a-service(SaaS) or products-as-a-service have opened up doors to solutions that were originally considered high-cost and high-maintenance.

From Enterprise Resource Planning (ERP) solutions to Support systems, ticketing systems, and Productivity Suites, nearly every software today has a cloud-based offering.

The SaaS market has seen exponential growth year upon year. With a CAGR of close to 19% and a huge untapped potential, the SaaS or the product as a service market is set to dominate the technology services arena.

Difference between On-premise product/software and Software as a Service:

What are the advantages of a Software as a Service (SaaS) or a Product as a Service?

Offering a product as a service has many key advantages!

Scalability:

• Companies grow over time, even if they start small. These companies are now able to pay a fixed monthly or annual licensing fee for the services that they use, and not the extras that come with it, reducing upfront costs further.
• With the ability to buy licenses as they grow with no additional costs except the per-user or per-instance monthly fee, it is a no-brainer for startups and companies with dynamic team sizes.
• This, of course, has the added advantage of not requiring increasing hardware and dedicated teams to manage the system, reducing overheads that cost over and above the cost of the software.

Upgrades:

• Upgrading software that requires high availability can be a pain. A product-as-a service offering mitigates any issues related to upgrading versions by simply offering a new version of the software that is hosted.
• As there is no downtime and the responsibility to maintain, upgrade and scale the system lies with the provider, all users need to do is access the software using a web browser or a mobile app, reducing the software’s footprint and enhancing availability.

Security:

• Most products offered as a service today are secured using the highest standards available, with no compromise.
• A hosted solution also has the benefit of the data center managing the systems and their security, acting as a huge benefit to the end user.

What are the advantages of a standalone Software?

A standalone product that is installed at a customer’s premise is not all bad news. Not everything is for everyone. Customers with complex requirements and security or regulatory limitations need software that is installed on-premise. These needs cannot be fulfilled by SaaS offerings as of now unless offered by a specialized software vendor.

Some organizations also require software to run in an intranet, with users not having access to the internet. For such organizations, it is impossible to use a product as a service.

For who the standalone Product and Product as a service is a better solution?

Not everyone can benefit from all types of software. Although the Product as a service market has disrupted the traditional software arena, there is still a niche market that deals with organizations that have extremely complex requirements that cannot be fulfilled by mass-market hosted solutions. For those customers, having a customized product is the only solution. For the rest, with requirements that require some amount of customization but with no specific regulatory limitations, a Product as a service is probably the best thing since sliced bread. With nearly zero setup cost, a very low monthly fee, products as a service are the way to go for most organizations, regardless of size.