In recent years there has been a clear trend of businesses opting for Pay-Per-Use compared to licensing or building their own software. At OfficeClip we started with providing both the options (buy or pay-per-use), and we have noticed that a certain category of businesses opt for buy and others go for pay-per-use. Based on our experience, I would like to share some patterns here.
Buy Software (or install locally)
We have seen that companies that are in the upper scale of small business (for example have 50+ employees), who have some IT staff weigh on buying a web-based software in house and install on their server.
- ROI - Total cost of ownership can vary depending on how much time you want to keep the software. Sometimes the software may not need many upgrades so once purchased they can be used for a long time.
- Limitations - Installable software sometimes does not have limits on the entities that can be created (for example, no limits on number of contacts that can be created in an installed contact manager) or the number of users that can use it.
- Customizability - Installable software is more flexible to integrate with other systems in the organization. This is because the company has the program installed on their machine and does not have to go through the security introduced by the hosting company.
- Backup and Maintenance - Many companies have their own full backup and incremental backup scripts. This allows them to treat all their products in a similar fashion thereby reducing administrative hassles.
- Security - Even though browsers have SSL and hosting providers claim that they have many levels of security, etc., many companies do not feel too comfortable keeping their (or their customer's) information in places where they do not have full control. Remember a few months back Barack Obama's passport information was accessed by some employees of the government. We regularly hear about stolen SS# or credit card numbers from the secured enterprises.
Rent Option (use Hosted Version or SaaS)
Mostly opted by smaller businesses or business that are geographically dispersed or do not have a full IT department.
- No Hassle Setup - Hosted software has gained momentum because it does not need setup and general maintenance. With the use of high speed networks, development of browser technology (like AJAX etc.), browser based software is getting closer in quality and performance to software installed on a user's computer.
- No Initial Investments - Hosted software is generally sold on a per user, per month basis, so the initial investment is low. Also, many hosting providers do not require any contracts so small companies feel more secure.
- Standardized Security - Web applications today offer security features like SSL, password protection, role based access etc. and it is getting better with time.
- Enough Customization - Although the customization features of the hosted software are somewhat less, small businesses most of the time do not need such customization.
This is the final option that many SMEs do not opt for unless they have very specific requirements. Even then there are many factors that lead small business to go this way:
- Cost of Build: Today the cost of building software is much less compared to what it was even a few years ago. This is because many companies provide ready-made business components that can be easily integrated to make a complete solution. Also, many outsourcing outlets like elance, rentacoder etc. provide a marketplace where competent offshore developers are available at a fraction of price compared to the in-house developers or even compared to buying a ready-made solution.
- Control on the feature set - In the build option there are no restrictions on what can be done. In other words it is like a meal prepared with your recipe just for you.
OfficeClip provides a balance between these choices by offering both Buy and Pay-Per-Use Option. It also provides source code so that companies can extend the software themselves.