by Bob DeHoff
Director, R & D
Every organization today relies on information technology (IT) to accomplish its core mission. The rapid growth of high speed Internet connectivity, the shift to web-based technologies, and strong competition in the cloud computing space are all making IT outsourcing more practical and more economical. Hosting and Software-as-a-Service (SaaS) are common IT outsourcing strategies. They have some common benefits but also have important differences. The purpose of this blog post is to clarify those differences to help you decide which strategy best fits your needs.
IT outsourcing can include the physical infrastructure such as servers and/or the staff who operate and maintain the infrastructure and the software systems that run on it. The degree to which you outsource these aspects falls along a spectrum. The decisions you make about where to go on that spectrum are driven by risk and cost.
At the “no outsourcing” end of the spectrum, you operate and maintain your own physical infrastructure and run the software systems you need on it. Your staff develop and maintain the expertise and knowledge required to do so. An example of this is operating the email server your organization requires on your own servers in your own facility with your own staff.
Hosting falls further along the IT outsourcing spectrum. With hosting, you can outsource the infrastructure and have your staff manage and run the software systems on it. Or, taking it to the fullest extent, you can outsource both the physical infrastructure and the management and operation of the software systems too. For example, you could take the email server you’ve been running yourself and outsource the infrastructure, management, and operation to a hosting specialist.
SaaS falls at the “all outsourced” end of the spectrum. This is beyond a fully hosted solution in that with a SaaS, you are sharing a single “multi-tenant” service with all of the other customers of the service. You gain even more economy over a hosted solution because you are sharing the infrastructure and operational costs with the service’s entire customer base. What you typically trade off to one degree or another is control and customization. For example, with a hosted system you can usually control when a new version will go live. That is not typically the case with a SaaS.
As mentioned above, the decision on where to go on the spectrum is driven by risk and cost. Let’s break that down. Running it yourself means you fully control it and you pay for everything, including maintaining the IT skills and expertise required. The further along the spectrum you move from there, the more potential risk you accept due to being more dependent on others, but the more cost you can save due to infrastructure and operational cost sharing, and leveraging the expertise of organizations that specialize in IT.
Organizations often mix and match IT outsourcing strategies. You could choose to run a custom software system you developed on your own infrastructure, and have someone host your preferred email server in their datacenter, and use SaaS solutions like Microsoft Office Online and Info Tech’s Bid Express service to meet the rest of your needs.
People are often interested in how a tech company itself makes these choices. At Info Tech, even though we are an information technology company, our bias is to use SaaS solutions to run our business. We could run our own human resources system, email system, and so on, but doing so would not deliver more value to our customers. Using SaaS solutions enables us to focus more of our energy on our core mission.