If you're a procurement professional here are some basics for choosing the right model for your company!
Today’s post originally from 2015 is from our SafeSourcing Archives and still relevant today!
If you’re not very imbedded with what’s going on in software development today, you have heard terms like “Software as a Service”, or “Open source” thrown around, but may not know much about what they may mean. And if you are having to make decisions for your company about the kind of software tools you use, you may find yourself needing some basic understanding of the different models for deployment that are available. Many of these models have similar components to them, but may not have the same full structure. As such, it can get a little confusing, but will be important to know the differences so that you know what to look for if for example you don’t need hosted service, but do need support, though not unlimited licenses, etc.
- Software licensing model: A company creates the software, and sells to customers for a one-time fee. It is essentially the customer’s responsibility to manage all aspects of the software as needed, for which all costs are borne by the buyer.
- Outsourcing model: Here you may purchase a software solution for a one-time fee, but also outsource support and development, rather than take on the responsibility in-house. This can be advantageous for cost savings, but brings with it many of the same risks and obstacles the come with doing multinational business.
- Hybrid Model: In this model, the buyer purchases the software upfront, but then the seller is paid regularly for ongoing service. So if a buyer wants to own the software, but doesn’t have the datacenter to host the software, this model may be a good solution.
- SaaS (Software as a Service) Model: A subscription based model, in which a buyer pays for both access to the software, and hosting performed by the seller’s resources. This model has been leapfrogging all other models because it allows segmentation of specialty, where someone with a great idea but no software expertise, can pay those with the technical skills to support businesses that never would be able to get off the ground otherwise. According to Gartner, “The traditional deployment model for on-premises software is expected to significantly shrink from 34 percent today to 18 percent by 2017”[1], and there are more and more options becoming available as SaaS providers continue to multiply.
- Open source model: In this case, the software is free (usually online) for the taking, but often unfinished, and unsupported. Many large and widely deployed products had their start as an open source project; however turning the software into a commercially viable product can still be very expensive to develop.
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[1] “Gartner Survey Reveals That SaaS Deployments Are Now …” 2014. 15 Nov. 2015 <http://www.gartner.com/newsroom/id/2923217>
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