The delivery of software applications as a service (SaaS) is fast becoming the preferred model for nonprofits to manage fundraising, advocacy, communications, marketing, and constituent relationship management. The vision of SaaS is to help nonprofits do things they could not do before, create efficiencies and reduce costs, and drive better results. But why should a nonprofit choose to travel the SaaS route?

What Differentiates SaaS?
If you ask a dozen people, you may get a dozen different definitions of Software as a Service. The fundamentals differentiating SaaS from other software delivery models, however, are consistent. According to Wikipedia, “Software as a Service (SaaS) is a software application delivery model where a software vendor develops a web-native software application and hosts and operates (either independently or through a third-party) the application for use by its customers over the Internet. Customers pay not for owning the software itself but for using it.”

So, the key differentiators are not technologies or protocols, nor for whom the applications or software are intended, but rather where the application code resides, how the applications are deployed and accessed, and the related cost of ownership.

When using a SaaS provider, nonprofits experience change in four areas:

1. A shift in the ownership of the software from the client to the SaaS provider;
2. Transfer of the IT responsibility and accountability for both hardware and professional services from the nonprofit to the provider;
3. Reduced costs through specialization, rapid deployment, economies of scale and access to analytics; and
4. A true partnership with the software provider.

1) Software Ownership and Total Cost of Ownership Improvements
Through traditional licensing agreements, customers purchase the right to use software and, for all practical purposes, license it to use as often and for as long as they need. Most “owners” do not consider the total cost of ownership, however, which includes investments in technical support and required upgrades to stay current, protected, and operational.

With SaaS, the customer “subscribes” to software that is running on someone else’s servers. If the customer stops subscribing, the software goes away, though the customer still owns the data. Additionally, SaaS applications require minimal installation and therefore offer the shortest deployment time and a typical upgrade can be done in just minutes. These aspects of SaaS may seem foreign, but help SaaS demonstrate a direct and quantifiable economic benefit over the licensing model.

2) Focus on Mission-related Functions, Not Software and Infrastructure
Traditionally, organizations spend their IT budget on software, hardware, and professional services to ensure the continued operation of the system. In traditional IT environments, most of the money is typically spent on hardware and professional services, not software. Yet software is most directly involved in the ultimate aim of IT: information management. The goal should be to add software functionality without extra hardware.

Transferring cost and accountability to a SaaS provider is one of the most compelling features of the SaaS model. The vendor hosts critical applications and the associated data on central servers at the vendor’s location(s), where the software and necessary hardware are supported by dedicated staff. This relieves nonprofit organizations of the responsibility of purchasing and maintaining the hosted software and server hardware. When SaaS providers upgrade their systems, expand bandwidth, or make other improvements, all their clients benefit incrementally, without the incremental costs.

Many nonprofits do not have staff expertise in IT, nor the resources to keep up with the technologies needed to maintain accessibility and accountability. Nor do they want to become a software company, with the ongoing challenges of upgrades, development, and deployment that can accompany “home grown” systems. Using a SaaS partner protects nonprofits from losing technical expertise due to staff turnover or changes in applications from other vendors or multiple providers.

SaaS applications have the additional advantage of being deployed on an external server. Unlike traditional software installs that rely on internal security to protect sensitive materials, SaaS applications reside in server farms where they are monitored and protected 24 hours a day. These servers automatically back up materials and applications, ensuring that even in the worst situation, information is not compromised. Best of all, this entire process is seamless to the customer, who no longer needs to assign staff to ensure operational security.

The level of infrastructure offered by SaaS providers would be difficult for most nonprofits to create and maintain on their own. Under the SaaS model, accountability means resolving problems, not just answering support questions, as is typical under the licensed model. Those involved in providing SaaS applications take full responsibility for all the components used to deliver the service and guarantee quality of service. According to a research report from McKinsey, the primary reason customers buy into SaaS is the accountability it offers. Such accountability is not available with licensed, on-premise applications.

3) Reduced Costs
One of the major roadblocks in the traditional software model is the time required to install and customize each solution. Depending on the size of the company, the installation process can take weeks, even months. Conversely, SaaS applications require minimal installation time. And although the program is installed on an offsite server, SaaS solutions still offer the customization capabilities organizations look for. Rapid installation is made possible because the infrastructure is already in place.

Under the SaaS model, updates are installed on the main server and users simply access the improved software through the same Internet portal. A typical upgrade can be done in just minutes, a significant improvement over an on-premise software upgrade that can take anywhere from several weeks to 18 months for an enterprise-wide upgrade.

Additionally, by hosting multiple clients on load-balanced systems, SaaS systems are scalable to an arbitrarily large number of customers. Leveraging these economies of scale represents a potential savings over the traditional model: as more customers are added, operating costs for each client drop, allowing nonprofits to obtain more software functionality for the same IT budget.

When you add the cost of maintaining availability to meet peak demand, SaaS becomes a reasonable and needed service. Since SaaS vendors serve multiple clients, they can easily absorb the peak demands of individual clients and leverage economies of scale in operating infrastructure. While nonprofits may not need industrial-strength performance the vast majority of the time, that small percentage of time when it is needed could be mission critical. The SaaS model gives nonprofits access to that capacity on demand.

4) SaaS Plus, A Partner State of Mind
Software as a Service is not just about delivering applications over the Internet. The vendor must also understand usage patterns and organizational goals, as well as how to leverage and share analytics across its customer base. SaaS vendors also handle the third-party relationships required to operate a complex online fundraising, marketing, and advocacy system, and bring economies of scale there as well. This means nonprofits get more than simply bandwidth and applications: they get a partner to help leverage the investment.

A SaaS provider’s knowledge of nonprofits thus becomes a critical aspect in selecting the right vendor. Nonprofits need to work with partners who understand technology, but can also apply fundraising, advocacy, and nonprofit marketing and management strategy to the system. If the vendor is unable to help the nonprofit apply technology to the organization’s goals and mission, its value is limited. A vendor who has developed nonprofit “domain expertise” from engagement with and focus on the nonprofit sector can help the organization configure applications to provide a unique user experience and feature set. A partner that understands the sector helps ensure that nonprofit can focus their resources on using the applications to support their needs and mission, not educating the SaaS vendor.

SaaS – Driving Results
In the nonprofit sector, where organizations strive for efficiencies in back-end systems and applications so they can invest more in mission-driven programs and services, the promise and performance of the SaaS model is improving, and in some cases, changing the way organizations operate. Compared to traditional on-premise installations, SaaS applications have an overall 20%-40% lower total cost of ownership, allowing organizations to reallocate resources to other areas.

The true value comes from selecting a SaaS partner that is not just selling a software package, but can also helping the nonprofit organization achieve the results needed to fulfill its mission. In addition to software and expertise, look for a vendor with a service and support team committed to client success. Ensure that the vendor provides broad and deep training programs, dedicated client account management, and access to support personnel without hidden costs. Then get back to your business: changing the world.