Software-as-a-service (SaaS) is an attractive alternative to on-premise computing, and many suppliers now use the SaaS model to deliver applications such as sales-force automation, customer relationship management (CRM) and human resource management. A smaller, but growing, number of providers also use SaaS for more complex applications, such as enterprise resource planning (ERP) and supply chain management.

However, SaaS does not spare customers the need to ask vendors the same questions about service levels, costs and other issues that they would ask themselves if they were planning on-premise implementations. SaaS providers’ answers to some of those questions may not be ideal because, for example, long-term costs are usually higher for SaaS than for on-premise computing.

Customers’ needs can change for any number of reasons – such as growth, acquisitions or changes in the competitive landscape – so the right SaaS-versus-on-premise choice today may not be the right choice tomorrow.

Of the nine questions customers should ask about SaaS, seven also apply to on-premise deployment. However, the issues of changing needs prompt two more questions unique to SaaS. These involve the option of shifting from SaaS to on-premise implementation of the same application and vice versa, and the range of choices among hosting providers.

Executive summary
The Ovum view
Question one: what are my requirements?
ERP is a special case
Question two: what’s the service history?
The proof is in the details
Question three: how strong is the SLA?
Fallback procedures must be considered
Question four: how much can we customise the application?
Consider long-term needs
Question five: when does break-even come for SaaS versus on-premise?
Estimating on-premise costs can be complex
Question six: how will my costs increase if I scale up?
Pricing schemes vary
Question seven: how safe will my data be?
SAS 70 isn’t the whole answer
Question eight: how easily can I switch between on-premise and SaaS?
Shifting needs call for flexibility
The code question
Question nine: am I able to choose my own hosting services provider?
Choice isn’t universal

List of Tables
Table 1: SaaS, application hosting and on-premise computing – a comparison