By Marco Cristini, Business Analyst
Software as a Service (SaaS), also called “on-demand software,” is a software delivery model in which software and associated data are centrally hosted on the cloud. While the SaaS model has been on the software product menu for almost 30 years, it is only now this offering is gaining in popularity and revolutionizing both the software industry and the way in which companies manage their IT infrastructure.
As a result of this surge, the transportation industry is now fraught with discussion around the differences between Saas/On-Demand and Traditional Licensed Software, with heated debate surrounding the pros and cons of each. Before you can “take a side,” however, it is important to understand the differentiating characteristics of each model.
SaaS is distinguished by a “pay for what you use” approach. In other words, customers pay based on their actual use of the application. Therefore, vendors have to ensure the application performs properly so that customers have the opportunity to fully utilize the software as intended. This unique dynamic often begets long-term contracts to ensure the commitment of both parties.
Another characteristic unique to the SaaS model is multi-tenancy. Opposite of what occurs in multi-instance architectures, where one application instance per client is in use, the multi-tenant approach commingles the data and processing for multiple clients in a single application instance (each customer operates with a custom, virtual application instance).
The Case for SaaS TMS: Flexibility
In the case of transportation, it is important to consider the complexity of the logistics networks. Typically, these networks are characterized by a large number of parties, including shippers, carriers, brokers, trading partners, etc., and more often than not, all of these parties need to be integrated in order to operate within the same shipping environment. Given this high need for integration, a SaaS solution allows for more flexibility than its Traditional Licensed Software counterparts. How? A SaaS model promotes communication within the transportation network. Communication between all of the logistics network parties commonly occurs via EDI (electronic data interchange) messaging, which is easily facilitated in a SaaS environment. Historically, EDI integration has proven challenging within Traditional Licensed models. SaaS also favors manual use, since it is seamlessly accessed by users via web browser, versus the corporate user base architecture typical of Traditional Licensed models. Having data on the cloud allows for easy access (and drastically reduces the lead-time for installation).
The Case for SaaS TMS: Cost Savings
A SaaS TMS model yields quick returns on investment due to:
- Savings achieved through optimization, automation, and control of the freight costs.
- Reduced IT support costs, because software maintenance and support is outsourced to the SaaS provider.
- The modular structure of a TMS solution, where customers do not need to implement the entire TMS functionality (order allocation, order optimization, shipment planning, execution monitoring, cost management, and reporting) but rather choose which modules to use, and scale later if necessary.
- The “pay for what you use” approach, which accounts for variations in freight volume and scope.
The Case for SaaS TMS: Security
It is important to note, SaaS model software’s multi-tenancy design frequently raises concerns regarding security. Typical feedback from users is that they feel uncomfortable sharing confidential data on the same system as their competitors. However, SaaS vendors are aware of this issue, and therefore security level design is prioritized to the point where it is arguably more reliable than some Traditional Licensed software alternatives. In fact, whether or not software is secure is more closely linked to the software architecture itself than it is to a multi-tenancy design. Interestingly, with an increase in the number of SaaS applications in use, the transportation industry is also adopting security controls to ensure protected data transactions. Gartner even predicted that cloud-based security controls for messaging applications would generate 60% of the revenue in that industry sector by 2013, up from 20% in 2008.
True SaaS TMS is becoming the preferred solution by many industry players. The multi-tenancy approach in particular makes SaaS a very attractive solution for the logistics community. The easy network connection, large-scale data transfer capacity, and fast ROI are some of the remarkable advantages a SaaS TMS has to offer over traditional hosted solutions. While we may not be ready to conclude that SaaS TMS applications are the wave of the future for all business information technology needs, it is safe to predict this is one segment of business information technology that will continue to expand.