SaaS pays for itself over time, Analysys Mason asserts
Communication Service Providers (CSPs) using Software-as-a-Service (SaaS) to replace on-premise licensed software for security, business support systems, and other essential services can realize a 25% IT cost savings over a five-year period, compared to the traditional on-premise software model. That’s the conclusion of new research from Analysys Mason, commissioned by Nokia.
“In many scenarios, the long-term software costs associated with SaaS can be outweighed when CSPs consider the significant savings that are possible in other areas, as well as reduced time to value for the creation of new services. Long-standing CSP pain points are also avoided: no more having to plan how data center resources, testing of changes and right scaling of hardware to best meet capacity needs; these all fall to the SaaS vendor,” said Justin van der Lande, research director at Analysys Mason and one of the report’s authors.
“There are some strong financial benefits to Software-as-a-Service,” said Mark Bunn, SVP, Cloud and Network Services at Nokia. But that’s not the whole story, he told RCR Wireless News. SaaS provides an agile, scalable cost-benefit for carriers searching for 5G monetization strategies.
“One of the most important aspects of this, is this time-to-market consideration,” Bunn said. “We’re going to see a lot of experimentation as CSPs find use cases where they can monetize these investments they’ve made in 5G, and SaaS comes into play in those scenarios.”
Initial operating cost of SaaS is lower than on-premise licensed software models. This provides carriers with an ideal lower-risk environment to experiment, and “fail fast” as they look for 5G monetization opportunities, Bunn asserts.
“But also, the heart of a mature SaaS service is the ability to scale.”
The report’s researchers came to a similar conclusion.
“CSPs that are planning to deploy new services, specifically new use cases, are likely to incur far fewer losses if the service fails when using a SaaS deployment compared to an on-premises or hosted-cloud deployment due to the lower sunk cost,” they wrote.
“CSPs that use SaaS models are also able to scale their services up more quickly because they do not have to purchase or install further hardware themselves, and can add additional functionality to their SaaS subscription as needed to support new services.”
The research firm’s estimates pegged SaaS opex for CSPs at 5% in 2019, rising to 11% by 2023 as network operators continue telco cloud digital transformation. The researchers also push back against the belief that SaaS costs telcos more long-term, compared to the traditional on-premise model.
“This view may not necessarily reflect all the benefits of SaaS and may over-emphasize the lower software licensing costs of non-SaaS deployments and not taking operational and hardware costs into consideration,” said the report.
Long-term SaaS benefits
“We consider the cost-saving benefits related to reliability, time-to-market, scalability, staff training, updates and upgrades, maintenance, IT hardware reduction and security. We also consider the improved potential for revenue generation due to reliability, time-to-market and updates and upgrades. We expect that, in general, the overall benefits of SaaS will outweigh the additional cost, even in the long term.”
“I see this as a natural step, but I do see it as a mindshift. Because right now, you still see operators thinking about what they have to do with the software they’re buying or licensing from their vendors,” said Nokia’s Bunn.
Besides SaaS as an accelerator for 5G business outcomes, Bunn encourages network operators to think about the benefits of offloading app service management to a service provider.
“The lifecycle of the SaaS service itself is managed by the provider,” he said. “If you look at where the report focuses on, it’s largely that. That operational ability begins to offset the costs CSPs have traditionally taken on themselves when they’re managing licensed applications.”
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