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  • Writer's pictureRoss Bright

SaaS vs Managed Services: What's the difference? What's better for your company?

The current landscape of software products is dominated by two pricing and delivery models: software-as-a-service (SaaS) and managed services.


SaaS is a subscription-based model, where businesses pay a monthly fee for access to the software product. Managed services involve a deeper relationship between the customer and the provider, where the provider actively manages and maintains the customer's software infrastructure.


Both these associated costs should be considered on-going maintenance fees and would be separate from the initial Implementation Costs.


SaaS in particular has grown prolifically, with the industry growing by over 500% in the last seven years. Now, SaaS makes up 70% of corporate software - according to BetterCloud.


There is, however, a place for managed services - and it may be cost-effective for some businesses to utilize this more comprehensive approach. Ultimately, factors such as cost, scalability, and security should be considered when deciding which model is appropriate for your company.


In this guide, Smartcost will provide you with a detailed rundown of both software models and help you decide which to opt for in 2023. Please reach out to us for how to save money on both, as that's what we do best.




What is SaaS?


SaaS, or software-as-a-service, is a model of software delivery where businesses pay a subscription fee to access a provider's software product.


These products are typically cloud-based (and often accessed online through a web browser) eliminating hardware and software upgrades and maintenance.

Examples of SaaS products include:

  • Customer relationship management (CRM) systems such as Salesforce;

  • Project management and collaboration tools, such as Trello

  • Online accounting and bookkeeping software like QuickBooks

These products allow businesses to access and use the software without installing and maintaining it themselves.


What are the benefits of SaaS?


What has made SaaS so popular? What are the key advantages of opting for a suite of SaaS tools to power your business processes?

  • Cost-Effective: One of the primary advantages of SaaS is the cost-efficiency it provides. When compared to bespoke software, licencing, or indeed, managed services, the low monthly fees of SaaS products can be enticing. A subscription-based model eliminates the need for substantial upfront investments in software licenses, hardware, and ongoing maintenance, as all of this is handled by the SaaS provider.


  • Scalability and Flexibility: SaaS offerings are highly scalable, enabling businesses to easily scale up or down based on their requirements. It's as simple as changing your subscription plan to meet your changing business needs.


  • Modularity: Whilst most SaaS products aren’t particularly modular by themselves, businesses that work with SaaS products tend to have a large suite of complementary products to work with. SaaS tools tend to focus on a few core functions and this approach allows businesses to find what they need and avoid paying for unnecessary features. By contrast, managed services tend to be a more holistic package - although MSPs can certainly remove or add services when needed.

  • Quick Deployment and Upgrades: SaaS applications are typically ready-to-use out of the box, meaning your business can get up and running quickly. Updates and upgrades are handled by the SaaS provider, ensuring that your business always has access to the latest features without any need for in-house IT support or downtime.


Of course, both the efficiency and effectiveness of SaaS deployments will depend on which tools you pick and the plans you’re on. Need some help getting the best deals on your SaaS tools? Talk to one of our advisers and see how we can help!


What are Managed Services?


Managed services refer to a model where businesses outsource specific IT software operations to a third-party provider, known as a Managed Service Provider (MSP). The MSP is responsible for the management, operation, and troubleshooting of these services on an ongoing basis.


A useful way to compare the two approaches is that SaaS is a more DIY approach where software products are made to be accessible by the end user. If anything goes wrong or needs changing, the customer will either need to contact software support (and usually wait for ages to get a problem fixed!) or deal with it themselves.


Instead, some businesses prefer to let a dedicated team handle every aspect of the software deployment - and the man hours that it takes to configure, maintain and upgrade anything is reflected in the MSP’s package.


The managed services model can be tailored to meet the unique requirements of a business, making it a highly flexible and adaptive solution.


What are the benefits of Managed Services?

  • Saves Time: While SaaS tools can be fairly straightforward and user-friendly, selecting, configuring, maintaining and upgrading software products can be fairly time-consuming. For some businesses, taking time away from C-suite management is just too costly. Moreover, by outsourcing IT management to an MSP, a business can focus on its core competencies and strategic initiatives. This can lead to improved efficiency and productivity.


  • Access to Expertise: Managed services give businesses access to a team of IT experts who specialize in various areas of IT. This allows businesses to leverage expertise that they might not have in-house. A managed services partner can make digital transformation easier for smaller businesses lacking this in-house expertise.


  • Customization and Integration: Unlike SaaS, managed services can often be customized to fit the unique needs of a business. This includes customizing software solutions and integrating them with other systems in the business's IT infrastructure. Instead of having to find products that fit your workflow, a managed service provider can adapt their software offering to suit your needs.

Final thoughts: Which should you choose?


The primary disadvantage of managed services is indeed cost. It can be much more expensive to hire a dedicated team to handle your software. But, is it less cost-effective?


That would depend on how much time and resources you spend on managing software products in-house - and also how much productivity you lose from inefficient SaaS tools that don’t fit your needs perfectly.


Of course, it’s exceedingly difficult to measure these two factors - and even harder to project how much you’ll save (or lose, if the costs are greater than the benefits).


We can’t draw the line on business size as small businesses can benefit from managed services just as much as large enterprises if the circumstances are right.


In general, if your IT and enterprise software needs are complex and transient, you should consider managed services. On the other hand, if you can find the SaaS tools that fit your needs, you often save a lot by managing those products in-house.


How can you be sure of which model is best? Get in touch with our team today for a software audit. We’ll discuss your current software needs and help you figure out where you can save money.


Once we’ve audited your software needs, we can help you draw up a spending plan and will negotiate with vendors for you. Our clients save an average of 30% per year on software spend. Lastly we’ll refund you the difference in the extremely rare case that our fee was more than the savings you received. Get in touch today and book a free 20-minute consultation.


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