Article

The benefits of software-as-a-service

Subscription-based is a cost solution to expensive licensing.

April 28, 2008 by Brian Dusho — President, BroadSign International

Dusho (left) and Womeldorf.

While screens are the most visible component of digital signage, the critical part of any network is the software that powers it.

Digital signage is the first and the only medium that effectively can reach the elusive consumers while they are out of home, and especially while they are shopping. The ability to customize each message to audiences at any location and even in any area within a location is another unique value that it brings to marketers. However, these requirements, combined with the need to constantly expand, pose a great challenge to operators in terms of network management.

One of the obstacles to faster growth has been the lack of software platforms that could accommodate all of the functionality without being cost-prohibitive to network owners.

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The current enterprise software applications for digital signage can be grouped as follows: applications that are built in-house, software-in-a-box and 3rd-party-hosted solutions.

In early deployments, many network operators tended to be a "one-stop shop," doing everything from IT to content creation, media distribution and ad sales. It did not take long for them to realize that being in the software or network maintenance business distracted their resources from the core objectives of making money on their media space. Some companies, however, already had made large investments in technology prior to defining a viable business model and the type of software that can fill their needs.

Today, digital signage operators are increasingly gravitating toward becoming lean and mean media companies rather than being a technology provider. A lot of legacy in-house software products now are being replaced by third-party applications and many look to outsource most of their IT responsibilities, similar to the way TV broadcast networks do it.

With build-your-own solutions largely on their way out, the competition among third-party products now is between ‘shrink-wrapped' (on-premises) software and hosted solutions, also known as ASP, On-Demand and SaaS).

It's all about the total cost of ownership

Here are a few numbers from research data showing the drawbacks of the traditional software models:

The Shortcomings of Legacy, On-Premise Apps

They have Deployment Challenges: • 31.1% of software projects cancelled before completed. • 52.7% of projects cost nearly 190% of original estimates. • 30-50% of software costs spent on integration.

There are Operational Costs: • Maintenance & management costs >10x original license fee. • Escalating hardware & staff support costs. • Over provisioning and under-utilization of software licenses.

Economic/Budgetary Pressures: • Need to reduce IT costs and increase business benefits. (Source: THINKstrategies, Inc. ©2008)

All of the above-listed issues essentially boil down to the costs that are getting out of control. They are characteristic of all industries where on-premise software is used, including digital signage network management. If we extrapolate the current digital signage trends into the near future, we'll see that managing networks the old way is likely to get even more expensive:

a) Networks will become bigger, more complex and more targeted.

b) The complexity of managing the media space inventory, targeting and scheduling content, multiversioning and a broad variety of campaign scenarios will require richer functionality, higher stability, reliability and security.

c) Competition will force network operations to focus more on making money on the media space and less on maintaining the network.

d) Network growth will put increasing pressure on in-house support and maintenance (for users of on-premise software).

e) Integration with third parties will require more in-house resources (for users of on-premise software).

f) Network operations roles will be more diverse and more narrowly defined (role-specific tasks); the difference between media management and technical jobs will be more pronounced.

g) Fast pace of change in digital signage as a medium and development of standards and metrics will require frequent updates.

The concept of SaaS has been gaining ground lately as the model that best meets the cost-cutting and efficiency demands of expanding digital signage networks.

What is SaaS?

The SaaS model first originated outside of the digital signage field and has proven beyond doubt that it is the most efficient way of asset management in areas like accounting, CRM, sales operations management and many others.

SaaS is breathing new life into technologies that were too expensive for the masses in a traditional enterprise model. The fast-growing Sales Performance Management market is living proof."

SaaS appears to closely match the nature of digital signage business.

• Networks don't have to invest into additional IT infrastructure; the software company already has done that for them.

• Networks do not need to manage a server, content distribution or a database, which incur high hardware, personnel and bandwidth costs.

• Software as a Service approach significantly reduces deployment costs, maintenance overhead and time to market.

• Operators can focus on their core business and not worry about technical aspects of a network.

• Networks are always using the latest technology and business methods, as software upgrades are included in the contract at no extra charge.

• The SaaS model breaks up an upfront software licensing cost into low monthly fees.

The other two of the previous concerns causing IT departments' resistance to SaaS — security and reliability — are no longer valid either:

• Web systems are reliable enough: Despite sporadic outages and slow-downs, most people are willing to use the public Internet, the HTTP and the TCP/IP stack to deliver business functions to end users. (Wikipedia)

• Security is sufficiently well trusted and transparent: With the broad adoption of SSL, organizations have a way of reaching their applications without the complexity and burden of end-user configurations or VPNs.(Wikipedia)

All of the above is corroborative evidence that quality SaaS platforms are capable of satisfying operational requirements of rapidly evolving digital signage networks, while offering a significantly lower cost of ownership than other software models.