Well both of them might share the common grounds for evolution, but their quintessential operating mechanism is what makes them absolutely different. Outsourcing refers to the mechanism of delegating certain business processes or functions to a vendor who is a domain expert. On the other hand, SaaS, referred to Software-as a-Service, is more of a business delivery model through which the software hosted on cloud can be accessed by enterprises. Though cost effectiveness, automation and resource optimization are three major objectives shared by both, the differences are critical and may lead to an effective decision making.
Twin Degrees of Separation
Data is one of the two crucial differentiating parameters. In the process of outsourcing, a great deal of stress is laid on data security, data hosting and overall data management. Most outsourcing vendors have SAS 70 certification. In contrast, SaaS lacks complete data compliance, business continuity and security owing to the lack of hosting parameters in Cloud.
When it comes to governance of business processes, outsourcing looks much better. Typically in an outsourcing, the delivery model is mostly utility based and follows one-to- many model. The process of outsourcing involves great level of customization on the part of service providers. Tables are turned when it comes to SaaS because the customers here need bring about a major transformation in their business processes to fit the requirements in the SaaS offering.
Furthermore in outsourcing, the initial investment might look big but the ownership and credibility factor is quite high since a governance mechanism is being devised to manage the outsourced processes. In case of SaaS, there is zero upfront investment. There is a loophole. Since there is no investment, enterprises often skip the process transformation part required to adopt Software as a Service. Apart from the initial cost, SaaS offers greater agility when it comes to aligning business and operational needs.
Well after all said and done, no one can deny the fact that compartmentalization, no longer remains an option for enterprises. With various platforms and mechanisms coming together to increasingly add value to the business, it is imperative that Outsourcing and SaaS should amalgamate to bring about a much more sophisticated business model. Outsourcing entails a strategic restructuring to delegate non core functions and focus on core competencies, whereas SaaS is all about a deployment model that eliminates the burden of software maintenance and support functions. Bringing about a synergy between both implies that an organization is outsourcing application services and processes to a vendor.