Use cloud or on-premises? This is a question that providers of receivables financing services have been asking themselves for a long time. There is no simple response to this question as a multitude of internal and strategic factors play a role here. As with all decisions, the pros and cons must be weighed with regard to the central question: “What benefits can be derived from this?” Of course, receivables financing, as well as finance transactions in general, both present sensitive areas of activity which have to be taken into consideration in addition to other, secondary criteria. For now, let us have a look at the crucial factors which, as a good example, may provide the basis for decision-making.
Security and updates
Compliance and security are without a doubt two subjects to always bear in mind as a service provider. How secure are my clients’ data? How do I handle updates and backups? Who bears the overall risk? One should not fall victim to the idea that on-premises stored data are much more secure than data hosted in the cloud. The security measures of Software as a Service (SaaS) applications (SaaS allows users to connect to and use cloud-based application over the Internet) are usually of a very high level. Ultimately, it is in the respective server and IT providers’ own best interests to satisfy their clients (SaaS providers) and not scare them away with data leaks and cyber attacks.
Furthermore, automatic backups ensure the necessary security in case of any system failures. SaaS providers also attend to everything to do with maintenance and support so that users do not have to. The applications also constantly receive updates, which means you are always up to date. All of these factors can also be applied to on-premises software; however, for each of the areas mentioned (security, backup, updates, maintenance and support) separate resources must be planned, which come with corresponding costs. You should also not forget that the entire risk falls onto you if you decide to support data storage and maintenance yourself. For SaaS, this can only be applied partially because the respective provider is responsible.
Shortened time-to-market
There are other criteria apart from security which are of more importance, at least for many start-ups and new market entrants. We are referring to processes that come into play at the very beginning of a service, that is, implementation and availability, as well as the factors that may only be important after the service goes live: scalability and functionalities. The SaaS concept entails a relatively small time investment for the implementation (also called onboarding). Although there are a few things to consider, such as a fixed assignment of roles with regard to responsibilities and the correct embedding of the SaaS solution in the internal workflow, generally speaking, the SaaS user can provide the application rather quickly to the end users.
This means, the time-to-market is reduced significantly compared to an on-premises implementation. Apart from a reduction in costs, this means you are able to enter a market relatively quickly. The fact that the application can also be used anywhere, at any time and on all devices makes the SaaS option even more attractive. Speed and broad availability are absolutely decisive competitive advantages.
Scalability and features
Scalability is one of the advantages of SaaS solutions. With a pay-per-use model, it is possible to quickly adapt to the growth of the user or to economic circumstances in general. On-premises solutions cannot keep up with that and are not an ideal option from the user perspective with regard to the foreseeable growth and/or market fluctuations. What about the available features of an application? Again, SaaS scores points in this respect because further functionalities can be added flexibly. Such modifications may also be possible for on-premises solutions; however, that is associated with significantly more effort. Another advantage to emphasise is the shorter cancellation periods with SaaS, which means extra flexibility.
Overview: the steps towards cloud application*
Let us move on to the point where you already know you want to migrate your factoring business to the cloud, but you still have no idea how, when and with whom. Here are some key points you should consider before getting started, otherwise, your intended journey to the cloud can quickly lead to disappointment.
1. Set goals:Ask yourself where you or your company want to be in one or five years? In any case, the goals you set should be in line with the business needs and goals of the company.
2. Set a strategy: Define a strategy and a binding timetable. By when should the goals be achieved? Is the timetable realistically achievable? Is the strategy also consistent with the company’s overall goal?
3. Select a provider: Now it is time to look for the right technology or the right provider. Ultimately, your goals and strategies will play an important role. Regardless of that, you should look for solutions that are flexible and scalable enough.
4. Assemble a team: Select qualified and motivated colleagues in your company to accompany the entire project. As a rule, the respective provider will also provide you with experts who will give you technical advice from day one – this way you can avoid unnecessary inefficiencies.
5. Carry out the migration: Which data should be migrated to the cloud? You decide this together with the provider’s technical experts. After successful test migrations and their acceptance, the final complete migration takes place – hopefully smoothly and without losses.
6. Go live and manage: After going live in the cloud, you will have taken an important step, congratulations! But now it is time to keep an eye on the application and its performance. Are things – such as cost reduction – developing as you had envisaged? If not, you need to make the necessary adjustments in good time.
To conclude, it becomes clear that nowadays—despite not being for everyone—SaaS solutions are a must for receivables financing. There is no way around it for start-ups or new establishments on the market. SaaS is also a good choice for whoever wants to stay highly flexible later on. Ultimately, you save money and time while gaining a great deal of flexibility and adequate security. In addition, it is important to keep in mind that, despite it sounding as if it is, SaaS is not necessarily a sure-fire success or an all-round carefree package. The processes around it must be constantly monitored and, if necessary, readjusted. Comprehensive reporting as well as integrated warnings will help with that.
* With references to the article written by Kevin Davis: “How to migrate (successfully) to the cloud” (2023)
