In the past four weeks I've discussed the benefits of cloud computing and its core components. My goal was to reveal the key value drivers of the cloud so you could better understand and evaluate ROI opportunities.

I described two of the three core components of cloud computing,infrastructure and platform, each delivered as a service. But, in the end, your users will not work smarter or more efficiently because of either infrastructure or platforms (save software developers or IT staff); employees will be more effective because of the third core component, software delivered as a service. This component ultimately is what saves time, reduces costs and increases revenue.

Like everything else in the cloud, software as a service (SaaS) is most commonly delivered in a Web browser and paid for based on usage; the more you use software, the more it tends to cost. However, the economic benefits of SaaS really fall into two categories. The first category is the cost savings to actually customize and deploy the software relative to traditional methods. The second category is the top- and bottom-line benefits to your business realized because of the advantages of cloud-based software.

The key thing to understand about the first type of savings is that, unlike traditional software purchases that represent large capital expenditures typically paid in advance and followed by material annual maintenance fees, SaaS often forgoes the upfront expenditure and enables the usage costs to be treated as operating expenses. Typically, these ongoing expenses of SaaS products' usage are at the same levels as the maintenance fees of the traditional alternative. Another thing to consider with this type of cost savings is that because of cloud-deployment infrastructure and flexible tool platforms, the expense to customize and deploy the finished product in a properly hosted environment also can be much less.

Of these two categories, the greater business value likely stems from the second type of savings: the benefits to your business. Understanding this benefit is less about knowing anything about cloud computing and more about imagining "what if." For example, what if your sales pipeline was better managed? Would that increase your top line? Or, what if your operations people were suddenly 10 percent more efficient across the board? Would that increase your bottom line? What if your organization could react to the market in a fraction of the time your main competitor does because of your flexible automation platforms and increased operational efficiencies?

The real value of SaaS is that it enables the use of the software your business really needs, rapidly and affordably. It allows you to drive software automation much deeper into your organization then it ever has gone before. It allows your business to remain nimble and react to market forces. And it allows your decision makers to receive data about your operations that is meaningful and actionable.

These are lofty ideas, but businesses are employing them right now. They are realizing significant ROI from their cloud-based software solutions and enjoying significant value as a result. The cloud is about delivering better software more affordably, plain and simple. There's not an organization in the world that wouldn't benefit from that.

This was posted originally on the Central Penn Business Journal Gadget Cube.

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