The concept of Software-as-a-Service (SaaS) has been brewing for quite some time now. Starting life as the ASP model it has moved on and evolved into a hosted model with greater flexibility than the one-size-fits-all of its early days. The idea of hosting software applications for the enterprise has generated a considerable amount of interest amongst vendors, as also among enterprises for the flexibility that such a model offers.
According to Gartner Inc., worldwide total software revenue for SaaS within the enterprise software markets is projected to surpass $5.1 billion in 2007, an increase of 21 percent over 2006.
Some popular applications like payroll, accounting, CRM and video conferencing are working successfully on the SaaS model. In fact, there have also been initiatives on part of vendors to offer ERP on a SaaS platform. Microsoft recently launched its ERP as a service offering and Sage Software introduced its CRM solution through a similar model. This trend of delivering software-based services over the Internet is an indicator of a shift in the way IT consumption is being viewed today.
“The e-ticketing, travel portals and e-banking phenomena that have caught our imagination are all manifestations of a trend towards conducting business on the Web. This shift in thinking–away from a hard copy only scenario to a preference for online–has been from the end user perspective. It has now begun in the enterprise segment as well. This is manifested as a willingness to explore new models for IT deployment–including software-as-a-service,” says Sushant Dwivedy- Lead, Microsoft Business Solutions, Microsoft India.
Thomas Abraham, Managing Director, Sage Software India Pvt Ltd puts forward a word of caution saying, “SaaS is a relatively new concept in India. There are applications like Sales Force Automation (SFA), CRM and accounting and payroll that use the SaaS model. The key issue to be addressed is that of data security. Some large enterprises may be nervous about migration of data, and could decide to exit the hosted offering. While data security should not be seen as a concern, companies should clearly identify how data migration can be done.”
Adoption: bit by bit
Enterprises are acknowledging SaaS as an efficient model for their businesses. This growing interest is fuelling the momentum of its adoption. In fact enterprises across verticals are embracing this model. Presently enterprises that are providing sales automation, logistics and financial services are in fact successfully operating on the SaaS model.
There is quick adoption of SaaS by product and service companies like banking, finance and health. However in percentage points, says James D Foy, CEO & President, Aspect Software, “The adoption level of SaaS today is in single percentage points because of the fact the market is new. This level will increase to 25 to 40 percentage points gradually in the years to come as more enterprises adopt this model.”
In addition, “Education, marketing automation, logistics/procurement sourcing and human resource are also looking at SaaS as a model for operation,” says Munish Gupta, AVP Program Management, High Tech, GlobalLogic.
“Companies that are suppliers to large Indian and global firms such as automotive spare part manufacturers, textile and pharmaceutical companies are driven both by the desire to improve their bottom-line and also by increasing pressure from larger partners to streamline their supply chains,” adds Dwivedy.
SaaS enables ‘quick start up’ with limited investments. It also allows the companies to move the application in-house should they desire that after using the hosted model and testing the applicability for their business. “SaaS is a power solution with zero up-front capital requirements. It is scalable and provides a great platform for SMBs and they can benefit from it in a big way,” adds Foy.
According to Dwivedy of Microsoft, SaaS will increase the affordability of ERP solutions by eliminating upfront capital expenditure and also eliminating the need for in-house IT resources and additional infrastructure.
He says, “We believe that the SMB segment will be the first off the bat in India to embrace the SaaS model. Among them, enterprises with global ambitions and desire to rapidly improve their business process in an increasingly competitive market will be the leaders in the pack.”
Go to Market
The SaaS model is fast gaining ground, and the market is receiving considerable focus from vendors. In such a scenario there are lots of offerings for the enterprise. There is growing trend of ‘Push towards the market’ as far as SaaS is concerned, and vendors are leaving no stone unturned to target their customers.
Vendors are resorting to an aggressive marketing campaign to penetrate the Indian market for SaaS. Sage Software has introduced a number of marketing initiatives to drive traffic to its Web site, in.sagecrm.com and to induce trials. Likewise a radio campaign and promotion through the Web is being done. They have also launched a PR campaign to create awareness in the market.
“We have an installed base of entry-level sales automation customers as well as ERP customers who are being targeted to migrate or sign up for this service. We are also expanding our partner community to address new markets like Punjab, Rajasthan, Gujarat, Maharashtra, TN and Karnataka to attract first movers in this space. Our focus will be to induce trials first. That gives us the customer touch points to move the relationship forward,” says Abraham.
Aspect Software provides solutions on the SaaS platform for contact centers, and is deploying measures to seize this opportunity. “We are basically focusing on creating a strong partner network to take our solutions to the market. Besides this, we are also doing branding in a focused fashion to make our products known,” says Foy. In addition the company is also resorting to conferences, undertaking promotional events and trade-based communication promotion.
Microsoft on the other hand has created a strong partner framework for its SaaS strategy, and also plans to create awareness about the benefits of this IT consumption model. “Our strategy is based on three delivery models, allowing for the greatest degree of customer choice and partner opportunity. In the On-Premise model software is installed at the customer location and licensed to the customer. In the Hosted by Partner model the infrastructure and software is owned and licensed by the partner, who purchases Microsoft software licenses. Lastly, in the Hosted by Microsoft model we own the infrastructure and provisioning of the software, which is provided as a service to customers,” says Dwivedy.
An affordable alternative
Businesses are adopting SaaS as an effective, affordable alternative to traditional packaged software. Vendors are marketing their products aggressively. However it’s not just solutions that they are looking at. In fact what they are demanding is customized or on-demand solutions that best serve their needs. This demand could range from customized ERP or CRM solutions to automation of services etc. However, just repackaging enterprise products as on-demand solutions is not enough.
“We see enterprises climbing on to this bandwagon with requirements for Lead Management. This is a huge pain area for many enterprises and they are happy to have a standalone solution to address this need. The other challenging demand from enterprises would be to have customized offerings in a hosted model. This gets complex as implementation costs shoot up and really the only benefit to companies will then be no infrastructure investment and maintenance,” says Abraham of Sage Software.
Dwivedy is of the view that enterprises look for automation. He says, “Enterprises are increasing focus on automating their supply chain. This helps them increase productivity by connecting to their supply base in real time. Deploying infrastructure on their end can be expensive. Adopting ERP through a hosted model enables a cost-effective approach to supply chain automation.”
He adds, “The second scenario gaining ground is the need for CRM with the distribution chain and channel partners. Again hosted delivery enables broader availability and access for the partner ecosystem that an organization works with.”
It should be noted that it is not merely the automation of services, availability of solutions through the distribution chain, or even low subscription cost that enterprises are demanding. There is an increasing demand of security, and usability among businesses.
Gupta of GlobalLogic says, “Enterprises today look for performance, security, usability, integration with back-office applications, scalability and multi-browser compatibility, when it comes to SaaS solutions.”
The SaaS solution platter
The Sage CRM solution comes with built-in analytics and dashboards, and sales, marketing, and service professionals can immediately act on relevant business, customer, and market events. The Sage CRM sales force automation solution within Sage CRM is designed for SMB sales teams. It allows sales teams in enterprises to effectively manage, forecast, and report on all phases of the sales cycle.
Aspect Software on the other hand offers solutions on the SaaS platform for contact centers. Its flagship solution, Aspect Unified IP 6.5 provides automatic call distribution (ACD), predictive dialing, voice portal capabilities, Internet contact, workflow management, multichannel recording and quality management. Another of its products named Performance Edge offers campaign management, workforce management and quality control.
Similarly Microsoft is offering hosted ERP. Hosting the Microsoft’s Dynamics Suite makes ERP solutions more affordable by eliminating upfront capital expenditure and also eliminating the need for in-house IT resources and additional infrastructure. Customers will have to pay on a per user per month basis. “Microsoft believes that this new offering will allow a larger set of SMBs in India to adopt and benefit from ERP services,” adds Dwivedy. In addition it also offers Windows Live, Microsoft Dynamics and Hosted Exchange.
Forecast for SaaS
It can be said that the stage for transformation from a traditional on site IT model to the SaaS model of IT deployment has been set. What needs to seen is how fast this transformation will take place. Although Indian enterprises have now become acquainted with SaaS, large-scale adoption is missing. Many are currently working on this model and reaping its benefits. At the same time there are businesses, mainly SMBs, who still have to adopt this model.
According to Dwivedy, “In India, the change will happen in multiple areas. The change in the SMB segment will be led by ERP deployments which is often the first step to a broader IT deployment. Enterprises that are constantly looking to leverage technology to deliver richer, better experiences to users will use next generation Web technologies to combine a high level of customer interactivity with the broad reach of the Web, rather than having to choose one or the other.”
Abraham of Sage Software is of the view that SaaS will play an increasing role in the future as companies complete their experience cycles and there would be some concrete data on the benefits of the same.
He adds, “The models and technologies will evolve making SaaS more customer friendly to implement and use. SaaS will always be a great generator of leads for application vendors as many organizations will try before they decide to buy or rent. There will be many more applications available on hire as the trend would be for organizations to minimize investments in infrastructure and trained manpower to manage the infrastructure and applications.”
That said, clear monetary advantages are required if SaaS is to be a successful proposition.
Gupta of GlobalLogic predicts a new level of adoption for SaaS saying, “SaaS in India will have to be integrated with mobile phones, because business users are likely to have data-enabled mobile phones. This tight integration along with the use of Web 2.0 technologies can help Indian SaaS providers build next-generation applications.”
He adds, “SaaS in India will not be limited to just enterprise applications. It will also extend to collaboration. One day in the near future, SMBs may need only mobile clients with Web browsers. Everything will be on the server and integrated with the mobile phone. We are not yet there, but 2008 will see the first steps in this direction.”
