Software as a service

Executive Summary

Rapidly changing customer requirements and accelerating technological advancements are fueling the growth of new generations of on-demand software as a service (SaaS) solutions. Faced with intensifying competition and tightening operating budgets a growing number of companies can no longer tolerate the escalating costs and disappointing return on investment (ROI) of legacy applications. As a result THINK strategies have found that an increasing proportion of organizations of all sizes are considering and adopting on-demand alternatives to traditional, on-premise software applications. Many of these organizations who are aggressively expanding their use of on-demand applications are finding that traditional, rapid application development (RAD) and legacy architecture such as .Net are not well-suited to supporting their on-demand application needs. THINK strategies continues to hear from customers that are frustrated with applications written in various RAD tools such as PowerBuilder , older versions of Visual Basic and other tools that may have poor documentations or are no longer fully supported. In other cases companies have had to deal with the inefficiencies of having different applications residing on separate servers

These organizations are now seeking to standardize on an on-demand platform that can more easily and cost-effectively meet their business needs. They are also interested in thinking about the future and selecting the right development and delivery platform to support their future requirements

Introduction

Software as a Service is a software distribution model in which application are hosted by a vendor or by a service provider and the vendor made it available to the client over a network. We can say that it is a software delivery method that can provides access to the software and its functions remotely as a web-based service, Software as Service allows the customers or organizations to access it business functionality at a cost usually that is lower than paying for licensed application. Software as service pricing is usually based on monthly fee, as well as, the software is hosted by a remotely, customer don’t need to buy additional hardware. Software as Service also enables the organization to remove the need to handle the installation, set-up and often daily upkeep and maintenance. Software as Service is becoming an increasingly prevalent delivery model as underlying technologies that support webhosting and service oriented architecture mature and new development approaches like Ajax become popular.

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SaaS is closely related to ASP and on Demand Computing software delivery models. in the software on demand model, the provider gives client or organization network based access to a single copy of an application created specifically for the software as service distribution.

CONCEPT

The concept of SaaS took hold at a time when information technology executives were fed up with the ballooning costs of packaged enterprise software. Company had to spend thousands of dollars just to buy one software license, as well as they also had to spend more dollars for the implement the software, that include the consulting fees, and the training costs, and some extra infrastructure that was required to run the software and maintenance fees. As a result, SaaS emerged from the wreckage of botched multimillion0-dollar CRM & CRP implementation as a radical alternative to the software licensing models. Software as a service is a speedier cheaper implementation and easier.

Enterprise Software Applications delivered as SaaS include business applications such as customer relationship management (CRM), web conferencing and collaboration applications, HR applications like talent management and payroll, enterprise resource management applications like ERP, supply chain management (SCM), product lifecycle management (PLM) and so on.

The key characteristics of SaaS are:

• Software as Services is only rented for the purpose of use they are not owner.
• This software’s are installed at a central server rather than on the client machines. The customer can access to the application through the internet. The vendor is responsible for the proper maintenance and performance of the software.
• The vendor provides the facilities such as maintenance, support & upgrades to the software from the server. The provider is also responsible for the up gradation of the software.

Situation

Analysis of the demand for the Software as a Service, here we are going to discuss whether sufficient demand for the specific product is prevailing in the market, and what are the advantages and disadvantages for using it.

RESEARCH METHODOLOGY

In the research methodology we have colleted data through search on internet keeping in view the demand and supply side. The detail of the research elements are as under:

At the first step we had colleted data relating to the public information sources on the internet. Our main information pertains to the Vendors, their earning statements, visiting their websites and white papers. In addition, other data is also collected for different areas such as government bodies, blogs, journals, articles, reports, and from other research bodies.

KEY TRENDS IN THE World

The sample was drawn from an external panel of IT and business management professionals, the Dun & Bradstreet database, and other customized databases. Because of the nature of conducting large-scale global surveys, the quota of one-third, one-third and one-third was not completely attained. However, we believe the geographic mix obtained (North America representing 26%, Europe 38% and Asia/Pacific 36%) provides a solid representative global viewpoint

SaaS is gaining momentum in Asia Pacific regions. Asian companies are increasingly seeing value in purchasing the SAAS based software’s although they are far behind Software as a Service (SaaS) is quickly gaining momentum in the Asia Pacific region. Although the region is far behind North America and Europe in terms of awareness and adoption of this new model, Asian companies are increasingly seeing value in buying subscription-based software services. As a result, the Asia Pacific region has emerged as

One of the fastest growing SaaS markets in the world, which is drawing strong attention from SaaS vendors in the US and Europe. Leading international vendors are in the midst of localizing their offerings as they strengthen their direct and indirect sales and marketing presence in the region. Springboard Research estimates that the market for Software as a Service in Asia Pacific (excluding Japan) will grow to US$501 million in 2008 registering a CAGR of 84% from 2005 to 2008. The market was around US$80 million in 2005, which represented a growth of 82% over 2004.

SMB and Large Enterprise Trends

The benefits of SaaS are more evident in the SMB market segment, which has been identified as the first battleground for SaaS providers. SMBs who usually find it hard to invest in IT infrastructure or other technical resources like manpower are looking at SaaS as a sort of IT lifeline. SMBs in verticals like technology, trading and distribution services, software services, and business services have been early adopters of SaaS in Asia Pacific.

SaaS Application Dynamics

SaaS is moving beyond CRM, the most fashionable SaaS application made popular by vendors like Salesforce.com and RightNow Technologies. Web conferencing, HR applications, Enterprise Resource Planning (ERP), Supply Chain Management (SCM) and Product Lifecycle Management (PLM) are gaining acceptance in the region. Of these, Web conferencing and collaboration tools have been one of the fastest growing SaaS applications.

This pioneering segment represented half of total SaaS revenues in 2005. CRM is followed by Web Conferencing & Collaboration, which held a 30% share in 2005, followed at quite a distance by Back-Office and HR applications.

SaaS vendors are definitely moving in that direction. Vendors like Salesforce.com and Webex are pushing integrated applications in the market taking software as a service beyond their core. They are also working with other application vendors and ISVs to offer a range of applications.

Country Adoption Trends

Given the cultural and economic complexity and diversity of the Asia Pacific region, the adoption of SaaS is not uniform across the region. Australia and New Zealand are closer to North America in terms of SaaS adoption trends. Australia is therefore the largest SaaS market in the

region. Growing broadband uptake in the SMB segment, which dominates the New Zealand economy, has seen many SMB companies opting for SaaS the country.

China and India are seen as countries with the greatest potential in the mid to long term future. Many vendors are even considering developing India as their hub for servicing their SaaS clients across Asia Pacific and other regions of the world. Singapore, Hong Kong, Korea and Taiwan are other key markets in the region.

Analysis

There are several factors driving the adoption of SaaS , but the cost advantages and ease of implementation and management are the key drivers. Software buyers in Asia are beginning to look to lower IT investment risks, increase management simplicity, elevate quality and lower costs, all of which are helping SaaS find favor in the region. In addition, the strong economic growth in Asia, lack of legacy applications and low IT penetration in general makes SaaS an intriguing option for many regional firms. As is the case elsewhere around the globe, actual and perceived cost savings, especially among segments of SMBs, have been a prime driver. However, more than that, Asian companies are finding SaaS attractive because of the IT and business benefits that it offers. Each of these market accelerators is described in greater detail below.

COST ADVANTAGES

The key value propositions driving adoption of SaaS among Asian enterprises are no different from those in North America or Europe. As such, as in North America and Europe, among the primary drivers of SaaS adoption in Asia Pacific has been the cost element. User organizations are now less inclined to pay hefty license fees and have been moving towards the concept of utility on-demand services not just in the software space, but in other IT service segments as well.

EASE OF IMPLEMENTATION AND MANAGEMENT

The speed and ease with which SaaS applications can be implemented is another key driver for this emerging market segment. IT departments in the region are challenged like never before due to the growing cost of IT manpower as well as a shortage of it. Moreover, in a region where most companies do not have dedicated IT executives, SaaS is a more convenient option as they can use sophisticated software applications without worrying as much about their maintenance and management.

FOCUS ON CORE COMPETENCIES

As more companies move their business online as a strategy and look at improving efficiency to serve their customers better and faster, SaaS is emerging as a strategic option for many enterprises in the region. A growing number of enterprises in the region are adopting SaaS

Because they want to focus more on business and less on IT. This essentially means that they would prefer to minimize IT investments and instead focus on IT capabilities that help them enhance their business. They want to realign IT to their business needs and hence want a more

flexible application deployment model.

GLOBALIZATION OF ASIAN BUSINESS

As Asian business goes global and more global companies expand their presence in the region, SaaS makes it easier for deploying applications in new offices. Moreover, globalization of a workforce that is increasingly mobile has also been a key factor in the growing SaaS adoption in the region.

IMPROVEMENT IN BROADBAND INFRASTRUCTURE

The growth in the Asia Pacific SaaS market has also been aided by the improvement in the broadband infrastructure in the region. Broadband access has grown considerably in most Asia Pacific countries in the past couple of years. This has helped the cause of SaaS as access to high quality broadband connectivity is a must if on-demand applications are to run smoothly.

BARRIERS TO ADOPTION

Even though the market is growing in the region, there are a host of factors inhibiting a smooth take off of SaaS in Asia Pacific. Some of these reasons are country specific, others industry or application specific (which we have described in detail in chapters on applications and countries), others are common across the region. We have described the major barriers to adoption of SaaS in Asia Pacific in detail here.

LACK OF AWARENESS AND UNDERSTANDING

The biggest barrier inhibiting the adoption of SaaS beyond a small section of the market is a lack of awareness and understanding of SaaS. A large number of companies do not even know of the existence of SaaS as an alternative to the traditional model of software delivery. Hence, they do not take it into account at all while considering a software deployment.

RESISTANCE TO PAYING FOR SERVICES AND PIRACY

In many countries in the region service is often taken for granted and viewed as something that must be offered with an application for free, or nearly so. Moreover, in a region where piracy is rampant and many SMBs use pirated versions of software, there is also a lack of willingness to pay for services. Why pay for a software service when you can get the software itself for free? This is the question that many vendors often encounter in the region. There are surely a growing number of companies who would not mind paying for software services provided that direct business benefits are delivered.

LACK OF TRUST AND PERCEIVED RELIABILITY

Trust and reliability are key challenges because many of the SaaS vendors are small companies and startups that are little known in the region, which holds back adoption. As seen in the market survey, many companies want their traditional software vendors to offer SaaS applications because they are well known and established brands, with relationships of trust and reputations of reliability already established.

SECURITY CONCERNS

Security is another key issue. Many prospective users consider SaaS applications less secure than on-premise applications. This perception exists largely because of the fact that a SaaS application resides in a server outside the user’s premises in a shared environment. Security of

on-demand software applications could emerge as a major worry for enterprises as it could mean more Internet-based threats to the applications they are using.

DIFFICULTY IN INTEGRATION

Many prospective users are wary of deploying SaaS applications because they believe it will be difficult to integrate them with their existing on-premise or packaged software applications. Moreover, many of the on-demand software applications are perceived as a “stripped-down” version of the traditional software applications, which makes them less attractive for potential users.

BANDWIDTH ISSUES

The quality of telecommunication infrastructure will be crucial for the growth of SaaS. Many of the SaaS applications consume substantial bandwidth. Even though bandwidth is not an issue any longer for most enterprises, bandwidth intensive applications are often problematic. As

applications are accessed online, the quality of bandwidth from the enterprise end to the data center where the application is hosted could be an issue in many cases.

Conclusion

Software as a service is a very different model than the traditional software license and maintenance and client server model. Software as service will be the way through most applications will be delivered in near future. We can say that technology innovations are the primary driver for SaaS adoption. it is an attractive delivery model for high volume and commoditized business processes in back-office banking, as well as SaaS does not have to be all or nothing value proposition, we can operate it in a hybrid model. Developments of Saas vary by region. while Europe, the Middle East and Africa respondents cited total cost of ownership as the main motivator, North America and Asia/Pacific participants focused on ease and speed of development. Although SaaS does not provide any guarantee to be less expensive than on-premises software and it also had some risks. In some organizations it is very difficult to relinquish control or trust third parties to manage their applications and data

A series of macro-trends is fundamentally changing the way businesses must operate. Globalization is changing the competitive landscape, and mobility is changing the way workers do their jobs. An explosion of consumer-oriented, on-demand services, led by Amazon.com and

Apple’s iTunes has taught people how easy it can be to access and share information or the goods and services they want.

These experiences, combined with the escalating competitive climate and challenges of managing an increasingly dispersed workforce, are forcing businesses of all sizes to re-think how they acquire and utilize software applications. Unwilling to continue to tolerate the operating inefficiencies and ongoing costs of traditional on-premise software products, a growing number of businesses are now adopting on-demand solutions to meet their business needs.

This has opened the door to an exciting new era of opportunity for organizations to leverage and build their own on-demand applications and a Pandora’s Box of challenges for organizations trying to develop and deliver SaaS solutions in a cost effective fashion. In addition to designing a unique on-demand solution, they must build and deliver it in a scalable and secure fashion. For ISVs, this must be done without the benefit of the upfront revenues of a traditional, perpetual license model. Instead, the pay-as-you-go subscription pricing approach inherent in SaaS places significant financial constraints on aspiring SaaS vendors. Yet, they must still get to market quickly and scale their operations in order to keep pace with escalating competition and customer demands in the SaaS market.

References:

• “Market Trends: Software as a Service, Worldwide, 2007-2012,”
• “Essential SaaS Overview and Guide to SaaS Research,”
• “User Survey Analysis: Software as a Service, Enterprise Application Markets, Worldwide, 2008 by Sharon Mertz, Chad Eschinger, Chris Pang, Yanna Dharmasthira”
• “The Software as a Service Market in Asia Pacific Ravi Shekhar, Dane Anderson”
• “Saas and Web Applications Specialist Level Complete Certification KitBy Ivanka Menken”
• “http://www.online-crm.com”