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BW Businessworld

A Service Solution

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Software as a Service (SaaS), is heralded by many as the new wave in application software distribution. The term software as a service (SaaS) is now considered to be part of the nomenclature of cloud computing, along with infrastructure as a service (IaaS) and platform as a service (PaaS).

While the prediction by some analysts that packaged software will cease to exist has been proved wrong, yet the spirit of this change – the delivery, management and payment of software as a service rather than a product — is affecting all participants in the software industry.

What Do We Mean By Software As A Service
Software as a service or SaaS, sometimes referred to as "on-demand software," is a software delivery model in which software and its associated data are hosted centrally (typically in the (Internet) cloud) and are accessed by users using a thin client, normally using a web browser over the Internet. SaaS has become a common delivery model for most business applications, including accounting, collaboration, customer relationship management (CRM), enterprise resource planning (ERP), invoicing, human resource management (HRM), content management (CM) and service desk management. SaaS has been incorporated into the strategy of all leading enterprise software companies.

In the software as a service model, the application, or service, is deployed from a centralized data centre across a network - Internet, Intranet, LAN, or VPN - providing access and use on a recurring fee basis. Users"rent," "subscribe to," "are assigned", or "are granted access to" the applications from a central provider. Business models vary according to the level to which the software is streamlined, to lower price and increase efficiency, or value-added through customization to further improve digitized business processes.The core value of software as a service is providing access to, and management of, a commercially available application.

The Gartner Group estimates that SaaS revenue will be more than double its 2010 numbers of $10 billion by 2015 and reach a projected $21.3 bilion. Customer relationship management (CRM) continues to be the largest market, with SaaS CRM revenue forecast to reach $3.8 billion in 2011, up from $3.2 billion in 2010.

What SMBs Need To Know About SaaS
SaaS is no longer a trend, but an accepted business reality. For SMBs, outsourcing their IT activities such as Microsoft Exchange that are not part of their core business can allow them to considerably save on costs and remain competitive.  They can also reallocate some of the capital expenditures and payroll costs by choosing the SaaS model rather than internal data centre and traditional software licenses and maintenance—all while improving productivity. Smaller companies who lack the financial and/or technical expertise can find themselves competing on the same playing field that larger corporations do in terms of their technology solutions.

While SaaS adoption continues to grow amongst SMBs, evaluation of the many options in the market can be overwhelming.  However, the key items for consideration by both IT and business decision makers include:

  • Necessary features for your business

  • Security and scalability

  • Time for implementation and service expectations

  • Integration of SaaS services with your existing applications

Other details to be considered include:

As growing businesses increase their use of SaaS technology, the need for integrating the businesses' applications is critical. SMBs want to retain legacy systems, so key characteristics for integration include:

  • Simple to implement

  • Out-of-the box connectors with cloud and legacy systems

  • Ability to configure without customization

While the comfort level with cloud computing is growing, many businesses are still wondering where to begin and need to find a partner to simplify the selection and implementation process. There is a new class of experienced partners who offer an end-to-end solution and who are capable of delivering multiple SaaS applications, plug and play integrations, cross application analytics and turnkey services. These partners can stand behind their solutions. The value-proposition a partner can bring is significant for a small- or medium-sized business who may need an end-to-end solution with implementation, integration, business process consulting and support across multiple applications.

SaaS Licensing Models
Today's Software as a Service pricing and licensing models can be confusing to say the least. Options include: 
Subscription-Based Model: Monthly payment is calculated on the software actually used, and includes acommitment as to the actual number of users. Subscriptions are usually written on a per-seat or nameduser basis.
Usage-Based Model: Payment is determined by application usage and is typically related to peak or near peak levels of usage. Payment may be tied to the number of CPUs (customers are charged for every computer that runs the hosted application). It may also be a written for number of concurrent users.
Transaction-Based Model: Service providers that provide online scheduling and similar products sometimes charge customers for each business transaction: purchasing one introductory relational database class is one service; two classes are two services, and so on.
Value-Based (a.k.a. Shared Risk or Revenue) Model: Premised on the provision of whatever software isneeded to achieve business goals, and payment is linked to the achievement of those goals.
The Fixed-Fee Model: An emerging option, users generally pay a predetermined monthly fee based onnumber of users supported, which application modules are rented and service and support levelsspecified by the customer.

In The End...
Many questions remain on where the Software as Service market is heading and all signs suggest that the "supply side" of the software as a service market is vibrant and has a high momentum. The massive influx of venture capital, investment in infrastructure, the growth of the value chain and the entry of established vendors indicate that the model has staying power.

But for those focused on entering the SaaS market, one overarching question surrounds customer acceptance and adoption -- the demand side of the equation -- of software services. It is clear that the large companies and dotcoms have been the key near-term drivers of software service demand. However, the large number of SMBs in India would prove to be valuable market for SaaS adoption. As the industry matures, the providers with true staying power will emerge.

(The author is CEO, GlobalOutlook)