SaaS Trends

Many IT professionals and industry “gurus” have questioned whether SaaS was a viable alternative to traditional, on-premise applications, especially in large enterprise environments. SaaS was viewed as a skinnied-down version of established applications that couldn’t scale or be customized to meet the needs of complex organizations. They also questioned whether SaaS solutions could integrate into legacy environments or be protected against system outages or security threats in order to meet escalating regulatory and compliance issues.

The trend in the market provides some insights. A brief outline of the trend (Source: Cutter consortium survey on SaaS usage) and the force behind the change is highlighted below.

There have been three significant drivers behind the growth of SaaS,

• Most organizations are no longer willing to tolerate the extended deployment cycles, ongoing administrative hassles, higher-than-expected operating costs, and lower-than-expected ROI of legacy applications. Therefore, reducing the time, aggravation, and cost of implementing and managing software so an organization can more fully leverage its functional benefits is driving many to examine SaaS alternatives.



• Success of on-demand services in the consumer market. The extraordinary popularity of Amazon.com, Google, Tunes, Yahoo!, and YouTube has made accessing content and services via the Web commonplace for people in their personal lives. They now want this same ease of use and set of user benefits in their professional lives.



• The proliferation of broadband networks that make it easier for organizations and end users to access online services, along with new software development tools and techniques that make it easier to develop these services.

The usage / consideration to use of SaaS is growing, according to a survey done by Cutter Consortium almost 1/3 of organizations are using SaaS and 43% are considering usage.

The primary motivations for adopting SaaS are the ability to accelerate the deployment process (67%) and to eliminate additional infrastructure costs (63%). Allowing internal IT and application staff to focus on more strategic projects (56%) is also an important reason for adopting SaaS, according to survey respondents (see Figure 4). The improved ROI and cost effectiveness of SaaS solutions (40%) have also been seen as the greatest benefits of this new software delivery model. The ability of current users to generate tangible and measurable results from their SaaS solutions (21%) has encouraged many other organizations to consider and adopt SaaS as well.

Fig 2 – Reasons for adopting SaaS

For most casual observers the misconception about SaaS is that it is best positioned to handle CRM, SFA, and other front-office end-user applications. In reality corporate customers are trying hard to leverage SaaS in both Functional and Industry specific areas.

In recent times users of SaaS solutions as well as those considering these on-demand alternatives are adopting or planning to deploy them in both front- and back-office areas. The greatest penetration of industry-specific applications is in the banking/financial, consumer products/packaged goods, and education sectors. A substantial number of users are also leveraging industry-specific SaaS solutions in the government and manufacturing sectors.

A growing number of SaaS vendors are responding to the escalating demand for industry-specific on-demand software services. In October 2006, NetSuite unveiled a new platform called SuiteFlex, aimed at delivering a new generation of vertical market applications. This is inline with what Salesforce has been nominally successful in doing using its AppExchange platform. There is also a growing assortment of industry-specific SaaS vendors, such as Builder Lynx in the construction industry, ePoweredSchools in the education arena, and LeanLogistics in transportation.

Fig 3 – Usage of SaaS in vertical market/ industry-specific applications

Key Benefits driving SaaS

Unlike many over hyped technology fads, which are driven by vendor innovations rather than genuine customer needs, the SaaS movement is rapidly expanding because the growing array of on-demand applications truly addresses longstanding shortcomings in traditional on-premise applications. Unlike legacy enterprise applications, which require a substantial up-front capital, expense to acquire the perpetual license and associated hardware platforms to support the software, customers can acquire SaaS solutions on a subscription pricing basis. Not only does this model significantly reduce the up-front cost, but it also permits organizations to purchase usage rights based on the actual number of current software users rather than buying excess capacity to anticipate future needs as they had to do with legacy applications. This approach also mitigates the financial risk of an organization not being satisfied with an application.

Also increasing the likelihood of success in the SaaS model is its rapid deployment capabilities and the elimination of any customer responsibility for application support. The online on-demand delivery model associated with SaaS eliminates the long deployment cycles that have been common with traditional enterprise applications. SaaS also takes the burden off the customer for maintaining and updating the applications. Instead, SaaS vendors are responsible for continuously maintaining and updating their solutions.

Key Drawbacks of SaaS

Some of the main drawbacks at this juncture for SaaS are,

• Application performance problems, such as lack of availability or slow response times.
  
  
• Inability to customize SaaS applications to meet user needs. The SaaS model has been built on the supposition that on-demand software can satisfy a majority of customers’ needs by designing the applications to address the most common business requirements. By employing the classic 80/20 rule, SaaS vendors are delivering on-demand solutions which do not necessarily meet needs of all users.
  
  
• Software integration is a closely related concern to SaaS. Many customers want their applications to link to one another so they can fully leverage corporate data and even create new software capabilities.
  
  
• The prospect of hidden costs that could become budget-busters for the organizations is a big concern. This concern often stems from either the per-user or transaction-oriented pricing models, which could cause organizations to pay their SaaS vendors more than originally intended, as software usage levels rise or subscription prices go up.

Considering the importance of SaaS in the market place Aztecsoft has devised a program ‘SaaS enablement Programme’ to assist ISV’s in exploiting the benefits of moving into a SaaS model. The SaaS Enablement Program developed by Aztecsoft meets the needs, by providing both a consultative and tactical approach to guiding you-ISV through the business model, code, and operational analysis necessary to successfully launch and deliver their SaaS offering. SaaS Enablement programme is a fully supported partnership model that enables the development of a hosted infrastructure to quickly deliver the SaaS solution to market.