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Many software delivery paradigms have come and gone. And many more will follow. But the one aspect that remains constant is that unless the acquisition drive of any emerging paradigm keeps up with the dynamic nature of software business it could loose its way pretty soon. Software as a Service (SaaS) is emerging as one such software delivery paradigm that can potentially change the economics of the software business.

SaaS is a multi client software application delivery model that allows users to rent Web-based software from the service providers site. Thus, instead of buying a software license (traditional way) and then implementing and maintaining the software on its data center, the customer can simply access the vendors server over the Web, utilize the hosted application and pay on a per usage basis. The customer is alleviated from the maintenance and daily technical operation and support of business and/or consumer software.

Meanwhile, global IT Services have undergone dramatic changes in recent times. The emergence of Global Delivery Model (GDM) of Indian IT Service vendors has changed the rules of service delivery. And now SaaS is seen as another disruption in the software business that is expected to shake up the IT Services market. Will the economics of SaaS take away their traditional source of revenue or open up newer business opportunities for Global IT Service firms? How potential combination of SaaS and global sourcing delivery models play out? The answers to these questions will have huge implications on the Global IT Services business.

Outsourcing & SaaS
The confidence that SaaS has the potential to shake-up the traditional software delivery system stems from the fact that the inherent drivers of SaaS adoption are much the same as witnessed for outsourcing.

Cost saving has been the single most important driver for companies in developed nations to offshore work in business processes & IT Services. Additional benefit of outsourcing is the alteration of cost structure from capital expenses to operating expenses making scalability of processes as a variable cost. This has resulted in greater cash flow efficiency for the firms using outsourcing. SaaS as a service delivery model for technology too promises the same benefits that companies in the past decade have experienced with outsourcing of business processes and IT Services.Where SaaS differs from the outsourcing wave is in its adoption trend. While larger corporations (Fortune 500) were the flag bearer of offshoring adoption, SaaS is currently more popular with SMBs. However, large corporations are slowly increasing adoption as issues related to customization capability and cost-effective transition path from legacy systems are being addressed.

Large corporations had always shown concerns in sharing information to third party vendors citing data security and customer privacy issues. However the safe and secure outsourcing experience in IT and business processes over the past few years has helped these companies to overcome most of these fears. This gained confidence of entrusting third party vendors with sensitive information in an offshoring engagement has translated into a mindset change that definitely augurs well for SaaS adoption across large corporations.

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