As one of the hottest buzzwords in the business over the last couple of years, Software as a Service (SaaS) has transformed the manner in which vendors conduct their business and enterprises use software. Easy to use, quick to deploy, and limited upfront investment coupled with reduced software management responsibilitymake SaaS a desirable alternative to the On Premise model.

Simply put, SaaS is a term used to describe a software application delivery model which sees a software vendor host applications over the Internet and deliver those applications to the customer for a recurring license fee.

But what makes SaaS truly different from the On Premise model is that no hardware or software needs to be purchased, implemented, maintained, or upgraded. The organization simply needs to use an Internet browser to plug-in. And since there is no software to install, time-to-benefit is accelerated.

For instance, the free email systems offered on the Internet like Hotmail or Gmail meet the basic criteria of a SaaS application. A vendor (Google, Yahoo! etc) hosts all programs, logic, and data in a central location and provides end-users access to this data and software that runs, and is used, over the Web.

The key benefit of SaaS is the lower upfront cost, which results in lower entry barriers for customers looking to acquire software applications. Moreover, customers do not have to fret about maintenance and upgradation since they are taken care of by the vendor, enabling them to focus on business processes and cut down on the size of their IT team. Another advantage of SaaS is the plug-and-play nature, thereby reducing time to deploy and in turn reduce the time to market.

SaaS can be divided into two main categories: first is the line of business services that refers to business solutions offered to companies and sold or made available on a subscription basis. Applications covered under this category include business processes like supply-chain management programs, customer relations applications and others. The other category is the customer-oriented services offered to the general public either on a subscription basis or free but is supported by advertising.

The SaaS model has democratized the local SaaS vendors and ISVs putting them at par with the larger vendors in terms of reach and access to customers	Indian SaaS market is the fastest growing market in Apac. With a CAGR of 76% over five years, the Indian SaaS market is pegged to reach Rs 1,050 crore by 2011

The Indian Market
Data from Springboard Research shows that noise around SaaS in India is more than just hype. According to Springboard, even though the Indian SaaS market currently constitutes a small percentage of the Apac SaaS market, it is one of the fastest growing markets in the region. Pegged at Rs 110 crore in 2007, the market is expected to have a CAGR of 76% from 2007-2011. What is significant is that by 2011, the Indian SaaS market is pegged to reach Rs 1,050 crore.

Springboard further estimates that local ISVs and small players have captured 54% of the Apac SaaS market during 2006-07, with the remaining market dominated by established players like Webex and Salesforce. However, local vendors are expected to play a bigger role in the growth of the market since most of these local vendors are the preferred choice of SMBs. Until now considered to be the Holy Grail for software vendors, SaaS is a viable alternative for Indian SMBs who could not deploy expensive software applications due to high maintenance, upfront, and upgradation costs. The SaaS model has democratized the local SaaS vendors and ISVs, putting them at par with the larger vendors in terms of reach and access to customers.

With more and more Indian companies going global, SaaS will see an uptake in adoption. Simply because for any company in the expansion mode, it is much easier to roll out an On Demand model for every new center, rather than do costly rollouts at each location, and then integrate them into a single system.

Understanding Trends
Issues around control, integration, security and limited application are downsides that need to be considered before a company turns to this increasingly popular software-buying model.

Perhaps sensing the data security and confidentiality issues, Oracle has come out with three unique SaaS models. The first model is the Shared Pods wherein a customer shares the network (like in any other model); the second is the Private Pods, where a customer apprehensive of sharing confidential data on a shared network uses an exclusive network albeit in a host-it service; and the third is the @customer model in which an On Demand network hosted in its own premise is used by the customer.

The other important trend is the change in the software industry and IT infrastructure. Odds like poor Internet connectivity and network are a thing of the past even in tier-2 and -3 cities. And with this challenge resolved, SaaS will probably see an uptake soon.

Popular Applications
On the applications front, On Demand ERP will see an uptake in demand fuelled by large enterprise as well as SMBs. Since most large enterprise use point solutions that are not integrated centrally, in order to integrate them, the enterprise will have to use the host-it model. Meanwhile, the SMB sector, which has not had any core application so far, would also deploy On Demand ERP.

In the next 2-3 years, one will see demand for applications like CRM, security applications, collaboration, and human resource management tools going up in large-scale enterprises. The arrival of social CRM application from Oracle is interesting. Based on the Web 2.0 technology, users can log onto the application without logging into the application. The other option is accessing other applications like Google via the social CRM application. This implies embedding the social CRM application with other applications.

Of late, contact center solutions have also picked up. Offered by telecom players like Tata Communications, the market for these solutions though is still very niche and limited. The reason being that most contact centers have already invested heavily in On Premise model, and, therefore, are unlikely to shift.

The other applications gradually finding audience include project management tools (popular in the government sector for e-commerce platform); email management tools (since most companies outsource their email requirements owing to compliance and security issues); On Demand collaboration tools (to be used in online marketing and conducting Web seminars); infrastructure support and management; HR related services (employees filling up travel and reimbursements online).

Road Ahead
Most industry players agree that the market for packaged software is on the decline and with this the need to upgrade ones systems every two years will also be done away with. And all this has happened because SaaS has presented a viable alternative to the On Premise model, and with low cost of installation, the time-to-market has also been reduced significantly.

Concerns about data security (as it is hosted on a shared network) are being resolved and more customers are beginning to trust the vendor resulting in more growth for the SaaS market in India.

In India, one will see action in the SaaS market from established players like Oracle, who is aggressively wooing the space. With established players looking to build on mind share by creating awareness about SaaS, the local players too stand to benefit from it. Almost all major players are looking to establish direct presence in the Indian market. Most SaaS selling in the Apac region is done directly by vendors without the active support of channel partners. But with post-sales equally important when it comes to addressing customer issues in integrating and utilizing the application fully, it is imperative that SaaS vendors leverage channel players to scale to next level of growth.

Stuti Das
stutid@cybermedia.co.in

Page(s)   1