Other SaaS Benefits
While enterprises that are moving from the traditional method of buying licensed software to SaaS, are renegotiating the entire buying cycle economics, it is not only pricing that is the sole advantage of this model. Enterprises are shortening the cycle of request for information and proposal, evaluation of proposal, demonstration, solution approval, procurement logistics, deployment, user testing and actual deployment on production environment. The inherent advantage of this model is the fact that what you pay for is what you consume. Professional services, ongoing support costs, upgrades, etc are included in the fees paid for the service on a per unit basis.

"The penetration of PCs/laptops/mobile devices and pervasive Internet connectivity are the driving force toward adoption of the concept in India" -Vishwas Mahajan, CEO, Compulink

SaaS also reduces the risk of failure of projects and allows for faster deployment of services. The level of maintenance required is low and there is no requirement for an IT support team. SaaS thus helps to redeploy IT staff and tools to focus on strategic technology projects that impact the enterprise's bottom line. In any traditional software, there is need for resources to implement the application and maintain it. Besides, regular yearly upgrades are necessary. For organizations with a multi-locational presence, investment on the software is made separately and these systems have to be inter-connected.

Challenge to Outsourcing?
'On-premise' vs 'on-demand' in software is a similar debate as outsourcing vs, insourcing. The key lies in control. The decision of choice between the two models entirely depends on the business strategy and cost benefits that each organization looks at. Having said that, a transition as such should not be very difficult, considering the lifecycle of software. Says Datar, "Software typically has a small lifecycle and hence upgrade is always an opportunity for moving on to SaaS. Most software vendors don't give support for more than 36 months and an upgrade beyond the timeframe includes cost of training as well. These problems are mitigated in the SaaS model."

Besides the short lifecycle, legacy systems are also a consideration. "Unlike global companies, many Indian companies have very limited legacy systems. Therefore adoption of SaaS model is relatively easier", says Mahajan. SaaS benefits are applicable to all organizations. However, there are variants in the hosted solutions that organizations can adopt as per their requirement. At the lowest end, companies have the option of just renting software, simple SaaS. Next stage, the organization that provides SaaS is managing it by helping with resources to actually handle some of the entries of the transactions. And then, it would move on to areas of business process services like BPO.

"While earlier IGetIt (engineering services training application) would cost companies thousands of dollars in licenses, now it costs them only $95 on per user basis" -Kevi Noe, MD, Tata Technologies IKS

Datar feels that the traditional model of outsourcing enterprise applications to third-party service providers could face a serious challenge as the SaaS model matures. "Not that outsourcing will go away altogether, just as the traditional licensed based model too would not completely vanish. Ultimately, it could be a combination of all three co-existing: while large enterprises could use SaaS model for non-core applications, the SMBs could go whole hog." Even in an outsourcing model, though pains of manageability, scalability and costs are less than license-based on-premise model, some headaches still remain for CIOs who can be wiped off by SaaS.

Better than ASPs
As a predecessor to the SaaS model, ASPs have already tested the market, though not very successfully. While both models refer to centralized delivery of software, there are some factors that differentiate the two. For instance, SaaS supports multi-tenancy whereas ASP is a single tenant. In other words, the ASP installs an instance of the application for each customer and if there are 100 customers using the same application there will be 100 instances running. In case of SaaS, there is only one instance of the software, which is shared by different customers. As a result, updates are faster in SaaS when compared to ASP.

ASP follows the traditional way of selling licenses whereas SaaS goes by the pay-per use concept. Also in cases of the developer of the software could be different from the one hosting it, which involves paying license and hosting fee, which is not the case with SaaS. SaaS, on the other hand, is very similar to the subscription-based model proffered by some of the Linux OS vendors.

Rajneesh De
rajneeshd@cybermedia.co.in

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