Servicing Software Needs

Source: Dataquest

When Marc Benioff and Parker Harris co-founded Salesforce.com in 1999, it was the addition of another entity in the assembly line of the dotcom dream, with little inkling of the revolution they had just given birth to. Therefore, in 2001, when the bloodbath and carnage was wiping out the dream, many would have thought that Salesforce.com would be another dotcom poster boy who would get consigned to cyberspace history. Instead, Benioff and Parker pulled through, and six years down the line Salesforce.com had surely given birth to the new phenomenon in software evolution-the model of SaaS or 'software as a service..'

SaaS is a method of selling software in which a vendor or service provider hosts the applications and makes them available to customers as a service, rather than as a product. This, according to Kiran Datar, MD, WebEx Communications India, is an emerging software delivery model in which application software is delivered remotely through a subscription-based fee rather than being sold for perpetual use. Sanjit Sinha, IDC India believes that SaaS allows a company the flexibility of using an application as and when it wants to, without having to bear the cost of buying it and thereby forcing its use.

As a new method of delivering software to the enterprise, Datar feels that SaaS would eventually mark the decline of the software-licensing era. The concept has evolved over the years, from a dotcom model to custom software to licensed software. Then came the offer of services along with the product and then software that was driven by services. Through this evolution SaaS has donned various avatars: hosted services, ASP (application service provider) services, utility computing and software on-demand. However, the fundamental idea has remained constant: instead of buying and installing expensive packages (enterprise applications), users can now access them over a network, with an Internet browser being the only absolute necessity.

Globally, the SaaS market till date has been dominated by the likes of Salesforce.com, WebEx Communications and Rightnow Technologies. However, as the entire software revenue model undergoes a paradigm shift, the big software vendors like Microsoft, SAP and Oracle too are now planning to jump into the bandwagon. The growing realization that the traditional software licensing model could get affected by SaaS, particularly among the SMBs, has resulted in the biggies too coming to the party. In India currently, Web conferencing and collaboration represent the largest portion of the total SaaS revenues. Salesforce.com is gradually making its presence felt, especially in the CRM domain (globally they have beaten the traditional CRM leader Siebel) while vendors like Tata Technologies IKS (engineering services training) and Compulink (collaboration portal) are bringing in new domains into the SaaS fold.

"The subscription model by SaaS will enable customers to have a computing environment that scales up or down, with seamlessness and continuity and flexible pricing"
-Kiran Datar, MD, WebEx Communications India

Reducing Costs
Pricing factor seems to be one of the biggest advantages of the SaaS model in India. By adopting SaaS-based applications for certain business processes, SMBs can reduce capital investment which they might incur in terms of setting up huge infrastructure, resources, software licenses, maintenance/upgrade costs and skilled IT manpower, if they buy and run similar applications within their premises. An example could be that of IGetIt, the engineering services training application from Tata Technologies IKS, who are transforming themselves from a traditional license-based model to a SaaS one. Informs Kevi Noe, MD, Tata Technologies IKS, "While earlier IGetIt would cost companies thousands of dollars in licenses, now it costs them only $95 on per user basis."

Software as a service also means higher revenue from applications due to volume, quicker upgrades and platform-independent applications. From the business angle, Vishwas Mahajan, CEO, Compulink feels that B2B integration/collaboration will be easier due to common platforms and compliance to standards. The penetration of PCs/laptops/mobile devices and pervasive Internet connectivity are the driving force towards adoption of the concept in India. In the SaaS pricing model, most vendors are providing services on a subscription basis, and payment can be made as per actual usage of the application.

In the wake of organizations looking at combating the spiraling costs of owning licensed software and upgrading it subsequently, Datar feels that the SaaS model will provide huge benefits for companies in terms of cost when there is a shift from their capital expenditure to their operating expenditure. The subscription model by SaaS will enable customers to have a computing environment that scales up or down as demand dictates, with a seamlessness and continuity that minimizes or eliminates disruption for end users, and with flexible pricing.