The economic slowdown may have had an impact on the IT sales. But SaaS continues to emerge as a cost-effective model rendering maximum revenue growth as well as higher customer satisfaction. India emerged as the fastest growing market for SaaS in the Asia-Pacific region and is expected to reach $267 million by 2011, according to Frost & Sullivan. The total estimated market for SaaS in India was $44.6 million in 2008. “SaaS market is very challenging and highly complex in India, as customers request highly customized products as per their varied requirements. However, the opportunity for SaaS providers is vast and strong in terms of a profitable growth in India,” says Asif Gani, Research Analyst, ICT Practice, Frost & Sullivan, South Asia & Middle East. An on-demand business software solution, SaaS is effectively addressing unmet needs of ‘sweet spot’ mid-market companies with 100–500 employees.
“Our software + services (S+S) is designed to deliver a new generation of seamless, service-centric experiences focused on the customer — personalized, integrated, and available nearly anywhere, regardless of connectivity or device,” says Moorthy Uppaluri, GM-DPE, Microsoft India. SaaS utility is spreading to a growing range of applications far beyond its early roots in HR, sales force automation (SFA), and CRM applications, asserts Liz Herbert, Senior Analyst, Forrester Research. “SaaS has continued to push the limits of customization in a one-to-many deployment model and has built integration capabilities to close in on the gap with on-premise solutions. Today, firms are deploying SaaS across a wide range of applications spanning from collaboration software to ERP to project management,” she says.
The Demand Driver
Hosted or subscription models allow companies to do away with the burden of having to hire, train, and retain talent to manage IT infrastructure, saving both cost and time. The main propellants for SaaS are cost (The ‘pay-as-you-go’ model makes it extremely attractive for SMEs), connectivity (broadband proliferation with ever-increasing speed has heightened interest in on-demand services aka cloud computing), and convenience (shifting to an alternate service is as easy as a mouse-click), according to Lakshmi Narayan Rao, Marketing Director - Global Channel Programs, Jamcracker. The applications leading the way include communication & collaboration solutions, CRM/SFA solutions, human resources management solutions, security, and business tools.
“Jamcracker offers a slew of solutions across multiple categories. SMBs and enterprises in India now have access to best-of-breed solutions via the Jamcracker SaaS catalog with world-class support and an average 99.99 percent service uptime guarantee,” adds Rao.
According to Frost & Sullivan, on-demand CRM held the major market share (35 percent) of key SaaS applications in 2008 across the Indian market, due to its potential to provide a sustainable alternative for customers dissatisfied with traditional licensing model. The market for on-demand CRM has grown nearly 70 percent in 2008. “Enterprises are increasing their focus on automating their supply chain in offering better experiences to their customers, by reducing response time, increasing productivity, and reducing costs,” agrees Uppaluri at Microsoft.
Accel Frontline has seen a lot of adoption of SaaS-based SFA and collaboration tools in the mid- market space, where this solution provider executes a large chunk of its business. At present, we offer ERP, CRM, and warranty management solutions on a SaaS model in India. “We believe that it is just a matter of time before office productivity tools, workforce management, BI, etc are adopted by enterprises in India. We intend to enrich this portfolio with more offerings in business intelligence for the financial services vertical,” says Rajeev Nair, Country Manager - Marketing ESS, Accel Frontline. Financial services, manufacturing, and education are big adopters of SaaS in India. “Be it on-demand ERP or collaborative applications, or applications for professional services, demand is building up and will see the market improving,” says Nirupam Chaudhuri, Senior Research Manager, AMI-Partners. According to Frost & Sullivan, ITES/IT vertical witnessed the highest demand for SaaS-based applications with a 23 percent share among all verticals in 2008 and is likely to grow at a CAGR of 65.3 percent in India.
Financial services, healthcare, and logistics have been the traditional hotspots for SaaS offerings primarily as these verticals also operate through geographically distributed workforce or distributed locations, thus adding to the complexity of application deployment, says Nair. However, the market will witness opportunities for more horizontal applications on a SaaS model, which can flourish only in a sales ecosystem driven by channel partners.
Data security and confidentiality are major concerns for most organizations while opting for SaaS-based applications. Low awareness of SaaS concept is one of the major restraints as many organizations are not very much aware of the benefits of this model. Few vendors in India are capable enough to provide robust framework for the smooth functionality of SaaS-based applications, as well as maintaining the standards necessary to have a secured data center for the safety of the clients’ data, says Ghani. Lack of awareness, resistance to change, and the cost of ‘ripping and replacing’ legacy technology are few inhibitors according to Jamcracker’s Rao.
However, there has been a tremendous upsurge in awareness in the past year, and currently it is in the cusp between awareness and consideration. The ongoing recession is only making the SaaS proposition more attractive and is accelerating the technology adoption, he says.
According to Accel Frontline, the clients are still worried about the safety of data, usage rights, and multi-tenancy issues during initial talk about SaaS adoption. This is overcome once ROI and benefits are communicated to prospective clients and if SaaS vendor is geared up with all security measures, adds Nair.
The Vendor Gameplan
The Vendor Gameplan
Today, both SMBs and large enterprises are looking forward to the convenience of software delivery and optimization of costs to move their applications on the software services model. One-stop shops (like Amazon EC2, Jamcracker) seem to enjoy an added advantage offering various solutions conveniently at an affordable cost for the customer. Boutique players (like Sugar CRM, and Salesforce) will also have their role to play. However, one-stop shops will have the benefit to help enterprises with various options of software solutions both on the cloud and as a service hosted by the partner. Microsoft offers the best of both worlds with a range of applications available as a hosted service and with Azure platform. “We also provide an operating system on the cloud that helps develop applications directly on the cloud or enhance the existing applications with cloud-based capabilities,” says Uppaluri of Microsoft.
SAP India sees a clear trend towards one-stop shop solutions, which is exactly what it offers with SAP Business ByDesign, an integrated on-demand solution that allows midsize companies to run all mission-critical business processes on one flexible platform.
SaaS aggregators like Jamcracker will have a better draw as SaaS gains traction, according to Rao. He reasons, “Choice of solutions vis-à-vis single play offered by point product SaaS vendors providing a ready comparison opportunity, better customer value, and interoperability between multiple vendor solutions is possible only with aggregators, advantage of a single billing source, and benefit of single window support for all services.”
“Impact of software + services will be huge as it will create all new business models and ways to monetize them for partner opportunity,” says Uppaluri of Microsoft. The company has crafted a partner framework for its software + services strategy based on three delivery models, i.e. on-premise, hosted by partner, and hosted by Microsoft. Most importantly, partners are free to use any delivery mechanism or monetization model, or use a combination of approaches that best suit their capability or their customers or their business plans, he says. SaaS being an online service model requires ongoing support to the customer backed with necessary workforce and infrastructure.
“Customers need good convincing or education on aspects like 24x7 availability, best practices, security, and constant innovation. Channels provide a best solution by providing consulting and to a certain extent customization of the solution to the client,” reasons Ghani of Frost & Sullivan.
Accel Frontline offers ERP, CRM, and warranty management solutions on SaaS model to various customers globally. While the ERP and CRM offerings are relatively new, the warranty management solution along with allied operations contributes to about 15 percent of the company’s turnover. Considering the success we had with unique business model for managing warranty chains, we are hiving off this business as a separate SBU, says Nair at Accel Frontline.
Jamcracker is taking the lead via a three-pronged approach by building awareness among customers about SaaS advantage, activating the channels to monetize the SaaS opportunity via 4E program, and build best- of-breed content by engaging with the ISV community. We are creating an ecosystem involving content providers (ISVs), resellers, and end customers, says Rao. In his opinion, successful SaaS VARs understand the advantages of SaaS-based applications, translate them into customer benefits and help customers transform their ‘IT’ into ‘Information Management’.
Chaudhari at AMI Partners says, “To support ISVs, SaaS hosts can provide them with value-added services like SLA monitoring, billing, etc. Post-sales support services and maintenance are major activities for partners in this domain apart from integration of SaaS offerings with remaining in-house applications.”
SOA as well as multi-tenant applications are going to make it easier for many ISVs to offer SaaS in India. E-learning, online banking, and share trading are expected to be used more on the basis of SaaS model along with demand for document management (DM), payroll, human capital management (HCM), etc within the next couple of years, according Ghani of Frost & Sullivan. “The content, communications and collaboration (CCC) segment followed by CRM and BI will be one of the fastest growing contributors to SaaS adoption in the near future. We plan to launch domain knowledge-intensive SaaS offerings,” says Nair at Accel Frontline. “We believe the increased pressure on companies to reduce costs in the current economic environment will also give a fillip to further adoption of cloud computing and software as a service models by enterprises,” says Uppaluri of Microsoft.
“CRM, ERP, HRMS, BI, dashboards, and other dizzying acronyms are no longer the exclusive domain of big budget and big muscled enterprises. The advent of SaaS and cloud computing has imparted huge impetus to SMBs looking for productivity and efficiency enhancing solutions, while operating in Spartan budgets,” says Rao at Jamcracker.
With downturn on the anvil, SaaS appears as a safe, long-term, and profitable playfield for the channel partners.