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SaaS Adoption on the Rise in India

By Yogesh Gupta on May 01, 2009

Despite the economic downturn, SaaS continues to emerge as a cost-effective model rendering maximum revenue growth as well as higher customer satisfaction.

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.

Overcoming Challenges
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.



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