In the 80s & most of 90s, paying for software (at-least for personal use) was considered a waste of money, at-least in India. Now with most people being able to afford to pay for software as the prices have also become more reasonable, I have heard people buying licensed software more than what they used to earlier.
With a lot of software companies offering bulk-usage licenses, for the corporates, the cost of software tends to get more reasonable. But even then I would say it makes sense to treat software as a service and expense it. Though my Office 97 license still works on the old Windows 2000 box that I have at home, I will not be able to open quite a few documents created with latest versions of Word. Would I have been wiser if I had bought Microsoft Office as a service in 1997? May be, provided Microsoft was selling it that way. That way I would have always been using the latest version though I would have paid for the service year on year.
A lot of hardware is also being offered as a service (HAAS model). I strongly believe that IT investments should be treated as an expense at-least by the non-IT companies. As IT by itself does not generate any business by itself and is just an enabler, why shouldn’t it be treated as an expense like marketing expense?
Coming to India as a market for software as a service, are we ready for it? I tend to believe we are. Most of the heavily used software tools are already available as open-source. But most of these tools by themselves cannot be used by corporates to run their businesses. We need someone to use these tools to build applications & sell them. Most of these applications are continuously evolving with their hardware footprints changing very quickly. As a user, I have no control over it, but the creator of the application will definitely have. In that case, why don’t we have the creator maintain the application as well? That is how SAAS was born.
In India we are used to renting an apartment, but not renting a car as it tends to get too expensive. But we do hire a taxi or hop on to a bus. We are also used to paying for electricity, water, broadband, browsing-in-a-internet-cafe, etc based on usage, then why not software? I am sure it suits most corporates as well. But the problem is very few people are selling software as a service in India. I guess that has to change first. I strongly believe that at-least here we can lead the world by adapting the SAAS model faster than the rest-of-the-world.
I would like to invite thoughts on this from the member of the venturewoods community.
On a side note, I am the Country Manager for Transera Communications (www.transerainc.com). We make on-demand software for call centers & offer it as a service (SAAS model) in the hosted model.
- Software As A Service: Is India ready for it yet? - September 25, 2008
- Sweat equity in new ventures - October 28, 2007
Allow me to list reasons why SAAS is already succeeding in the BPO business, and make a few relevant observations:
One, the ASP model in BPO is already far ahead than in many other industries, growing by over 27% on a y-o-y basis.
Two, large companies like VSNL, Eagle, and new entrants like Huawei are taking it further not just in market growth but in offering. Now you have an end-to-end Service-Solution, with hardware, Software and Bandwidth, all thrown in by a single provider. The Customer has the choice of taking what (s)he wants and paying-per-use.
Three, in the coming years BPO will make IT its sub-set. Funny since we started as ITeS, a sub-set of IT, not knowing any better then. I say this, and use a term I often use, EAAS (everything as a service). Look at what is happening in the global ecomony with extreme pressures on BPOs. The ASP model offers flexibility to choose among options, cost benefits and most importantly newer additions to the offering at no extra capex. The vendor does timely innovations and developments for the customer.
Four, for the vendor and the market, since the vendor has so many customers on a single solution the feedback they get is very valuable and additions (or alterations) can be made to the service-solution so that everyone benefits. A lot of new features come up simply by having a diverse set using the ASP.
Five, there are not really many solutions on the pay-per-use (ASP) model for the KPO Industry. I for one would like to see a vendor get up and do something about it. Solutions for the Healthcare, Analytics, LPO verticals, among many others have a very un-stated need today. Given that they face the same pressures as any other BPO would.
To sum up your headline, India has been ready for it for over 2 years now. We need to look around for action. Its already started and the need of the hour is to accelerate and take full advantage.
I’d be happy to take critics and queries. If the moderator approves it, you may write to me at editor (at) bponews (dot) in
Cheers!
Being a cheapskate, I drool over the SaaS economics. But is it really up to ejecting high cost on-premise licensed s/w out of the window?
My concerns. There are just too few vertical applications for which there are robust SaaS offerings. Few large companies are going to use a generalized order entry or billing system. Or have zero customizations. Just as importantly, few of today’s SaaS vendors would stand the security and SLA scrutiny of large company due diligence.
I think a far more logical solution for large companies will be a hybrid – what I call SaCS – a customized service. It is an aggressively negotiated software license and maintenance contract, combined with an on-demand outsourcing arrangement. The outsourcing would be a no-capex, utility computing, fractional resource, shared infrastructure, flex capacity with robust data center, connectivity, disaster recovery and security standards. Not completely multi-tenant, but uses multi-tenant concepts in appropriate areas.
A far more logical solution for large companies will be a customized hybrid. It could be an aggressively negotiated software license and maintenance contract, combined with an on-demand outsourcing arrangement. The outsourcing would be a no-capex, utility computing, fractional resource, shared infrastructure, flex capacity with robust data center, connectivity, disaster recovery and security standards. Not completely multi-tenant, but uses multi-tenant concepts in appropriate areas.
Up anyone?
SaaS is seeing an uptake – just take a look at # of SaaS startups that are fighting for the pie:
http://ecosystem.pluggd.in/index.php/directory/saas/
SaaS looks to be a very promising concept to me.
1) IT investments (rather expenditures) are quite big for companies. It will be good, if it can be charged on usage basis i.e. per month, per user, per feature.
2) To get the latest software without having to painfully, routinely update, apply patches and fixes and get new versions without having to pay every time.
3) With SaaS, A Business Manager can avoid to a large extent the hassles of managing an in house IT Infrastructure and its Maintenance Staff.
4) A non-IT company can focus on its core Business and customers than IT. It is best left to the experts i.e. SaaS vendors.
5) If the company is not satisfied with the Vendor he can switch to a different one without incurring much switching costs.
But to have mainstream users using SaaS,
1) Network Infrastructure i.e. Broadband Internet should be fast, reliable, consistent and inexpensive.
2) There should be a few mature Vendors whose products (err..Services) are as good as if not better than traditional applications.
People interested in cloud computing can read http://www.cloudave.com. BTW, I am not a member of VW, just a student who regularly follows VW.
The key reason for lack of SAAS can be inability of sellers to accurately price the software – and also fear of customers that they might end up paying more than they are paying currently.
Think of it this way, would you agree to pay for car insurance based on number of hours driven and at what time of day…? may be not if you are driving a lot and driving in peak hours or driving in hours when accidents happen most (1-5 AM due to sleepy drivers)
Norwich had introduced this policy in UK, I am not sure if there are too many takers..
same issues could apply to software companies..
And also finance and sales people in existing companies might resist change(it changes the way you invoice, recognize revenue and also receive bonus…)
having said that I feel that SAAS will be embraced by new companies than existing software companies and this will take off in India as Indian market is always wanting to buy something in which up front cost is low… esp in current times when cash is scarce.
All it takes is a company which is willing to go all the way in SAAS pricing and not just have that as option….