Tamil Nadu - Chennai

What makes SaaS attractive?

CHENNAI: In an environment in which cutting costs is on the top of everyone’s agenda, Software as a Service (SaaS) is becoming an attractive proposition for enterprises.

A recent study by Gartner, an information technology research and advisory company, predicts that SaaS revenue in the enterprise application markets worldwide will grow 27 per cent during 2008 and the total SaaS revenue will more than double by 2012. Before SaaS became a viable option, software was purchased by organisations. This meant buying licences. For example, if ‘Wear it!’ retail chain wanted to use a software product for its supply chain management, it would buy licences. Then it would install the software in its machines and have a team to maintain the software. So, a cloth shop would need to employ software professionals and also have data centres for storage. If ‘Wear it!’ wanted to cut costs, its technology spending would be on the top of the list. Here is where SaaS helps.

SaaS is defined as software which is not owned or maintained by the user; the user only gets the rights to use it for a particular period and pays for it. In essence, it is software available through a subscription model, says Asheesh Raina, Principal Research Analyst of Gartner.

So, instead of purchasing licences, ‘Wear it!’ would subscribe to the software it needs. Some other person in a remote location would have the headache of maintaining the software, troubleshooting and taking care of the hardware and storage. “You get the most updated version of software. Irritants, which are part and parcel of the software, are not there. It is a win-win situation for the enterprise and vendors,” he says.

SaaS emerged as a concept in the 1990s. “Just like other technological concepts, it took time to percolate to the user level and become relevant,” says Mr. Raina.

There are various situations in which SaaS becomes an attractive option because of its flexibility. “SaaS takes care of seasonal loading. If there is a lot of work now and 20 licences are needed and fewer are needed later, the enterprise can subscribe to 20 licences for a short period and then give back a few. If they buy software, they will have to own 20 licences for the entire period,” Mr. Raina says.

“For small and medium businesses in verticals such as healthcare and hospitality that want to go global and do not want to bet on high software costs, SaaS is a viable option,” he says. Industries that do not want to invest energy and time in managing IT are targets for SaaS solutions.

With growing market demand, more software products will become SaaS-enabled. There will be a second party which will take care of logistics, in terms of internet connectivity, storage and uptime of application, he says, explaining the functioning of a typical SaaS eco-system.

Such systems are already in place; the current trend is that of adoption and awareness, says Mr. Raina. “IBM, Oracle, Microsoft and other vendors offer SaaS-enabled products. There are many players in the market to host the software. End-user enterprises will adopt SaaS more because it will prove cheaper.”

The next step will be to fine-tune the adoption. “Best practices around the usage of SaaS will be formed,” says Mr. Raina. Data security and safety issues are still concerns in the market. Hence, there will be more consulting practices around when to use SaaS and when not to use it. “Consulting will also be formed around how to integrate SaaS and the existing legacy applications,” he says.

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