India has one of the largest concentration of SMBs in the whole world and much of these SMBs have little or no exposure to Information Technology, mainly due to the pricing of the proprietary software available in the market and the cost of underlying hardware.
Indian SMBs are opening up to adaption of IT for various reasons including improving efficiencies in their operations and gaining a level playing field vis-à-vis their large competitors.
Cloud Computing provides a huge opportunity for Independent Software Vendors (ISVs) startups to build and grow applications for these SMBs. ISVs using cloud computing can build Software as a Service (SaaS) applications which can be delivered over the internet. SaaS applications can provide a unique advantage to the ISVs to cater to a large set of customers with lower operational costs with minimal overheads and complexities.
So what is SaaS?
Software as a Service or SaaS is a software delivery model in which software is delivered over the internet, as a service. The software and data associated with the software is hosted on the Cloud.
As application is available over the internet as a service, the users do not need to install or maintain any software on their own hardware. Also SaaS applications are generally consumed on a pay as you go basis. The provider maintains the application and is responsible for its availability and upgrades of new features.
SaaS applications are also sometimes referred to as On Demand Software.
Characteristics of SaaS.
SaaS applications are accessible over the internet, from multiple of device types.
Common infrastructure and code base is maintained for all the customers. This allows vendors to innovate and release a better product faster to the customer.
Ease of customization
Each customer should be able to customize and configure the application to fit their business process without impacting the common application code or infrastructure.
Benefits of SaaS.
For SaaS Consumers:
Lower initial Costs, pay as you go
With SaaS, the consumer doesn’t have to pay any upfront fee for purchasing hardware for hosting the application or for software licenses. SaaS applications are usually purchased on a pay as you go basis.
Easy to use, faster deployments
SaaS applications are available over the internet, and available over multiple devices with uniform interfaces. SaaS applications are self-serviced applications and have a smaller learning curve.
No maintenance overheads
The application vendor maintains the software and its availability, so the consumer does not have to worry about maintaining the software or the hardware. Software vendor also takes care of the scalability and security of the data for a SaaS application.
Get the latest upgrades faster
Software vendors tend to release multiple versions of software frequently to include new features, better user interface or to fix existing bugs. Typically with on premise software, consumers have to undergo huge change life cycles every time a software upgrade is released with a cost overhead. With SaaS the software upgrades happen automatically and are handled by the vendor. This gives a key advantage to consumers to stay on the latest version of the software, always.
Most SaaS vendors provide Application Programming Interfaces or APIs to integrate the SaaS application with the consumer’s other applications. Certain SaaS vendors also allow customer to change the application to suit their own needs using APIs.
For SaaS Vendors:
Aggregate operating environment
Vendors have complete control over the operating environment, right from the hardware infrastructure to application code. This makes it easier for the vendor to serve customers and give better customer experience.
Continuous and recurring stream of income
As the customers pay on a monthly basis, there is a continuous and predictable recurring stream of income for the vendors. Also monitoring the usage patterns of the users can help in offering better services and predictable user experience.
Reduced losses from piracy and use of unlicensed software
Because the software remains with you, there is no risk of revenue loss due to software piracy.
Is SaaS a one size fits all Solution?
When is SaaS a good fit?
Applications which are specialized for a particular industry or a business process within an industry are best suited for SaaS applications. Examples include ERPs for specialize industries, eLearning platforms etc.
Applications which can be used without making any changes for specific customers can be developed as SaaS. Examples include online collaboration tools, emails etc.
Applications which are accessed over the internet and have significant interaction with the external world can be developed as SaaS. Examples include Customer Help Desk software, mobile sales management software etc.
Applications with demand spikes
Applications which have demand spikes in usage are a good fit for SaaS applications as customers are saved from provisioning for extra hardware resources to meet the demand spikes. Examples include payroll and tax applications, BI tools etc.
When is SaaS not a good fit?
- Applications where regulations do not allow data to be hosted externally is not a good fit for SaaS
- Applications where high processing speed for large amount of data is required
As you can see, SaaS applications can provide advantages to start-ups to develop applications which can be developed and sold over the internet and enable access to a huge customer base.
In the next post we will look at the considerations to take care for developing a SaaS application.