SaaS is the latest buzz word in the IT industry. According to Gartner, 16% of all enterprise software applications will be delivered through the SaaS model by 2014 and SaaS revenue is expected to reach a staggering $22.1 billion by 2015 as more companies are starting to invest in cloud.
Given all the SaaS statistics, it’s not really a question of what SaaS is anymore but really why it’s such a big deal. Let’s look at five big ways SaaS is transforming the IT landscape:
1.) Increased Agility and Opportunity
Software as a Service is opening up a world of unprecedented opportunities for ISVs as the cost of innovation goes down dramatically with SaaS. SaaS users have the freedom to innovate much more rapidly through testing out various SaaS products with minimal financial commitment. SaaS gives its users the ability to quickly scale up business while keeping capital expenditures low. With the flexibility it offers, cloud also reduces time to market for new business applications and features, while also reducing your total cost of ownership. As an ISV, you have the potential to generate way higher value through SaaS because it allows you greater agility.
2.) Reduced financial commitment and easier sales
One of the biggest benefits of Software as a Service is reduced costs not just for you but for your customer as well. Software vendors don’t have to spend a huge amount in logistics, infrastructure or support because all they have to do is maintain a single copy of the application. In a similar way, users don’t have to pay a huge amount upfront to own your software product; instead they can just ‘rent’ it on a pay-as-you-go model creating a win-win situation for everyone. It makes sales easier as well because any prospect client would be much keener to pay an affordable rental fee to access the one copy he needs as opposed to complete ownership of a product which would require a much higher financial commitment and IT dependency, not just to own but also maintain. Customers can minimize their capital expenditure including long term financial commitments, licensing and implementation costs that are associated with on-premise software by shifting to an operating expenditure model.
3.) Hassle-free administration
As mentioned in the point above, with SaaS, you don’t have to spend all your resources and energy on managing operations and other hassles that come with owning and running software on-premise. You only really need to maintain a single copy of the application. The implementation times for SaaS projects are a fraction of the time it takes for large on-premise software to go live. So, you can spend all the time and resources you save on innovation and value-adding activities. The biggest reasons for the popularity of SaaS are its ease and speed of deployment. Software as a Service does away with a huge IT team and other hardware expenses that are required for maintaining on-premise products.
4.) Value for customers
With Software as a Service, you aren’t limited to accessing it only in the office. The business application is accessible anywhere, anytime due to its online availability. You are also not tied to a vendor since it’s on ‘rent’ basis and should you find one that is more suited to your business needs, you can easily make the switch. Because the process of upgrading is much simpler with SaaS, users have access to current software which integrates the latest updates without having to worry about lengthy, cumbersome and expensive software upgrades that is normally associated with on-premise software products. With SaaS, customers can respond to market changes quickly by assessing their business needs and scaling their costs and products accordingly.
5.) Faster growth
As we have already mentioned at the very beginning of this post, the SaaS market is growing immensely, leaving on-premise software market far behind which really means that SaaS is stealing away sales from Software as a Product. Infact, Gartner predicts that over 50 percent of enterprises will have some form of SaaS-based application strategy by 2015. One of the biggest reasons for this is that it enables fast growth by providing more upgrade real estate. While it is true that SaaS products are more complex to build, once the architecture is set in place, it creates a stable platform from where innovation can happen. Newer features and modules can be added with much more ease than with on-premise software, giving SaaS companies an amazing opportunity to respond to flux in the market on an ongoing basis. With Saas, the most decisive advantage is its revenue driving model which enables continuity as opposed to Software as a Product where, after the product is bought, there isn’t as much scope for revenue generation.
Given the SaaS model and the ease with which a customer can make a switch to a different vendor, it is highly crucial that SaaS companies continue to provide exceptional service and remain competitive; this way they can retain and grow the customer base resulting in a revenue generating model that is continually building up.