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How will SaaS affect your market? 5 Points to Ponder & Prosper!

January 21, 2011

SaaS will bring changes to many application, markets, services, and offerings. In this article I take a look at who will be impacted most.

First some thoughts on applications that, can prove difficult to move to SaaS:

  1. Industry based process specific applications
    1. Financials as accounting and financial reporting
    2. banking or securities transaction systems
    3. Utilities customer information systems
    4. Insurance claims management and underwriting systems
    5. Hospital management systems
  2. operating, database management systems
  3. Software for managing internal IT operations (such as job scheduling or change and configuration management) or internal data (extract, transformation, and loading tools; predictive analytics and data mining; or customer data management)

Next: areas that are beginning to erode: Companies that have large investments in Legacy “software” from vendors have applications that manage and follow processes. Supply chain management, product life-cycle management, Procurement in purchasing products, asset management, manufacturing materials management, electronic design automation, financial management, or human resource management. I would expect to see 30% growth in this segment over the next 3 years; however the lack of integration will continue to be an issue here, as companies are not willing to let data outside of the firewall.

Successful, SaaS inroads have been made SaaS, is unseating licensed software vendors is sales force automation and CRM applications, salesforce.com has captured market share from licensed software vendors like Oracle, SAP, Microsoft and others. Other areas include: Human Resources, governance, risk, and compliance, application development, Payments & Risk Management, security products like identity management and security operations or IT management products like server management, service desk, and IT asset management

SaaS is the emerging standard in other application market areas:

  • Content management document management, blogging, and wikis
  • Purchasing applications for electronic invoice presentment and payment (EIPP), Sourcing, and automated spend analysis
  • Travel & entertainment (T&E) expense reporting
  • Time & attendance tracking products as SaaS solutions

SaaS is the dominant model in

  • Web conferencing
  • Services procurement, supplier risk and performance management, and supplier network services in the ePurchasing market
  • Talent management, compensation management, and recruitment management in human resource management systems (HRMS)
  • Application security
  • Global trade management

What does this mean for your every day run of the mill software vendor?

  1. Most vendors have taken a singular approach either “all-SaaS” or “no-SaaS” stance on the offering. Large software vendors position that SaaS has only limited relevance. Small vendors are trying to offer both licensed, on-premises solutions for some clients and SaaS for others. Both of these views are inaccurate looking at the data to support, 45% of 2010 software revenues, where in fact SaaS for the next three years at least will have little or no role. While that still leaves more than half the software market in which SaaS will compete with (or complement) licensed software, in most cases, SaaS will grow into a minority position or is already headed for dominance.
  2. As a software vendor focus on products with low barriers, You can overcome the SaaS challenges of integration, security, customization, and migration from existing systems, those are barriers of perception rather than reality. If you already carved out a leading role in a product category where these challenges exist, it may be worth the effort to overcome these barriers to expand SaaS’ share. However for a SaaS vendor looking for other products to go after, it is much more cost-effective to focus on products where those barriers are low.
  3. Legacy or incumbent licensed software vendors have more decisions and more complexity involved with selecting a SaaS offerings. For instance there is no reason for a major enterprise supply chain or vertical industry application vendor to replicate their produ. After two or three years, what started as a single product will become in effect two (or more) products requiring their own development and support teams.ct portfolio on a SaaS. Because there is a SaaS vendor like NetSuite offering a SaaS counterpart.
  4. Each company should have a product portfolio and profitability approach to decide where to offer licensed vs. SaaS.
  5. Vendors with licensed software products are starting to offer SaaS as an alternative. This is not a good idea vendors need to understand the longer-term challenges of maintaining two products that will quickly be on two development tracks and cycles. The SaaS product lends itself to frequent, incremental updates and enhancements. However the licensed product will have longer version releases. It is better in my view to have purely licensed software offerings for some products and purely SaaS for others, rather than trying to support both versions for one product.
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2 Comments leave one →
  1. jodie_microsoft_smb permalink
    January 21, 2011 8:20 pm

    When planning out your technology and taking into account concerns about security, etc., consider MS Cloud offerings. You have options to mix deployment in a hybrid environment to accommodate your needs and you can deploy add-on applications that integrate with both on-premise and SaaS. This link will give you more details: http://smb.ms/Outreach96WYQ8

    Regards,
    Jodi E.
    Microsoft SMB Outreach Team
    msftoft@microsoft.com

    • January 21, 2011 8:40 pm

      Thanks Jodi thats a great point, your offerings are new and I haven’t fully explored the catalog of I,P,SaaS

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