The recent Gartner's “2006 Emerging Technologies Hype Cycle” proclaims that Web 2.0 Technologies and Business Models dominate emerging technologies. This was not unexpected and I personally think, the time for Web based applications or Software as a Service (SaaS) based applications has arrived. Especially, with easily available broadband, richer and easy to use web based applications; more enterprises are forced to consider moving to Software as Service applications. The biggest challenge however, is to convince these enterprises to give up control over their information.
Termed as On-Demand Software, hosted software, ASP model and Software as a Service, analysts claim that in 5-10 years time around 30% of new software will be delivered via SaaS. And Salesforce.com is regarded as one of the biggest success stories of the SaaS business model.
Listed and explained below are what I think are the reasons of the growing interest in SaaS and the benefits of On-Demand Software.
1. Extremely low entry costs
The cost of entry is extremely low. You pay for the software monthly only for the number of users you buy. Software that you buy for your organization has to be paid for upfront. The license fees are normally on the higher side. Whereas with On Demand software, you pay for as much you use.
The graph below very clearly depicts the value you gain in time against the money spent monthly. The graph is done by Jim Geisman, president MarketShare for a “SaaS aligned with value delivery” Presentation from www.Softwarepricing.com
2. Increased information accessibility
Web based applications enable you to save your information on the Internet, hence making it easily accessible from anywhere. Your business knowledge is made accessible to all your knowledge workers increasing collaborative productivity. Geographically separated teams function better with better information availability.
3. No infrastructure
All your information is in a central location hosted on the SaaS vendor’s servers. So you have no local software and don’t have to bother about old aging technology. Another advantage of having a hosted service is that you don't have to worry about software upgrades. You don’t have any infrastructure at your office that helps you keep out a whole lot of maintenance costs as well as reduce on the overall technology upgrade spends.
4. Cost-effective scalability
The benefit of On Demand software is that it grows with you. The Pay-as-you-go SaaS model gives you the freedom to buy the application for two employees, or a department or an entire organization keeping your costs minimal.
5. Low Risk of Investment
The risk of investment in web based applications is very less. Instead of spending thousands of dollars for a license for your organization at one time, you can pay for the software monthly. This drastically reduces your financial risk. If you are not satisfied with the service, you can stop paying.
Software as a Service is not about technology, it is a better way to deliver value to your organization. Software as a service model gives you the freedom and flexibility you need and hence is here to stay.
I would love to know what you think are the benefits of the Software as a Service model.