Software as a Service (SaaS) – Future is Friendly!

SaaS – Software as a Service

SaaS – Software as a Service

During this economic turbulence when businesses are looking over their operating strategies and planning ahead to cope with unpredictable future, SaaS vendors and customers can see some light at the end of the tunnel. According to Gartner, Software as a Service (SaaS) revenue is expected to reach 14.8 billion in 2012, more than double of what it was in 2008 ($6.4 billion). The research however only account for enterprise wide application software like Enterprise Resource Planning (ERP), Supply Chain Management (SCM), Customer Relationship Management (CRM), Digital Content Creation (DCC), Content, Communication and Collaboration (CCC) etc.

The good news is that there is good news from both sides: SaaS Providers and SaaS Adopters:

SaaS Providers:Salesforce (poster child for SaaS) reported 34% increase in fourth quarter earnings compared to the same period last year.TreeHouse Interactive, an on demand (SaaS based) Partner Relationship Management (PRM) and other technology products vendor closed 2008 with a 35 percent increase in annual revenue and a 30 percent expanded customer base. Proofpoint, Inc. , the leading provider of SaaS based unified email security, email archiving and data loss prevention solutions reported highest revenues ever for the first quarter of 2009 in the company’s history and 23rd consecutive quarter of record-breaking revenue.

SaaS Adopters:NetSuite customers achieved 30% increase in revenues, 36% increase in web transactions and 99.99% site uptime during past holiday season.Salesforce CRM customers are reported to have 34% revenue growth, 17% profit margin improvement, and 25% increase in overall customer satisfaction.OrderMotion customers saw a cumulative 13% increase in merchant revenue during 2008 holiday season with one customer Stroll, lifestyle information products retailer touched an enormous 474% increase in revenue.

While the results are promising and the research is optimistic, both providers and adopters of SaaS should need to do some aggressive planning and make some cautious decsions to get to the lighted side of the tunnel. SaaS providers should take a look back at their pricing models, mind customer acquisition costs, provide incentives like free trial and waive some setup costs based on the length of contract a customer signs. They should target customers based on the scalability and adaptability of the service they are offering and the nature and size of the businesses they are aiming at. When it comes to SaaS, size does matter. A start-up company with fewer resources would most likely be willing to go for SaaS solutions provided by the SaaS vendor of almost the same size i.e. a startup or catering to small businesses. It is essential for SaaS vendors to ensure 99.99% uptime at all times with upscale reliability and uncompromising security with easy to use interface (if software application with complex functionality and require extensive user interaction like Order Management Systems…simplicity is the key!) and 24/7 customer support, absolutely necessary if customer base is spread over multiple time zones. In today’s economic crisis, SaaS providers should focus mainly on cultivating customer retention strategy than on formulating customer acquisition strategy. They should offer different service packages to suit various clienteles and bundle different service options to highlight cost savings for customers; e.g. offer custom upgrades or product training as part of a package deal.

SaaS adopters should do a thorough need analysis before embarking on a journey with any SaaS providers. Try different vendors, and use trial versions to match product compatibility with your business model. If SaaS vendor provides several pricing options go with the one that costs the least to get a hang of it and to determine required usage and short term ROI in order to ascertain its long term feasibility. There’s always a possibility to upgrade later based on business needs assessment. SaaS adopters should not completely rule out the option to try out on premise licensed solution. They should weigh in the pros and cons of SaaS versus Licensed solution before making a decision. In these crucial times cost savings top the most selection criteria so be vigilant of where your money is going and what you are getting in return.

If interested to get a complete listing of SaaS Providers and other SaaS related information check out SaaS Showplace.

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Jim Love, Chief Content Officer, IT World Canada

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