“When we started talking about SaaS back in 2007, nobody seemed to truly grasp its meaning. Now, we see a lot more enterprises—small and large— identifying with the on-demand approach.”
-Winston Damarillo, executive chairman, Morph Labs
“Companies want solutions that are low cost, low risk, and that work and given the economy, this cloud computing trend couldn't have come at a better time.”
-Salesforce.com APAC
“The technology would not only help companies to save on costs in these times of crisis but would also help them to streamline their operations and focus on their core competencies.”
- Greg Martin III, president, Impart Solutions Inc.
“Often, organizations are not prepared to invest in costly long-term infrastructure investment and staff training and as such, SaaS is an attractive option.”
- Vinita Ananth, director, software-as-a-service, HP software and solutions, Asia Pacific & Japan
The computing world has seen various technology buzzwords come and go; while some gained prevalence and wide adoption, others eventually died somewhat silent deaths. A few years back, we began to hear about one such buzzword—software as a service (SaaS, which also sometimes went by the term cloud computing, causing confusion for some) and, at that time, the concept of on-demand, subscription-based software may have seemed “strange” or “uncomfortable” to some.
Today, however, SaaS may have slowly but surely penetrated the IT world, as it appears to have surpassed the buzzword stage and is gradually becoming a mainstream concept. According to Springboard Research, the SaaS market in APAC is experiencing “tremendous growth” and, in fact, is expected to grow to approximately $1.16 billion by 2010, at a compound annual growth rate of 66%.
For its part, Gartner last year predicted that SaaS would become 25% of the overall software market by 2011. The research firm forecasts worldwide enterprise application SaaS revenue to reach $11.5 billion by 2011 and, while the CAGR varied between different types of services, the overall CAGR is touted at 26.5%.
NOT A FAD
Salesforce.com defines SaaS as cloud computing—essentially as the next generation of applications. One of the SaaS pioneers, Salesforce.com believes the shift to cloud computing is happening right now and is gaining speed. “Companies want solutions that are low cost, low risk, and that work and given the economy, this cloud computing trend couldn't have come at a better time,” says the SaaS provider.
“Cloud computing is not a fad, but is a permanent change in the model that people expect of how they'll use the power of computing and collaboration. Growing bandwidth, rising technology complexity, and higher expectations for business performance are trends that will never reverse—and these are the enablers and the drivers of the mass migration into the cloud,” says Salesforce.com.
Also a SaaS provider, IT giant HP sees SaaS emerging as a “strategic option” for enterprises as it allows businesses to channel its resources to take on more strategic initiatives that provide value to the business and leave the IT operations to the experienced vendors. “SaaS is definitely changing the software business landscape, large enterprises and SMBs alike are embracing SaaS across the region for its ability to make organizations more competitive and agile. The promising adoption and growth certainly attest to the fact that SaaS is beyond trend and is integral and strategic to the growth of the business,” says Vinita Ananth, director, software-as-a-service, HP software and solutions, Asia Pacific & Japan.
Filipino-owned open-source, platform as a service (PaaS) provider Morph Labs, says SaaS is gaining significant popularity among enterprises, as well as software vendors. According to Morph Labs executive chairman Winston Damarillo, market demand continues to accelerate especially during this global economic crisis as SaaS “frees companies from making capital investments, turning them into more manageable operational expenses.”
Salesforce.com agrees, believing the economic disruption makes it especially difficult for companies to make a commitment of capital to build new capability. Likewise, market conditions demand increased attention to keeping the customers one already has, and finding ways to strengthen those relationships. “This combination is clearly compelling many companies to move vigorously forward with cloud computing and SaaS initiatives,” the firm says.
In Asia-Pacific, the adoption of SaaS is not uniform due to the diversity and economic complexity, according to HP’s Ananth. “Interestingly, we are seeing a growing interest and adoption of SaaS in the emerging markets including the Philippines as companies are seeing value in buying subscription-based software services for its ease of deployment and lower total cost of ownership,” the official adds.
Local IT firm, Impart Solutions Inc., which offers ERP solutions distributed through this on-demand model, describes SaaS as “key” for organizations to do well amid the ongoing global economic crisis.
According to Greg Martin III, president of Impart Solutions, using SaaS is 40% less expensive compared to traditional enterprise level service providers. “The technology would not only help companies to save on costs in these times of crisis but would also help them to streamline their operations and focus on their core competencies.”
GETTING SaaSY
Morph Labs’ Damarillo believes Philippine companies are beginning to understand the value of the software as a service model. “When we started talking about SaaS back in 2007, nobody seemed to truly grasp its meaning. Now, we see a lot more enterprises—small and large— identifying with the on-demand approach.”
Damarillo explains that SaaS is akin to the Filipino concept of "tingi" and as such, SaaS adoption in the country will continue to grow and eventually pervade in the everyday business landscape. Philippine businesses that shy away from investments will grab SaaS with both hands as they begin to realize its value over the traditional model, he says.
Meanwhile, HP sees the adoption of SaaS happening across all major verticals, saying that it is especially getting significant interest from security-conscious sectors like the public sector, along with verticals like telecommunication and financial service institutions.
On the other hand, one area that Salesforce.com is quite keen on has been the contact center industry. “We are very excited about the fact that 75% of customer service centers will use cloud computing applications and we firmly believe that the Philippines will not be far behind as the service cloud brings the next generation of customer service to companies of all sizes, without the expense and maintenance of traditional software,” says the giant firm.
Customer service indeed seems to be a key focus of companies going into SaaS. One such SaaS adopter in the country is Columbian Autocar Corp., the official sales partner and parts distributor of Kia Motors in the country. Columbian Autocar Corp. has three main business divisions: sales, service, and parts.
“Our business is largely built around service, particularly after-sales service, and that’s why we needed a system that would help us in providing customer satisfaction without of course having to spend too much,” says Reynaldo Santos, national parts manager at Columbian Autocar Corp.
In 2002, the company deployed a traditional enterprise resource planning (ERP) system across its three divisions, hoping to increase efficiency in its business processes. “Before, we used to do things manually and this demanded too much manpower and time, which then rendered our processes slow.”
The new ERP system indeed served its purpose well, shares Santos, but five years into using the traditional license-based software, the manager realized the system was turning out to be “too expensive” for them. This is why, in 2007, the parts division proposed to deploy a separate ERP system, this time implementing a solution through the SaaS model provided by Impart Solutions.
“While before we used software that “bound” us for the long-term, we are now on a per-month, per-user subscription and it is working perfectly for us,” says Jocelyn Tingzon, parts supervisor at the Kia distributor.
According to Tingzon, they have realized “significant” cost savings since they began using the SaaS model and have been able to improve its parts department processes within only a two-month timeframe. Tingzon adds that they are now looking at rolling out Web-based services such as online ordering and online inquiry to further improve customer service.
Cost benefits are the most obvious advantage of SaaS applications over traditional software, shares Morph Labs’ Damarillo. “SaaS drives down the costs involved in acquiring software and applications deployed through this model are easier to consume, are readily available and accessible via a Web browser. Licensing costs, laborious maintenance, and additional personnel related with on-premise software are no longer necessities, and are just not worth it.”
READY FOR SaaS
According to HP’s Ananth, customers today are seeking better control and visibility on the IT investment and resource that are available for business and performance, scalability and security in particular are “of paramount importance” in the delivery of secured and quality services to business. “Often, organizations are not prepared to invest in costly long-term infrastructure investment and staff training and as such, SaaS is an attractive option,” he adds.
Software as a service presents opportunities not only for consumers and enterprises but also for vendors looking into deploying on-demand solutions. According to Damarillo, software vendors also benefit from “SaaS-enabling” their applications especially amid the global crisis where businesses are “tightening their belts.” By turning into a subscription-based revenue model, these vendors would be able to tap a larger market, the Morph Labs official says.
However, one disadvantage SaaS has brought, Damarillo believes, is the hype about it, which may “overpower” the value and benefits it brings. “Also, one of the biggest concerns when it comes to SaaS is the customer’s relinquishing control of the application (particularly its availability) to the provider. This is particularly true for small-time providers who do not have a large budget for infrastructure investments,” the official notes.
For his part, HP’s Ananth believes one of the key challenges for SaaS adoption in the country would be Internet bandwidth. According to him, the quality of the telecommunication infrastructure will be crucial for SaaS adoption especially for bandwidth-intensive applications. Nevertheless, the telecommunications infrastructure in the region is improving, he says.
One other challenge is convincing the market of SaaS’ reliability in terms of application availability. “This is why we have started offering an on-demand CRM application on top of the Morph Application Platform as a way to lead the industry and show them that by deploying to a tested hosting environment, SaaS is possible on a limited budget while still remaining reliable,” says Damarillo.
“Education and awareness are paramount in driving up the adoption of SaaS in Philippines by helping enterprises understand the benefits and return on investment (ROI) they can reap from SaaS,” says Ananth, “The Philippines is poised for growth and is an emerging market with plenty of potential. Without a doubt, platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS) will help escalate the growth of SaaS as more organizations move to Internet-based or cloud services.”
“The Philippines is a very important market for us and we are extremely excited about the potential here,” says Salesforce.com, “IP-Converge Data Center Inc. (authorized consulting partner of Salesforce.com in the country) has organized events around cloud computing and the rooms have been packed to capacity on a regular basis despite the uncertain economic times. This is a very encouraging sign that we are on the right path and we do have long-term plans for the Philippines.”
Damarillo offers a bold prediction, saying that by 2010, the Philippines will emerge as a major SaaS innovation hub. “The Philippines will become an important consumer, as well as supplier, of SaaS applications, given the Philippines’ affinity for easy-to-swallow investments and global reputation for software development.”
The Morph Labs official believes there is big opportunity for SaaS applications to gain ground with small and medium enterprises, including start-ups. “Furthermore, because many open source projects have become more and more mature over the past few years, local SaaS providers can hit the ground running by building their solutions on top of that instead of starting from scratch,” Damarillo notes. “When all of these pieces start fitting together in the eye of the market, we’re going to see a significant uptick in adoption. It would do well for aspiring SaaS providers to get started today in preparation for this.”
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