Many independent software vendors (ISVs) are recognising the benefits of offering software as a service (SaaS) as an alternative for their customers and once the teething problems have been overcome there are a number of long term benefits for both parties.
QUOCIRCA INSIGHT REPORT April 2007 On-premise to On-demand Contacts: The Software as a Service Opportunity for Independent Software Vendors Bob Tarzey Quocirca Ltd Predictions of the death of software are over-stated and the reality is that all businesses are Tel +44 1753 855794 becoming ever more reliant on it. What is changing are the number of options available for bob.tarzey@quocirca.com how the software applications that businesses rely on are managed, delivered and paid for. Clive Longbottom Many independent software vendors (ISVs) are recognising the benefits of offering software Quocirca Ltd as a service (SaaS) as an alternative for their customers and once the teething problems have Tel +44 118 948 3360 been overcome there are a number o f long term benefits for both parties. clive.longbottom@quocirca.com . There are a number of reasons for businesses to consider SaaS, but they all come down to Tony Stimson three things; managing business costs, reducing business risk and creating business value IBM Most SaaS installations are co-located in secure data centres with levels of security and Tel +44 1179295000 management that even enterprise IT departments find hard to achieve. The SaaS delivery model stimsont@uk.ibm.com allows business application and infrastructure costs to be spread over a period of time rather than paid for upfront. It also eases remote access to business applications and interaction between different organisations, both of which are increasingly required for many business processes. . Most ISVs are not starting from scratch and need to develop a SaaS business model along side their existing one of on-premise delivery Almost any business application has the potential to be adapted for SaaS, but it needs to be R introduced carefully alongside existing business models. It is the financial and cultural issues that T EPORT NOTE: his report has been need to be addressed as much as, if not more than, the technical ones. written by Quocirca in . SaaS can be implemented in a number of ways, but to achieve the full benefits and the conjunction with IBM to economies of scale that can be realised it is likely to require a considerable software re-write address certain issues Early SaaS implementations were based on the 1-to-1 hosting of servers for each customer. But the faced by independent real benefits come from managing many customers on the same base infrastructure. Here, the software vendors (ISVs). The report draws on challenge is not just that the software needs to be adapted for multi-tenancy deployments, but for Quocirca's knowledge of many ISVs it will involve a move from supporting numerous small implementations to a single the technology and enterprise SaaS deployment. business issues faced by . The SaaS model can, and should, be adaptable to suit the way the end user organisation ISVs and their customers conducts its business and suppliers, and Many SaaS applications are paid for on a per-user per-month subscription basis, but this is not the provides advice on the only way. For some application types and customer needs other models suit, such as transaction or approach these volume based pricing. The managed service providers that many ISVs turn to for infrastructure organisations should take to create a more effective provision are themselves coming up with new and innovative ways to support and finance ISVs in and efficient environment order to reflect these different business models. Many software platform vendors also provide for future growth. special pricing models for ISVs moving to SaaS. . The businesses challenges for the ISV moving to SaaS include pricing, service level During the preparation of agreements, cash flow and managing the expectation of sales staff and resellers this report, Quocirca has Funding SaaS is different, because unlike the on-premise model where the bulk of fees are paid spoken to a number of upfront, customer value is now realised over a number of years. On top of this the ISV, rather than ISVs, IT vendors and service companies involved the customer, now has to cover infrastructure costs. There are long term benefits to making the in software as a service. move but there will be short term issues with cash... [download for more]
