Making the Most of On-Demand Software

Title
The Business Benefits of Software-as-a-Service: Making the Most of the On-Demand Advantage
A White Paper for Growing Businesses September 2007
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Title
The Business Benefits of Software-as-a-Service:
Making the Most of the On-Demand Advantage Executive Summary Software-as-a-Service (SaaS) is a growing phenomenon in worldwide business today. From the original ideas of outsourcing the data center and having third parties manage the software (the ASP movement of the turn of the century) to true SaaS today, the tsunami of outsourced IT and new methods of accessing business software solutions has created a multi-billion dollar market. Research backs up the widespread adoption of SaaS in business: . 1 IDC reports that it expects customer spend on SaaS to increase to $14.8 billion by 2011. . Gartner Group reports that SaaS revenue in enterprise application software alone will grow 21% in 2007 2? to reach $11.5 billion by the end of 2011. . 3 Two out of three businesses are either buying or considering buying software via the subscription model. . McKinsey reports that the proportion of CIOs considering adoption SaaS applications in the coming year 4has gone from 38% a year to 61%. SaaS ? also referred to as On-Demand ? is not "same old software ? as a service." It represents a breakthrough in technology delivery, serving as a powerful catalyst for changing the value proposition and economics of business management. This white paper, one of the NetSuite Business Series for Growing Businesses, explores the business advantages and considerations in moving to "on-demand" ? and running your business via Software-as-a-Service.
1 Erin TenWolde, Research Analyst, IDC. August 2007. 2 "SaaS Demand Set to Outpace Enterprise Application Software Market Growth." Gartner Group. August 2007. 3 "Businesses Get Serious About Software-as-a-Service." InformationWeek Research. Reported in InformationWeek, April 14, 2007. 4 Abhijit Dubey. McKinsey. Panel at the SIIA OnDemand Summit. San Jose. November 8, 2006.
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The Business Benefits of Software-as-a-Service:
Making the Most of the On-Demand Advantage What do you want to invest in to grow your business? 9 Your people? 9 Industry-specific technology that can differentiate you from your competition? U Your on-premise IT infrastructure and staff to support it? One response here is the wrong answer; one answer gives you no Research indicates that a differentiation, no leg up on the competition, and creates the money-pit of sizeable proportion of technology expenditures. organizations expect that On- Demand services would allow Enter Software-as-a-Service (SaaS): here we will look specifically at the them to adopt new applications business benefits to mid-market companies. This paper will explore the they could not have previously advantages of Software-as-a-Service as an alternative to sinking valuable cost justified. investment dollars into high cost of ownership/low return business strategies. 5But first we will define the terms we are using. Consider the following industry definitions:
. On-Premise - Software developed internally or purchased via a perpetual license - An up-front capital expense - Software that runs entirely within the hardware systems of its owner or licensee - The consumer is responsible for the management of the software installed - Customers may be on many different releases of the software . Hosted software - Licensed software for which the supporting infrastructure and application support is outsourced to a third party - Single tenant software - The consumer may configure the software, but the technical infrastructure that hosts the software and its management is outsourced
5 Brian Sommer. TechVentive, Inc. 2006.
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