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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:
- IDC reports that it expects customer spend on SaaS to increase to $14.8 billion by 2011.1
- Gartner Group reports that SaaS revenue in enterprise application software alone will grow 21% in 2007 to reach $11.5 billion by the end of 2011.2
- Two out of three businesses are either buying or considering buying software via the subscription model.3
- McKinsey reports that the proportion of CIOs considering adoption SaaS applications in the coming year has 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.
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?
__ Your people?
__ Industry-specific technology that can differentiate you from your competition?
__ Your on-premise IT infrastructure and staff to support it?
One response here is the wrong answer; one answer gives you no differentiation, no leg up on the competition, and creates the money-pit of technology expenditures.
Enter Software-as-a-Service (SaaS): here we will look specifically at the business benefits to mid-market companies. This paper will explore the advantages of Software-as-a-Service as an alternative to sinking valuable investment dollars into high cost of ownership/low return business strategies. But 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
- ASP
– Application service provider
– The software developer often hosts the application directly
– Popularized today through standalone applications that are delivered over the Internet
– Multi-tenant application6
– Created a reputation as inflexible and hard to customize
– The consumer accesses the software and does not manage it.
- SaaS (also referred to as On-Demand)
– Software-as-a-Service
– Hosted software based on a single set of common code and data definitions that are deployed in a one-to-many model by all contracted customers at any time
– Hosted software sold on a pay-for-use or a subscription based on usage metrics (instead of a perpetual license)
– “Pay as you go” operational expense rather than a capital expenditure
– Highly responsive and scalable (upwards and downwards) solutions that cover entire business processes
– User access to the application is over the Internet
– Flexible and customizable solutions
– The applications are multi-tenant and Web-native
– The management, support, and upgrading of the software and the infrastructure that supports it is the
responsibility of the solution provider
The ASP movement at the beginning of the century introduced a novel concept for application use: “apps on tap.” While the term died away with the ASP model, the concept is still useful for us to consider: business applications that are available and paid for like your utilities - think electric power - there when you need it and you pay for what you use.
The business reasons for the very high adoption rates of SaaS, as stated by industry analysts, include:
- More rapid access to state-of-the-art technology
- Shift in focus to core business management, rather than disproportionate attention on the computer
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