The Hindu Business Line : SaaS is <I>khaas! </I>

Can you imagine changing your car every quarter?" asks Jayakumar Singaram, CTO, Epigon Media Technologies, an embedded solutions firm.The car buyer generally keeps the same model for at least half a decade. This is regarded as a sound investment as the user takes ownership of the car for a long term.

Software, however, changes every three months. So it would make sense for the provider to license the software only for three or more months at a lower price, and allow the user the freedom to look for better software or choose an update from the provider, he says.

Enter SaaS or `software as a service.' SaaS is a method of selling software in which a vendor or service provider hosts the applications and makes them available to customers as a service, rather than as a product.

SaaS takes on other aliases: hosted services, ASP (application service provider) services, utility computing, or software on-demand. The fundamental idea remains constant: instead of buying and installing expensive packages (enterprise applications), users can now access them over a network, with an Internet browser being the only absolute necessity.

The concept has evolved over the years, from a dotcom model to custom software to licensed software. Then came the offer of services along with the product and then software that was driven by services.

Termed as an irreversible phenomenon, this model is set to flip India's software makers on their side and give the consumer control. For it allows you to do all the work that you ever do on your regular computer (home or office) using any computer in the world as long as it is connected to the Internet.

Portal to your data

"It is the portal to your enterprise data: your browser is now the only thing you need to access all critical office information," says Jeremy Cooper, vice-president, marketing, Asia-Pacific, Salesforce.com, a Web site that offers enterprise resource planning (ERP) and customer relationship management (CRM) applications online.

Enterprises that need CRM had to previously spends lakhs on licences, training and implementation. Now, with a few clicks, they can get under way, thanks to Web-based firms such as Salesforce.com that host the software at their offices, allowing the buyer to access the information over the Internet, using a browser.

A whole new horizon of applications will become available to consumers - a generation of pay-per use applications may become available with the oncoming software as a service revolution, says Ramakanth Desai, Vice-President, Wipro Technologies.

With this model, users will be able to use lower-grade hardware for applications that were previously out of reach. It also allows the user to stop worrying about the complexity or other associated IT hassles with the application.

SMB - the driving force

India is expected to be the fastest growing `software as a service' market in the Asia-Pacific with its five million small and medium businesses. According to analysts, only 5 to 8 per cent of Indian SMBs have adopted some form of CRM. This factor, along with the price sensitivity and lack of legacy applications, is expected to drive adoption of the software as a service model across enterprises.

The concept is not new to India, but hasn't been as widely adopted as it should have been, says Anurag Shah, Director Technology, ESI Software Test Labs, Omnitech InfoSolutions, adding, "SaaS could break down the barriers with a combination of skilled resources and the right tools offered as a service."

With high economic growth perceived in the small and medium segments, coupled with large enterprises consolidating their IT investments, software licences will soon have to vie for attention alongside software as a service, adds Kiran Datar, Managing Director, WebEx Communications India.

WebEx offers conferencing applications online and is one of the pioneering firms offering software via this model.

Biggies in list

Tata Consultancy Services is also adopting the software as a service model. Initiatives include the offer of a core-banking system (FNS) for cooperative and regional rural banks online and plans to extend the model to its suite of products in the insurance, healthcare and retail spaces.

"FNS will be offered to smaller banks in India, who cannot afford the investments required for a core-banking system," says K. Ananth Krishnan, vice-president, CTO, TCS.

The firm, in partnership with on-demand CRM vendor Salesforce.com, is planning to jointly launch a series of call management solutions in India.

Growing interest

While the actual adoption of `software as a service' remains much lower than on-premise deployment, interest is growing, reports Forrester. Some examples of efforts taken by firms here are: Computer Science Corporation has a group tracking software as a service as a potential disruptive model to the IT industry and Bangalore-based Informatica India, a data integration software firm, recently unveiled its SaaS strategy and has made it a focus area for the company.

Wipro Technologies too feels that this model has the power to create new opportunities in the infrastructure management space for it and is eager to adopt it.

"Epigon's earning is going to come from SaaS" believes Singaram.

Opportunities in India

SaaS in India, according to Forrester research analyst Ray Wang, has a lot of potential. "There are tremendous opportunities for SaaS to be successful here, given the number of skilled developers and engineering talent," he says.

As outsourcing talent shifts to developing the Indian software market, a number of SaaS entrants are expected to make India their hub over the next couple of years, says Wang.

India and China have been ranked as having the greatest potential in the mid to long-term future by `software as a service' application vendors. The market for this is expected to grow to $48 million by 2008, representing the fastest growth in the region, says Datar. Gartner Research predicts that by the end of this decade, 30 per cent of new software purchases in the Asia-Pacific will be delivered via an application utility or the software as a service model.

Role for banks

Worldwide, too, the concept is seeing elevated growth. Analyst firm International Data Corporation (IDC) reports that worldwide spending on SaaS will grow to $10 billion in five years.

The key trends that would surface in India, according to Forrester's Wang, are the increasing opportunities for large Indian banks to play a role in assisting with financing options for Indian software companies. "India has all the pieces of the ecosystem. What needs to happen is a stronger catalyst to create an innovation network around software that is understood and sustainable for the long run," he says.

application areas

Currently, the software as a service model is gaining traction in both generic applications such as CRM, HR/Payroll as well as the more specialised chip design industry.

"It is expected that the market for enterprise resource planning, supply chain management and human resources applications will grow significantly, opening up new opportunities for on-demand vendors," say analysts.

Aggressive adopters of the model will be the finance and manufacturing domains, say experts. Telecom companies will see this as a big revenue potential, they will host consumer applications (travel, financial modelling) as services to earn revenues, observes Desai.

E-learning and conferencing are also expected to take off with its adoption. Online banking and share trading would offer an opportunity to use the SaaS model, says Vipin Tyagi, CEO, Network Programs India.

Voice over Internet Protocol (VoIP), travel and tourism, e-shops, online shopping engines and e-commerce are also likely target areas, he adds.

One of the innovative trends noticed by experts is the use of software as a service in publishing. With the increasing availability of e-books that can be bought and read on the Internet, this concept would probably see book lovers opting for the online medium.

Saving on costs

By adopting SaaS-based applications for certain business processes, small and medium businesses can reduce capital investment (which they might incur in terms of setting up huge infrastructure, resources, software licences, maintenance/upgrade costs and skilled IT manpower, if they buy and run similar applications within their premises), says K. Sudarsan, CEO, Vaakya Technologies.

Software as a service will also mean higher revenue from applications due to volume, quicker upgrades and platform-independent applications. From the business angle, experts say business-to-business (B2B) integration/collaboration will be easier due to common platforms and compliance to standards.

The penetration of PCs/laptops/mobile devices and pervasive Internet connectivity will be the driving force towards adoption of the concept in India.

Prospects bright

Its future is bright — according to a range of firms, from IC design, to software for media entertainment. Reduced growth in IT budgets will also bolster the case for adopting this model.IT budgets for the next five years appear to be increasingly constrained, says Forrester Research. Overall software spending growth is slowing from 10 per cent in 2005 to 7 per cent in 2006 and enterprises are now ready for `software as a service.'

Feedback mechanism

An advantage of the concept highlighted by Datar of Webex is the ingrained feedback mechanism giving more power to the lay user: SaaS users can constantly provide a stream of feedback on what's working and what's not.

The use of search engines in the near future could also change — intermediate applications that act as a broker between the user and search engines may be mainstream, says Desai.

With `software as a service', the average Indian can use custom versions of the big software packages at affordable costs. One example is TCS's webhealthcenter.com, which offers professional medical advice reachable to anybody with access to a PC. The Rent-a-software model is bound to work as it did in other markets — from real estate to cars to video-cassettes and DVDs, assures Krishnan.

preethij@thehindu.co.in