The Hindu Business Line : Not too keen to pay for use?

When every rupee counts, one would think the ‘software as a service’ model is poised to grow. But the action appears muted. Here’s a reality check..

K. Gopinathan

A trickle-down for now, it appears.

Shamik Paul

Though Software as a Service has been held up as the next big revolution in the IT industry and has indeed become prevalent to an extent, it still appears to be at a nascent stage in India, and it is yet to be seen if it would be as successful as industry experts have predicted.

Software as a Service or SaaS enables IT companies to offer solutions to clients without the latter having to invest heavily in IT infrastructure. The solutions are hosted in the vendor’s data centre and are offered to the customers on a pay-per-use pricing model. The principal benefit of SaaS, therefore, is that it saves costs for the customers.

“It allows companies to convert their capital expenditure into operational expenditure, which could be a huge advantage to small and medium businesses,” explains Devesh Kumar Mathur, Chief Technologist, Wipro Infotech.

Most of the IT companies eWorld spoke to agreed that given the uncertainty in the business environment, the adoption of SaaS would now grow because their customers are wary of big investments. However, many of these vendors are yet to offer a substantial part of their solutions as a service. While some said they do have certain solutions on the SaaS model, there are few players who offer a complete ERP solution on the pay-per-use model. Some said they doubt whether SaaS would be widely adopted in India.

‘Built with our IP’

Chennai-based Ramco Systems is one of the few companies to offer an ERP solution on the SaaS model. Chetan Pathak, Vice-President, India Operations, says the company has seen good response from its customers and the number of users has increased to 2,000 from 1,000 in April, 2008.

Infosys Technologies Ltd offers its social platform solution as a service. The company says it is also building a Governance, Risk and Compliance (GRC) solution that would be offered on the SaaS model. The social platform, comprising blogs, wikis and other user-generated content, is a communication tool that can be used by the clients to generate and fulfil demand through the online medium, says Balaji Sampath, Group Manager, Corporate Marketing, Infosys.

On being asked why Infosys has so few solutions that are offered as a service, Sampath says the solutions are more akin to a product and the company has to spend considerable amount of time to develop them. “They are not just a service, but built with our IP,” he says.

Infosys engages with its clients to define what their needs are, and then develops a business plan to create a new product. Infosys is in talks with multiple clients for the GRC solution and sees a good amount of traction. The customer-facing and the employee-facing components of the social platform solution have good demand. The early adopters of the technology are the hi-tech, retail and financial companies, he adds.

Making client processes easy

NIIT Technologies also offers solutions on the SaaS model, but it is limited to certain HR-related solutions. “These solutions are not to provide a competitive edge in the products or services the clients are in, but to make their processes easy,” says Arvind Mehrotra, Senior Vice-President & Head - APAC & India, NIIT Technologies.

He says NIIT Technologies’ suite of SaaS offerings, known as Process-Easy, comprises process-centric solutions for HR management, payroll, sales and distribution, and finance & accounting. It is to make the clients’ internal processes easy. It could sit on their core ERP system, he adds.

The company has done pilot projects for two government agencies (one State government and one Central government) and is in talks with one of the Navaratna companies. In the corporate sector, the company hopes to close deals soon with companies in the manufacturing and retail sectors.

APAC lagging West in adoption

A recent report, Software-as-a-Service in APAC: The Momentum Continues, by Springboard Research, estimates the SaaS market in APAC (excluding Japan) to reach $1.8 billion by 2011 from about $274 million in 2007. However, the report cautions that the market is rather immature as customers are still grappling with issues such as finding the right application and ensuring reliable connectivity. Concerns about data reliability and security are also impacting the growth of the market.

In markets such as India, solutions focussed on customer relationship management (CRM), security, e-mail management and HR are more commonly used, says Balaka Baruah Aggarwal, Senior Manager, Emerging Software, Springboard Research. ERP on demand is there in patches in the manufacturing, textile and auto components companies and in some small and medium enterprises, she says.

In terms of maturity of adoption, there seems to be a stark difference in trends between APAC and the Western economies, she says. APAC is still in the early stages of adoption. The companies use isolated applications and not across their business. In mature markets, there is large-scale adoption. Here, a lot of education is needed, she adds.

Clicking with SMBs

Wipro Infotech, which is also creating solutions to be offered on the SaaS model, expects SaaS to be popular with small and medium businesses. In India, SMB is the fastest growing market segment, but they are not in a position to spend on IT infrastructure, says Devesh Kumar Mathur. “The SMBs are our target,” he adds.

Mathur says the project has crossed the drawing board stage and the company is recommending the model to the BFSI and manufacturing companies. However, Wipro Infotech is yet to sign any contracts. “We are optimistic that investments will pay off and it will gain prominence in India,” he says.

Wipro Infotech is working with its ecosystem partners including software companies, hardware companies and telecom service providers to create solutions that would be hosted on Wipro’s data centres and offered to customers on a pay-per-use model.

Mathur says for the model to be successful, the entire ecosystem must work together. The company will also develop specific solutions for different industry verticals such as retail, real-estate and infrastructure, jewellery and textile. Wipro would have to invest in setting up the infrastructure, but the cost would be recovered from multiple customers who would be using it. The price point to the customer would depend upon the total number of users, he adds.

All fine, but...

However, not all companies think the model would be very successful. Anjan Lahiri of MindTree Ltd says the company has gone into a few relationships on the transaction-based model. “We see some traction, but I do not see this becoming a major part of our revenue,” he adds. Many enterprise customers have stringent security requirements. In such a model, the customer does not know who is doing the work and that becomes a problem, Lahiri adds.

Avinash Vashistha, Chirman and CEO, Tholons, an offshoring advisory company, says he does not think SaaS would become very popular. Companies might take to it because of the present economic situation, but in the long run, it might not be very successful, he feels.

Will SaaS become Khaas? We’ll have to wait and watch.

shamik@thehindu.co.in

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