We’re just developing our relationship with Microsoft, and so I was at an ISV Innovation Day at Thames Valley Park yesterday. One of the good sessions was from Robert Redgate of IDC, presenting a survey they did on behalf of Microsoft investigating the Software as a Service (SaaS) marketplace. This was essentially a presentation to Microsoft ISVs, encouraging them to actively investigate SaaS as a business opportunity.
IDC found that, whereas the SaaS market was a $5.5bn market in 2005, they predict it will grow to $11bn by 2000. That’s a compound growth rate of 20% per annum, set against the overall software market, which is only growing at around 6% per annum. This leaves IDC in no doubt that there is, in Redgate’s words, “a fundamental shift ” towards SaaS as a delivery mechanism.
Robert explained that IDC see the shift as result of 5 primary drivers:
- Purchasers believe that the current cost of software is disproportionate to the value that it creates.
- In these budget conscious times, there is intense pressure to reduce the cost of acquisition and maintenance of software solutions (the on-going support and maintenance of solutions can often be 4 times the original capital cost).
- Organisations are striving to reduce risk, and want a far more tangible relationship between software’s benefit and it’s cost.
- The drive for reduced risk demands a much greater predictability of the running costs of the organisation’s software solutions.
- The value of solutions is no longer determined by the functionality available (in fact most organisations are only using a small subset of the functions available in their software products), but by the feelings and experience of the users in the way that they use and interact with the solution.
Every one of these drivers maps in to the typical benefits of SaaS solutions over traditional, on-premise software.
He went on to say that the typical SME/SMB organisation is obviously attracted by SaaS. They are always working with limited cash resources, and so prefer on-going rental rather than big upfront costs, and because they generally have less staff and limited technical skills, they prefer the fact that the application and many of the technical aspects are being managed by somebody else.
However, he also highlighted that enterprises are beginning to act more like SME/SMBs in terms of the way they look at the cost/benefit equation and risks involved, and so the SaaS opportunity is not just limited to the SME marketplace.
The rest of his presentation was aimed at encouraging, and suggesting how the ISVs might start with SaaS by setting up a ring-fenced new business unit, and steadily migrate at least part of their business to this delivery model.
Redgate summarised his presentation by highlighting that the SaaS market is already established, will grow fast over the next 4 years, and more importantly that the logic behind user demand is based on solid business reasoning rather than mere fashion.
I couldn’t help feeling that I wished my friends at AccountingWEB were listening to this presentation.
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