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You are here: Home > Experts' Views > Details

Software-as-a-Service (SaaS)

Shyamanuja Das, Editor, Dataquest, Cyber Media

Software-as-a-Service (SaaS) expands the limits of outsourcing even as it shakes up the traditional governance role played by IT executives. Will sourcing professionals inherit the burden of sourcing or managing on-demand software initiatives?




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Enterprise-wide Adoption

Innovations notwithstanding, there are two major challenges that are still to be met by SaaS providers: Enterprise-level integration, including connecting to legacy systems and provision of and adherence to better service levels.

SaaS, at the end of the day, is a service. And it has to be delivered and measured by using typical service industry-parameters. The providers have to think like service providers. “They have to be service-oriented,” says McNee.

Typical ISVs have to deliver on functionality and ability to solve business problems. It is difficult for them to think like service providers at the back-end. While the pure-play SaaS providers still are comfortable with the idea, the large ISVs like Microsoft and Oracle who are now seriously charting out their SaaS roadmap, have never gotten their hands dirty with integration, leaving it to the service providers and VARs. It is very difficult for them to change overnight and think like a service provider.

What can a global service provider do to help make SaaS happen on a global scale? “I see no reason why an Infosys, a Wipro or a Tata [TCS] cannot package this stuff,” says McNee. “They should get into the SaaS game, build on cheap infrastructure, leveraging open source and combine their own proprietary applications and offer it as SaaS to a client.”

That sounds absolutely radical, yet extremely logical. In fact, in its study, Saugatuck identifies IT service providers as a category of SaaS providers.

Arguably, IT service providers — and not just the offshore-based ones — have an edge in the SaaS game. Consider these arguments:

•   Their experience in meeting service-delivery requirements
 
•   Their revenue model where recurring revenues are a norm, is quite unlike the ISVs. It is not a big shift in business model for them
 
•   Though they do not own the software IP, they understand most of the major packaged applications, thanks to their experience in experience
 
•   Today, most of the global service providers have an on-demand/utility computing strategy in any case. SaaS could be part of that offering.

Where the global service providers cannot match the pure-play SaaS providers is in the depth of expertise in this type of development. But there is an age-old solution to this lack of expertise: Buy it. McNee actually expects a lot of mergers and acquisitions happening around the SaaS space. Especially for the India-based providers such as Infosys, TCS, Cognizant, Wipro and Satyam, it should not be too much of an issue, considering the huge acquisition currency available to them, thanks to their high valuations.

If that actually happens, the last barrier — the wall between software products and services — will fall. And that would be good news for the buyers of software, business and technology services.

There Is No Alternative to Strategy

For most enterprises, the challenge is to step back and consider a coherent, centralized SaaS strategy, while still allowing room for decentralized implementations in areas where that is needed. While the individual business units decide on their applications, they must conform to some common standards laid down by the central IT department. In short, there should be a SaaS/on-demand framework for the entire organization.

Such a framework is not just useful to prevent a financial disaster resulting from ERP integration issues. It is also useful to evaluate and deal with service providers in a uniform manner.

A SaaS strategy that involves the central IT department, adds business discipline to the sourcing and governance of SaaS providers. Many IT executives today possess some provider management and evaluation skills, a lot of which they have learned the hard way.

Also, there is too much emphasis on cost. In the Saugatuck study, most of the respondents said that reducing operational costs is the number one reason for SaaS implementation. But taking any new step with a cost-orientation at its core could be dangerous, as we have seen in the case of many severed outsourcing contracts. While cost savings is a key objective, service levels, reliability, governance and integration should not be overlooked while formulating and executing a SaaS implementation strategy. Sooner or later global sourcing expertise will come in handy here, too.

Next
STEPS
  SaaS’ promise is for real. While that does not mean you have to rush into it, start evaluating SaaS — and what it will take to source and manage it
 
  Start with a central SaaS strategy. Better still, formulate it as an on-demand strategy with SaaS as a part of that. Prepare a framework for organization-wide SaaS deployment
 
  Prepare a standard and ask the individual business units to conform to it, at the same time, leaving out the selection of applications to them. Help them in negotiations and implementation
 
  Keep an eye on the fast emerging exchanges/SaaS integration platforms
 
  Start talking to the IT and BPO service providers on how they can work with you to improve SaaS implementation and maintenance.



 


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About Author
As Editor Dataquest, Shyamanuja is responsible for editotrial strategy, planning and operations of Dataquest, India's most read business publication on IT. He is a columnist and blogger for Global Services (www.globalservicesmedia.com), where he earlier worked. Shyamanuja has been a business journalist for close to 14 years and has covered telecom, IT, and offshore outsourcing industries. His interest includes research-based stories, unconventional blog writing, and professional networking within IT industry.

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