Call it an important milestone on the road leading to a fully service-oriented IT regime. Or, call it the next logical step in the epic migration from build to buy. Software-as-a-Service (SaaS) promises to destroy the last fence that stands in the middle of an otherwise highly competitive IT marketplace. That barrier is the demarcation between what are today called IT services and commercial software products.
Yet, for some strange reason, the discussion around SaaS has revolved around what Microsoft might gain or what Oracle might lose vis-à-vis the new pure-play SaaS providers such as Salesforce.com. But that debate, notwithstanding how big it seems today, may actually turn out to be a much smaller, if not completely irrelevant point, in a much larger discussion — on what value SaaS can offer to the buyers of business and technology services.
To the uninitiated, SaaS is the jargon-loving IT industry’s term for an arrangement wherein the functionality of a software product is delivered to the user of that product over a network, typically the Internet, through a service interface. The user pays the host of that software — the SaaS provider — for either his actual usage or a fixed monthly/quarterly/annual fee, as opposed to a one-time large fee plus support as in the traditional software-licensing model.
Apart from the difference in pricing and architecture, SaaS differs from the licensing model in one more significant way. Since the provider hosts the application, the onus of upgrading the IT platform that hosts the application also lies with the provider. The user is not worried about upgrades of either the application or the platform. So by turning to a SaaS model, an IT manager passes on some nuts-and-bolts planning to the SaaS provider.
SaaS heralds a significant change in how tech executives approach the task of enterprise architecture and management. For the CFO, however, the whole proposition can be summarized in a simple sentence — SaaS is all about turning yet another “cap-ex” to “op-ex” — capital expense to operating expense. And that translates into not just better balance sheets, but also lower risk. For global sourcing and procurement executives, the SaaS trend represents a new opportunity to expand their IT and business process governance roles.
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.