Cover Story
SaaS Shift
With Software-as-a-Service gaining momentum, partners will have to reinvent their traditional business models to make the most of this opportunity
By Sharmee Roy
 Software-as-a-Service (SaaS) is finally entering the market realization phase, after going through a hype cycle over the last couple of years.
Many in the IT channel believe that this new model of on-demand software and service delivery will change the rules of channel business forever.
SaaS growth figures are astounding and many believe that the adoption of SaaS and cloud services will be further accentuated by the current global economic recession.
In a report released in early 2008 before the global recession began, Gartner predicted the global SaaS market would be in excess of $19.1 billion by 2011. It has also predicted that, 25 percent of all new business software sold globally by 2011 will be delivered as SaaS.
India will be the fastest growth market for SaaS, according to Springboard research. From under $55 million in 2007, SaaS revenues from India are expected to grow at a CAGR of 76 percent to reach $260 million by 2011, as per Springboard.
Balaka Baruah Aggarwal, Senior Manager, Springboard informs, “In a recent survey of large and mid-market customers, nearly 76 percent of the respondents said that they are planning to adopt SaaS in some way within the next 12 months.”
The present economic slowdown is expected to give a strong boost to SaaS adoption. “The economic uncertainty is compelling many customers to seriously consider SaaS. The awareness level for the new on-demand computing model is very high in India and we believe the market is set for an exponential growth,” says Moorthy Uppaluri, General Manager, DPE, Microsoft India.
Agrees Jasjit Shawney, CEO, Net4India, Microsoft’s leading hosting partners, “We have seen acceleration in inquiries and rise in demand for SaaS model. There is pressure on organizations to move from the capex to the opex model. We have received significant amount of queries since January which proves the point. In January we had ran a customer trial promotion, which got an overwhelming response. Many customers who started by trying a single mailbox solution have bought 5 mailboxes.”
According to M Lakshmi Narayan Rao, Marketing Director (Global Channel Programs), Jamcracker, the company that calls itself an aggregator and distributor of SaaS services believes that India has definitely entered the realization phase of the SaaS adoption cycle. “The SaaS market is pegged at Rs 540 crore this year and we are expecting to capture 15 percent of this market. Many customers I have met are in between the awareness and consideration phase,” says Rao.
Affordable Business Solutions (ABS), specializing in hosting services and SaaS has witnessed a 150 percent increase in customer base in 2008.
“For the past 3 to 4 months, companies have abstained from taking decisions on IT purchases for
curtailing costs. In such a situation this model becomes commercially viable. Also with 3G on the anvil, broadband will no longer be an issue. With SaaS, the market will increase 10 to 15 folds, with IT penetration reaching into untapped tier-3 and tier-4 cities,” says Srikant Rao, CEO, ABS.
Vendor strategies
SaaS has already started dominating the market strategies of vendors and large SaaS providers. They are devising plans to enroll channels to take their offerings to a wider audience. Microsoft India is expected to launch its online services portfolio branded as BPOS (Business Productivity Online Suite) in June this year which includes SaaS versions of Exchange, SharePoint, Office Communications Server, Office LiveMeeting and CRM Live. The vendor will also roll out its Online partner program.
Elaborating on Microsoft’s cloud services strategy which includes SaaS, Uppaluri of Microsoft says, “We have three SaaS offerings—Windows Live for consumers and small business which is already available; the second is the hosted SaaS offerings where third-party companies will host our mailing, collaboration and CRM solutions and offer it to the market while the last piece is the Online services which will be hosted and delivered by Microsoft. While the hosted services are currently being offered by more than 200 of our hosting partners, it’s the online service which we will soon be launching in India.”
Most believe that entry of Microsoft with Online services, will give a fillip to the SaaS movement.
HP, one of the largest channel companies, is also readying up for the SaaS play. Says Vinita Ananth, Director, SaaS, Apac, HP, “We have been piloting our SaaS offerings through select partners and are ready to roll them out to the larger partner community. We have evolved a partner framework consisting of a partner-led program and a pure-reseller program. The first one will allow partners to ensure the delivery of their own brand of SaaS offerings using HP’s SaaS platform. The reseller program will enable partners to resell HP branded services.”
Jamcracker too is on a channel expansion drive. The company has signed up 100 partners within the last six months. “We have invested considerably in enabling these partners to sell our SaaS offering that range from mobility to messaging solutions to collaboration, application and security offerings. Most of them are now actively selling the offerings to their customers and we are seeing the numbers increasing.
Soon we will start our second phase of expansion going to smaller towns and activating and enabling partners there,” informs Rao. Jamcracker is also forging partnerships with local ISVs to create industry-specific applications which it believes will help expand business.
Even data center and ISPs are getting into the fray and are aggressively looking at selling SaaS services through channels. “Channels will play an important role in the proliferation of SaaS. Nearly 40 percent of our on-demand business comes through partners. We have 1,700 partners managing 200 customers for messaging solutions,” says Shawney.
Rao of ABS also thinks that the role of partners in adoption and expansion of SaaS in the country will be extremely important. “Our aim is to have 10 million users for our offerings over the next 5 years. To achieve this, it is imperative to work closely with channels. We are in the process of evolving a franchisee model which will groom 100 associates over the next 12 months,” adds Rao.
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SaaS will change channel business forever >>
Partner opportunities
While vendors are bullish about SaaS and are evolving their channel strategy, an increasing number of partners are also gearing up to assess and realize the opportunities presented by this new on-demand computing model.
Says Suresh Ramani, CEO, Techgyan, “Presently, we target small businesses with less than 100 nodes to provide on-premise software infrastructure. But with cloud services we will able to target larger companies as we don’t have to bother about deploying multilocational on-premise infrastructure. Also we don’t have to manage SLAs as they will be managed by either the hosting partner or the vendor. Our USP will lie not in deployment and maintenance but consulting, customization and training.”
Jamshedpur-based Sparx Technologies has also embraced the SaaS concept whole-heartedly. Last November, the Rs 12-crore solutions provider took a dive into SaaS by partnering with Jamcracker and Google. “We have recently bagged a big order from Tata for messaging solutions. Currently we are in talks with 40 companies and expect to clinch at least 10 deals,” says CEO Jaspal Singh.
Another partner that is completely enamored by the SaaS opportunity presented by SaaS is Panduranga Mallaya, CEO, Growfast Computing Services. “We entered the SaaS business six months ago with a tie-up with Jamcracker and have seen exceptional interest from our 450-odd customers. Our strategy is to create belief in the concept and increase awareness around it. One of our customers wanted an on-premise email messaging solution closed user network for its 18 branches. We offered them this model and are presently conducting a pilot run for them,” says Mallaya.
Leading Microsoft partner, Futuresoft Solutions is also readying to enter the business with Microsoft SaaS offerings. “We plan to start off with hosted model and then have about 10 customers, and when we have our revenue stream going, we will invest in our own data center,” adds Sandeep Salman, VP, Technology, Futuresoft Solutions.
Gururaj, MD, SAAS India has already readied his company for the kill during the April-May period when software licenses come for upgrade: “We have done a lot of groundwork to gear up ourselves to sell SaaS. We have close to 1,000 customers who buy licenses from us and our strategy is to convince them to pilot SaaS when we meet them for renewals. We have set a modest target of acquiring business worth Rs 25 lakh from this exercise.”
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Sparx bets big on SaaS >>
Challenges
Despite a promising picture, the challenges surrounding the model are hard to ignore. From a customer point of view, the primary concern is about the reliability of SaaS.
Agrees Uppaluri of Microsoft, “The obvious concerns for customers are that of quality, availability and reliability of SaaS—whether the services will be available round the clock and in case of failure what will be the uptime turnaround.”
From the vendor point of view, they will need channels that can ramp up their capabilities and transition into consultants and trainers who can effectively guide and help their customers into adopting SaaS.
Partners are worried about disintermediation. The branding, pricing and service delivery of SaaS will reside with either the service provider or the vendor thus leaving them with little control of the customer.
All these challenges and fears are but natural. After all SaaS is going to be paradigm shift for the entire IT industry. But eventually its success will depend on how all the partners of the IT ecosystems function in sync. |