So far, we have seen that buying software as a service makes great sense from a customer perspective in our case, the SMEEMs (small- and medium-sized enterprises in emerging markets). The key benefits are: there is no need to invest in any IT infrastructure, payments are made monthly and can be tied to business outcomes, and it is possible to get an integrated solution which automates key business processes. David Coursey has more:
1. The app provides functionality many businesses need, but isnt terribly different from one company to the next.
2. The service allows customization, but the Software as a Service (SaaS) model prevents clients from doing too much reinvention. This saves money and grief. It also encourages best practices.
3. The service brings together information from several sources and presents it to the user in a friendly, web-based interface.
4. Hosted services are easier to get running, partially because of the limited customization potential but also because theres no hardware to buy and no software to install.
5. Theres also no software to manage, fix, upgrade, etc. All that is the responsibility of the vendor. Customers get a semi-custom application without having to hire developers and people to keep it running.
6. SaaS costs are predictable and typically usage-based.
7. If the vendor doesnt meet your needs, there usually is no long-term commitment and its easy to switch. This keeps SaaS vendors responsive.
Ed Sim adds: While every piece of software should not and will not be delivered as a service, it is also quite clear that customers are tired of buying expensive software products with large upfront licenses, expensive hardware to purchase, manage, and maintain, followed by expensive professional services to get the product up and running. From this backdrop, it is easy to see why reducing complexity and simplifying technology for customers is a big driver to more rapid adoption of products. It is also easy to see why reducing complexity for the customer also helps reduce complexity for the vendor, lowering the friction to sell and deliver its product. This means a more capital efficient business model, one which would hopefully scale much quicker and cost less to build product, sell, and support customers.
From an emerging market perspective, buyers have few choices once they decide they want to automate their business and invest in IT. Most current packaged software solutions continue to be priced in the dollar-equivalent in local currency making it far too expensive for most enterprises. The home-grown solutions packaged software solutions may not be good enough. This leaves them with three unpalatable options: non-consumption (which does not help them do what they started out to do), piracy (which tends to happen quite a lot in the emerging markets but is limited to some of the more basic applications), or customised development (which can leave them dependent on a mon-and-pop software company, take time and over the long run, prove quite expensive). Thus, buyers in emerging markets will look favourably at ASPs. Given their lack of legacy in terms of business applications, it may actually help them leapfrog with state-of-the-art software applications delivered over the Internet, and integrated with their mobile phones.
Tomorrow: The Sellers View