This week's eSourcing Wiki-Wednesday topic is 'On Demand SaaS Application Platforms'. An excerpt of the article is below, but you can also read the full article on the eSourcing Wiki by clicking here. Have something to add? The eSourcing Wiki is an open content community and you are invited to register and contribute to this resource, which benefits our whole professional community.
Do you have any experience in this area or have any questions? Read today's post on "The Point", Using Saas Application Platforms.
On-Demand or SaaS (Software-as-a-Service) is the delivery of software functionality over the Internet from an application instance that may be shared across many clients. It is not simply ASP (Application Server Provider) re-invented. With ASP, an organization bought a license to a traditional piece of software designed to be installed within an enterprise and paid someone else to host and manage it. With on-demand, an organization rents a license to a software module designed for the internet from the ground up and the provider hosts and manages it.
On-Demand is becoming the new paradigm in software delivery and “the emergence of on-demand software is not an isolated trend; it is a fundamental, market-altering shift in how software is built, bought, delivered and used.” (Bill McBeath, Chief Research Officer @ ChainLink) It’s the frontrunner of the new “utility” computing movement in which technology is provided in the way power or water is delivered to the business, as a service.
A look at the sharp increase in on-demand adoption statistics verifies this trend. A 2005 study by IDC (summarized on Forbes) determined that almost 33% of respondents were using software on demand and that another 48% were considering doing the same. This is a sharp turnaround from a study 18 months prior that determined 70% of companies were not willing to consider on-demand. Furthermore, a study by Aberdeen Research in 2006 focusing on the use of on-demand applications in the supply chain, one of the business functions that was not an early adopter of on-demand, determined that half of the study participants said they now used or were considering using on-demand applications to manage select portions of their supply chains. Finally in 2006, Gartner claimed that by 2010, 30 percent of new software will be delivered via SaaS as businesses continue to adopt this approach.
Furthermore, on-demand software-as-a-service comes bundled with a slew of benefits not found with traditional software models. Fifteen of these benefits are:
Pay As You Go
No more spending thousands, tens of thousands, hundreds of thousands, or even millions of dollars up front for a software license only to spend that much again on implementation and training costs. The cost is simply a fixed, relatively small (when compared to traditional enterprise software costs), monthly, quarterly, or yearly fee (often less than the maintenance costs associated with traditional licensed software).
The organization can start using the software the minute the provider activates its accounts, which can happen within minutes of payment in a true on-demand platform. Most of these offerings come with easy-to-use streamlined data import utilities that allow a buyer to fully set-up and configure the organization’s instance in a matter of weeks, or even days, not the months or years associated with traditional enterprise software deployments!
All organizational users see a single instance of the software when they log in, regardless of how many instances and boxes are required to support the software behind the scenes. No more one instance per organizational unit, department, or division.
Economies of Scale
The fact that on-demand software is built from the ground up to be a multi-tenancy model allows a provider to share the hardware and software instances required to support an organization’s instances across clients and pass on the savings generated by economies of scale to the provider’s clients.
Provider handles administration, maintenance, and headaches
Software-as-a-service is the ultimate in computing from a utility perspective - and the only hassle-free computing model out there. All of us know how much of a hassle it can be just keeping Microsoft Windows on a PC working on a regular basis - enterprise software can be much more complicated. But neither the sourcing team nor the IT department need to worry about that, the provider takes care of all the administration, regular maintenance, and associated headaches.
On-demand software is updated automatically by the provider when new features are available. With many providers, this often occurs frequently, and some providers offer significant free upgrades three to four times a year. Compare this to traditional enterprise software where a buying organization might get an upgrade once or twice a year if they are lucky, and willing to pay for it.
The customer has the leverage
Many on-demand offerings are month-to-month (after an initial sign-up period, depending on the provider, which is typically never more than six months to a year) and the organization can cease using the service at any time if the sourcing team becomes dissatisfied. A provider’s success is not measured on the income from the initial contract but by adoption, satisfaction, and, most importantly, client renewal. Unlike a traditional installed enterprise software provider who gets all the money up front and disappears, on-demand providers are in it for the long haul. SaaS providers continually strive to make their offering the best it can be.
Because on-demand is internet-based, a user can typically access the full-functionality anywhere the buyer has access to an internet connection. This is different from traditional web-access to enterprise applications which requires a VPN connection and specialized client software.
Buy what is needed, and only what is needed
With the on-demand model, an organization can buy just what it needs and not a bundled package where its users may never use more than half the features. Recent studies have suggested that the vast majority of product features go unused by a customer. If this seems preposterous, count how many features of Microsoft Word an average buyer uses on a regular basis. Maybe 20 or 30 if they’re a real pro. Now compare this to the 300+ (or is it 400+?) features that Microsoft Word has. With on-demand, if the user base does not need it, the organization does not have to buy it.
eSourcingWiki is an open content community of strategic sourcing and procurement best practices. This wiki is intended to be a dynamic document that constantly adjusts and transforms to current trends and thought leadership in supply management. Iasta welcomes global contributors to assist in the ongoing documentation and knowledge building that is essential to creating useful information for supply management professionals.