by October 3, 2007 0 comments

The concept of software as a service or SaaS is nothing new. In fact, it was
introduced in the late 90’s under the banner of application service providers,
as a low cost alternative to installing the actual application in-house. It
didn’t really succeed then due to a number of issues. The bandwidth costs were
prohibitive at that time, making it extremely unfeasible to give employees
remote access into a hosted business application. Web-based access technologies
hadn’t really matured to the extent they have today. Client/Server architecture
was the ‘in’ thing then, as a result of which organizations preferred buying
licensed software. Moreover, organizations were more comfortable hosting their
business applications in house, as they felt it was more secure. As a result,
the ASP model failed miserably. We didn’t hear of any further developments on it
until recently. Interestingly this time, it seems to be making a strong come
back, and all the initial signs indicate that it’s likely to succeed this time.
Let’s see what has changed to cause this.

Bandwidth costs were the biggest hurdle to the success of SaaS, which have
come down considerably now. The other issue is that packaged software is more
expensive. Not only do you have to purchase its license, but you also have to
pay for a maintenance contract. Further, you need to retain an IT team to manage
it, secure it with the latest patches and updates, customize it, etc. In fact,
software upgrades of business applications are also very expensive.

Anil Chopra,


SaaS doesn’t require any of this. You just need to pay a fixed monthly fee
for it, and the vendor takes care of the rest. Moreover, the mobility revolution
has also happened, and a lot of employees spend time travelling these days or
even working from home. The SaaS model fits in perfectly here, because employees
can access their business applications through a web browser anytime and from

Another factor that’s going in favor of SaaS is IT manpower. Today, companies
are finding it difficult to find and retain manpower for their IT setup. This
was also the result of a survey we conducted of CIOs in July this year, to find
out the issues they faced while managing their manpower. Now that IT has become
extremely important for business, organizations can’t afford to have this kind
of a manpower churn out. They need a stable team that can handle the IT
infrastructure effectively. The SaaS model can tackle this problem effectively
because the vendor or service provider would always have a pool of IT resources
ready, who would provide the support.

Lastly, the SMB segment in India has opened up, and SaaS gels perfectly with
their requirements, because of its lower cost as compared to purchasing and
hosting the application in house. So hopefully, one should see a lot more action
in this space in the near future.

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