Bangalore: Indian technology companies that write part or all of the code that goes into products of independent software vendors, or ISVs, such as Microsoft Corp. and Oracle Corp., will see their earnings increase from such clients as they gear up to sell software on a pay-as-you-use basis under the software as a service, or SaaS, model.
Catching on: Oracle Corp. headquarters in Redwood City, California. Vendors such as Microsoft and Oracle are using the pay-as-you-use model to tap a broader market and add to the sales of licensed software.
These companies are also known as outsourced production development, or OPD, firms. Driven by demand from end users, ISVs such as Microsoft and Oracle are adopting SaaS to tap a broader market and add to sales of licensed software installed in customers’ computers. SaaS — where products are delivered online — allows vendors to sell software through monthly subscriptions that are usually cheaper than licence fees.
OPD firms such as Symphony Services India Pvt. Ltd, Ness Technologies Inc. and Aspire Systems Pvt. Ltd are receiving increased enquiries from their clients seeking to migrate to SaaS. “It (shifting to SaaS) only increases our opportunity,” said Gowri Shankar Subramanian, chief of Chennai-based Aspire Systems that serves clients such as Progress Software Corp. and SciQuest Inc.
Research firm Gartner Inc. has forecast that the worldwide SaaS market would touch $19.3 billion (Rs82,199 crore) by end 2011, up from $6.3 billion in 2001. The SaaS way of software delivery has been well adopted by start-ups and mid-sized firms such as Salesforce.com Inc. and Dorado Software Inc.
Small and medium ISVs will take the lead in migrating to SaaS, while large vendors will still see a majority of their sales through licensed software, said Pari Natarajan, chief operating officer of Zinnov, a consultancy firm that tracks OPD business.
Large ISVs will offer peripheral software such as customer relationship management and human resource management through SaaS, Natarajan said. Business software vendor SAP AG has already adopted Saas by offering its enterprise resource planning, or ERP, solution ByDesign to small and medium customers.
For an ISV to shift to on-demand SaaS, it would require many changes in pricing, delivery, and sales structure, besides tackling migration issues. Therefore, OPD firms such as Symphony and Aspire have partnered with specialist firms to help their clients manage the transition.
Symphony is a founding partner of the Oracle SaaS Platform Alliance, which enables ISVs adopt SaaS. Aspire has partnered with OnDemand Solutions, a US-based consultancy firm, to handle the business consultancy aspect of SaaS transition because of the cost implication for clients due to their customer base and issues surrounding it.
Ness Technologies, whose clients such as the Cobalt Group Inc. and Chordiant Software Inc., have already adopted SaaS, is seeing increasing interest from customers seeking to migrate to SaaS, said Shashank Samant, president of the company’s North American operations. Ness’ partnerships with vendors such as SAP, Oracle, International Business Machines Corp. and Microsoft helps the company assist its customers get on to SaaS, Samant had told Mint earlier.
Symphony has set up a centre of excellence for SaaS and has implemented several SaaS projects, said Ajay Kela, managing director and chief operating officer.
“As transitioning to SaaS is a pretty complex work, it offers a lot of opportunity for us,” Kela said.
Besides consulting and tweaking a product to SaaS, such migration by ISVs also opens up opportunity on the operational front in terms of infrastructure management and customer support, said Kela, adding about half of the new start-ups are seriously looking at SaaS as a delivery model.
Aditi Technologies Pvt. Ltd, which has a delivery centre in Bangalore, has assisted its customers such as Docusign Inc. and SchoolNet Inc. with their SaaS strategies. “We are aggressively focusing on getting business from existing mid-size customers,” said Ravindran Kittu, director of marketing at Aditi.
Adopting SaaS would also mean more frequent product releases for the ISVs and the reach is also vast as the delivery is online, said Aspire’s Subramanian. “Frequent product advancement would mean steady stream of revenues for vendors like us,” he said. About 20% of Aspire’s customers, mainly small and medium businesses, have adopted SaaS.
B. Ramaswamy, chief executive officer of Sonata Software Ltd, said besides huge potential in moving applications to SaaS, there will be long-term opportunities in terms of maintaining the platforms. As the delivery model is undergoing a change, ISVs do not want to be left behind and SaaS is high on their agenda, Ramaswamy said.