New Delhi: Leading software vendors such as Microsoft Corp., SAP AG, Oracle Corp. and Sage Software Inc. are launching their products on a subscription-based service model on the Internet to tap into demand from price-sensitive small and mid-sized businesses in India.
Customers such as Mumbai’s Cadila Healthcare Ltd, which has started using SAP’s CRM (customer relationship management) software through such a hosted model, are increasingly considering use of ‘software as a service’ as they seek to reduce expenses in licence fees for buying and running software as also invest in computer servers to automate production, marketing and sales processes.
Globally, CRM software vendor Salesforce.com, which counts AOL, part of Time Warner Inc., and chip maker Advanced Micro Devices Inc. as customers, is among the very few companies that have built a successful model of selling subscription-based offerings of software by charging about $65 (Rs2,626) per user a month.
Microsoft, leading software vendor
Apart from saving costs, the ease of use in hosted models helps. Companies can access complex business applications such as ERP (short for enterprise resource planning) or CRM just as they would check their emails through an Internet browser.
Many customers are eager to make the shift, as they are frustrated by the “traditional cycle of buying a software licence, paying for a maintenance contract and then having to go through time-consuming and expensive upgrades,” McKinsey & Co. principals Abhijit Dubey and Dilip Wagle wrote in a May report on ‘software as a service’.
With the world’s largest software maker, Microsoft, launching its ERP software through a hosted model on Thursday in India, smaller enterprises in the country will not need to invest in their own server and own pricey software licences anymore.
Microsoft has partnered with Bangalore-based Affordable Business Solutions (ABS) to offer the software powerhouse’s Dynamics Suite of ERP software.
Companies need to pay a monthly fee of Rs25,000, Rs35,000 and Rs60,000 for three, five and 10 users, respectively. “In the next three to four years, using software as a service will become the most natural thing for organizations,” said Rajeev Mittal, group director of small and medium business segment at Microsoft’s India unit. If bought the traditional way of owning software licences for these products, companies have to pay between Rs10 lakh and Rs15 lakh for the Microsoft ERP solution.
The Irvine, California-based Sage, which makes software to help companies manage customer relationship and automate their sales force, will launch its products on a pay-per-use basis on Friday in India aimed at small and medium businesses (SMB) in India.
“Companies in the SMB space do not want to be bothered about installing their own hardware and servers and do not want to spend more on hiring an IT manager,” said Thomas Abraham, managing director of Sage Software India.
Sage offers two packages. Sales Force Automation Solution is priced at Rs33 per user per day. The annualized fee is Rs11,940 per user. The full CRM suite product costs Rs66 per user per day.
As against these hosted prices, the Sage CRM packaged product, which is based on an ownership model, costs Rs20,000-40,000 for a one-time buy, in addition to hardware and administration costs.
“The hosted products will revolutionize the market, because in the case of packaged products, for a five-people organization, it would cost between Rs5 and Rs10 lakh plus an annualized maintenance charge at 18%,” Abraham said, adding that 50 customers, including Snowcem Paints and the Leisure Hotel Group, have signed up for a trial service on its India website.
Industry experts estimate that an enterprise looking to support around 100 users with, say, SAP’s CRM software, can save almost 60% of the licensing cost by paying anywhere between Rs20 lakh and Rs25 lakh a year. “These companies are seeking a low-cost model, and that is why software as a service makes sense to them,” Geraldine McBride, president and CEO of SAP Asia-Pacific and Japan, said in a July interview.
SAP’s arch rival Oracle has already announced its plans to offer ERP software earlier this month by entering into an alliance with India’s Zensar Technologies Ltd, with the software hosted at a Pune data centre. Some of the modules to be made available through pay-per-use model by Oracle will include finance, order management, inventory management and business intelligence.
Zensar and Oracle said in July that almost 300,000 small and medium businesses in India are being targeted by the two companies.