Here’s a small change on the Indian software landscape that could portend a coming big wave: Large tech users such as Cadila Healthcare and a few cooperative banks have started “subscribing” to software applications, rather than pay a hefty one-time licensing fee.
The adoption of the new ‘software as a service’ model — also dubbed ‘on-demand software’ — comes at a time when software vendors SAP, Microsoft, Oracle unit iFlex Solutions and others start offering their products on the Internet.
In this model, price-sensitive enterprises do not need to buy hardware such as servers and pay system integration vendors to deploy the software, saving them significant amounts.
Here’s how it works: An enterprise looking to support around 100 users with SAP's ‘customer relationship management’ suite can save almost 60% in licensing costs by paying about Rs20 lakh a year, say industry insiders who don’t want to named. One such ondemand model has been wildly successful in the US:Salesforce.com, which charges as little as $65 (Rs2,860) for each subscription a month, has nearly 30,000 customers, including America Online and chip-maker AMD.
While Microsoft joined hands with phone company Bharti Airtel in November last year to offer a business software—known as enterprise resource planning, or ERP solutions—to small businesses in India, SAP, the world's largest business-software maker, has started offering a customer management, or CRM, software to companies such as Cadila Healthcare. Bharti Airtel, headquartered in New Delhi, partnered with Microsoft to target half a million small businesses in the country which need accounting and human-resource applications.
Jai Menon, Bharti’s corporate director of information technology and innovation, told Mint that this target customer base—mostly, not very tech-savvy—is growing 17% annually. “We are going to target large enterprises for data-centre services and storage management through software as a service model as well,” Menon said in a recent interview. In Mumbai, Cadila has opted for an on-demand software offering from SAP for managing its relationships with key hospital clients.
“Cadila has started with around 50 users for our on-demand CRM solution and we expect them to increase the number of users as they see the benefits,” says Atul Sareen, vice-president for business process platform, SAP India. Currently, the company is hosting its CRM solution from a data centre in Waldorf, Germany. But by end-2007, it may establish a data centre in India as demand from local customers grows. Cooperative banks, which have infomation-technology budgets of just a few lakhs every year, are also taking to the on-demand models. i-flex has recently revived ‘Flexcel’, a web-based version of its best-selling banking solution Flexcube, to target such lenders.
Flexcel, say sources, sells the subscription at up to a two-thirds discount to the price at which Flexcube sells. Result:A cooperative bank has to pay Rs3,50,000 for every branch that uses the software under this model without worrying about hardware and infrastructure costs, besides expensive support services.
“The available solutions meant for large commercial banks are pricey. Our aim is to go for the most cost-effective solution and this model looks good,” said V. Sukumaran, assistant general manager of the Tamil Nadu State Apex Cooperative Bank. In Punjab, the state’s cooperative bank signed up with Flexcel in September last year. And now it plans to have its 20 branches live with the product by April 2007.
The message is spreading. “We signed up Kerala State Cooperative Bank, and today, over 30 branches are live with Flexcube. It is now planning to rope in other 13 state cooperative banks as well,” said Venkat Subramanian, the Bangalorebased chief executive of Flexcel.
Abhineet Kumar in Mumbai contributed to this story