No licence fees to pay, no hardware to install and no maintenance burden to shoulder. It is no wonder that the concept of software-as-a-service, or Saas, is changing the way many companies purchase and deploy enterprise applications.
Take, for example, Allianz Cornhill, the insurance company. In 2006, it rolled out a CRM system to 350 underwriters and sales staff, so they could track and manage the process of converting sales leads into policies.
Rather than deploy the software in-house, however, Allianz Cornhill opted for a suite of hosted applications from Saas provider Salesforce.com.
As a result, its CRM tools and data are hosted, managed and regularly upgraded by Salesforce.com staff in the provider’s own data centre. Allianz Cornhill staff, meanwhile, access them over the internet and pay a monthly, per-user subscription fee for the privilege.
It was not hard to convince senior executives of the attractions of the Saas model in terms of cost and convenience, says Phill Harding, broker development manager at Allianz Cornhill. For a start, the roll-out of the software took six weeks, where an equivalent inhouse deployment might have taken months, he says.
“In fact, once the concept had been adequately explained and demonstrated and the solution was in place, we were asked by senior executives: ‘Why haven’t we used this approach before?’,” he says.
Others are wondering the same thing, and demand for Saas applications is soaring. Recent estimates from analysts at IT market research company Gartner, for example, suggest worldwide sales growth of 21 per cent this year, to $5.1bn. By 2011, they say, Saas will account for one-quarter of business software sold globally.
“Ease of use, rapid deployment, limited up-front investment in capital and staffing, plus a reduction in software management responsibility all make Saas a desirable alternative to many on-premises solutions, and will continue to act as drivers of growth,” says Sharon Mertz, a research director at Gartner.
Some potential users, however, still have reservations about Saas. If information is power, and data among the most valuable of corporate assets, they ask, then why would we put them in another company’s hands?
How can we customise software that is hosted remotely by a third party to fit our company’s unique business processes? And how can we possibly integrate Saas applications with the core in-house systems that remain vital to our business?
These are all areas that leading Saas providers, such as Salesforce.com and NetSuite, are working hard to address.
In terms of reliability and availability, for example, NetSuite offers a money-back guarantee of 99.5 per cent uptime. “Most companies would really struggle to achieve that kind of uptime inhouse and yet we offer it consistently to our customers,” says Zach Nelson, chief executive of NetSuite.
And, following well-publicised outages in early 2006, Salesforce.com has upgraded its architecture and can now promise uptime of 99.999 per cent, according to Lindsey Armstrong, the company’s European president. In addition, it has committed itself to full disclosure of performance metrics via a website that was launched in response to those outages, trust.salesforce.com.
Other obstacles to Saas are “more perceived than real”, says Robert Bois, an analyst with market research company AMR Research. “Integration and customisation are still common concerns that our clients raise with us, but in fact, the larger Saas suppliers are pretty good at solving those problems and the technology of the multi-tenant architecture that underpins Saas solutions has matured sufficiently that they’re no longer a big issue,” he says.
At one time, a “one-size-fits-all” Saas approach was the norm, and “plain vanilla” functionality (where the same product is deployed by all customers) was viewed as the necessary trade-off for relatively low cost of entry.
But recent technological advances have changed all that. “Not only can you customise pretty much anything you need to in NetSuite, but those customisations carry over every time the application is upgraded – and we upgraded NetSuite 400 times last year,” says Mr Nelson.
“You certainly don’t get that when you customise on-premise software and then need to upgrade it,” he adds.
“We do a huge amount of customisation,” confirms Andy French, head of information systems at NetSuite customer Opal Telecom, a division of Carphone Warehouse. “These tweaks and changes range from making certain data fields mandatory to installing Java scripts that drive system logic and user behaviour,” he says.
In fact, the only limitation facing Carphone Warehouse, which has more than 3,000 users of Netsuite company-wide, is the number of skilled IT people available to do that configuration, he says.
Integration between Saas tools and inhouse applications is also more commonplace these days. Most Saas companies publish application programming interfaces (APIs) based on web services standards, which allow disparate systems to exchange data whether they are based inside the firewall or on a third party’s premises.
According to Ms Armstrong, more than half of all API calls to Saleforce.com applications come from non-Salesforce.com systems.
Analysts at Gartner, meanwhile, predict that by 2010, three-quarters of large enterprise Saas deployments will have “at least five integration or interoperable points to on-premise applications”.
But with increased scope for customisation and integration of Saas products comes greater demand for outside help – a point not lost on a number of leading systems integrators, including Accenture and Deloitte, who have already set up dedicated practices in this area. Mr Bois of AMR Research says other IT services firms are “eager to tap this market, but less willing to go on record with details of their Saas strategy. They’re taking more of a ‘wait and see’ approach.”
One company that is certainly not holding back is Saaspoint, a specialist Salesforce.com implementation and consulting partner led by John Appleby, who previously worked for Salesforce.com and was that company’s first EMEA employee. “Demand for help with Salesforce.com implementations far outstrips supply and, as long as Salesforce.com continues to grow so quickly, we don’t see that demand drying up,” he says.
For Saaspoint, buoyant demand currently translates to year-on-year quarterly sales growth of between 250 per cent and 300 per cent, fuelled by projects at leading names such as P&O Ferries and pharmaceutical company Quintiles.
This flurry of progress suggests a rosy future for Saas, not to mention the consultancy ecosystem that is fast springing up around it, says Mr Bois of AMR Research. “Already, there are few areas of the enterprise applications industry untouched by Saas,” he says.
And as software companies associated with more traditional models of software delivery, such as SAP, Oracle and Microsoft, catch up, he says, the case for Saas deployment can only get stronger.
By Jessica Twentyman