Software as a Service
The future of our world is a combination of software and internet. Since software make services better and services make software better, why not bring the best of both worlds together. This process is described as Software as a Service also known as SaaS. It refers to delivering software over the internet. This means that customers to not need to install any software on their desktop. Instead, through a web browser, they can access it and use it. Instead of paying for owning software which can sometimes be very expensive and use it internally in an organization, customers pay to use it. It is the idea that you ought to be able to use the service you want and let somebody else manage it. The providers are responsible for the software maintenance and upgrades.
SaaS, most of the time, is associated with business software that is thought of as a low-cost way of obtaining the same benefits of commercially licensed and internally operated software, but without the complexities and high initial cost.
CRM, video conferencing, human resources, accounting and email are just a few of the application areas that show the success of software as a service.
SaaS, most of the time, is associated with business software that is thought of as a low-cost way of obtaining the same benefits of commercially licensed and internally operated software, but without the complexities and high initial cost.
CRM, video conferencing, human resources, accounting and email are just a few of the application areas that show the success of software as a service.
The following image shows the simplicity and ease of Using SaaS.
Some advantages of using SaaS are that the service providers reduce the internal operating costs of a company and thus making the overall cost of doing business smaller. Also, the customers can easily enable or disable the features of the software as they wish. The ease of implementation of SaaS is remarkable. Also, SaaS is very affordable for corporations. By using SaaS, application development and implementation times are shorter. The SaaS model also reduces risk in the budget planning process, which is often just as important to decision-makers as total cost of ownership considerations. SaaS users also benefit from constant updates of the software.
But, there are certain disadvantages. First of all, SaaS is considered a potential security and operational risk. In fact, many businesses wish to keep their information technology operations under internal control. But, there is a counter-argument to this. In fact, the professionals operating SaaS applications may have much better security and redundancy tools available to them, and therefore the level of service may be superior in many cases. Second of all SaaS may be troublesome for businesses that need extensive customization because Saas is typically very standardized. However both customization and publication programming interfaces have progressed a lot. In addition, it requires that customers be connected to the internet at all time which can create problems is the internet service goes down.
But, there are certain disadvantages. First of all, SaaS is considered a potential security and operational risk. In fact, many businesses wish to keep their information technology operations under internal control. But, there is a counter-argument to this. In fact, the professionals operating SaaS applications may have much better security and redundancy tools available to them, and therefore the level of service may be superior in many cases. Second of all SaaS may be troublesome for businesses that need extensive customization because Saas is typically very standardized. However both customization and publication programming interfaces have progressed a lot. In addition, it requires that customers be connected to the internet at all time which can create problems is the internet service goes down.
The following diagram mentions different reason for the adoption of SaaS. Namely, we have greater ROI and cost-effectiveness, improved application reliability and performance, lower staff support requirements, systematic upgrades and updates and finally other reasons.
Porter's Five Forces Model
Threat of New Entrants
As a starting point, the barriers to entry in the market are very low and the market is wide open to new entrants. New entrants can put their product or service on internet and possibly offer free trials and low-cost-per-user models to easily capture new customers. So, the threat of new entrant is pretty big. The only difficult thing is to gain funds and develop the online application. But, once it is done, the barriers to entry become nonexistent. What really increases the threat from new entrants are the ease and low-cost of distribution.
Buyer Power
Right now, the buyer power for software as a service is not very high but as time goes by it will become higher and higher. In fact, since the market is easy to enter, it is sure that companies will offer similar services in the near future. Service providers have to create a competitive advantage for themselves by making it more attractive for customers to buy from them than from their competitors. One of the best ways to do so is through loyalty programs. Loyalty programs consist of rewarding customers based on the amount of business they do with a certain organization. For example, SaaS providers could offer a discount after customers use their service to some extent. This reduces the buyer power and firm want the buyer power to be as low as possible.
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posted by Jean-Philippe Langlois @ 12:11 PM
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