Software as a Service
A profound shift in the development and distribution of software has transformed the industry. The Software as a Service (SaaS) business model is impacting the
software industry and how your customers acquire business functionality
and solutions.
In this model,
application functionality is delivered through a
subscription model over the Internet.
The customer does not take ownership of the software, but instead rents
a total solution
that is delivered remotely. With the SaaS model, you can reduce up-front support costs because
you no longer need to support multiple platforms and versions. This
rapidly emerging delivery model can help you, as an ISV, enter new
markets.
In the software as a service model,
the application, or service, is deployed from a centralized data center
across a network - Internet or private network - providing access and use on a recurring fee basis. Users
"rent," "subscribe to," “are assigned”, or "are granted access to" the application from a central provider.
Business models vary according to the level to which the software is streamlined, to lower price and
increase efficiency, or value-added through customization to further improve digitized business processes.
The potential benefits of the model are significant for both the vendor and the customer.
In the past few years, many new companies have been established that took this new paradigm into
consideration from the onset. However, what about the traditional independent software vendor (ISV)
whose products were not designed or optimized to be utilized in a service model? Should they be worried
that their products will become relics in today's distributed computing environment? Or is a service model
even appropriate for these products? Many ISVs are therefore asking themselves whether to
service or not to service?
ISVs contemplating such a move want to consider the following:
· What is the strategic motivation for considering offering Software as a Service?
· Has a competitor created one yet?
· Is there pressure from the customer community to offer one?
· Is the company highly profitable and in no hurry to threaten the current business model?
· Is the company losing money and feels a need to offer a new product?
· Does the application lend itself EASILY to an application-hosted product or is there a significant
development investment needed to get it ready?
· Is the service offering targeted at existing prospects (and can therefore threaten current revenue
from license sales) or is targeted at new markets?
The decision to develop a service offering necessitates significant changes in the software development
cycle and can have a profound effect on the operations and bottom line of a company. It requires a new
skill set that many traditional ISVs may not currently possess. Once this strategic decision to proceed has
been made, a whole new set of questions comes to the fore.
· Does the ISV host and manage its own service? Do they go with a third-party xSP to manage it for
them? How do they get to either?
· Does the ISV hire an application infrastructure provider to provide the technology for the service and
the integration with legacy systems?
· And what about the changes in the ISV business model. How does it impact internal operations? How
does it impact revenue streams?
· What about the channel?
· Where to begin?
The answers to these and other questions lie in this white paper. Through real world explanations and
examples, it outlines such topics as the technical considerations of selecting a SaaS partner, how
applications will integrate into your current business model, the long-range impact on revenue, and how
to manage this new channel. It's a tool to assist the ISV as they begin to address this burgeoning model
of software as a service.