Best of 2007: Software as a Service

Question: How do service providers move up the value chain to offer SMB customers value-added, revenue-generating services they need and are willing to pay for?

Answer: Software as a service (SaaS).

By providing network-based applications for accounting, antivirus, collaboration, CRM/customer service, human resource management and, eventually, more vertically focused requirements, service providers and their software partners give SMBs and other businesses access to the tools they want and need, but without the heavy upfront costs and ongoing maintenance concerns they would face if they purchased, installed and managed such software internally.

Delivering applications from “the cloud” rather than the desktop also fits in with the growing trends of the mobile workforce because it makes it easier for a business to provide remote workers with access to the applications they need and to track activity on and performance of those applications.

And, for the service provider — whether it be a telco, a hosting company or another entity — SaaS provides the opportunity to build customer loyalty while growing ARPU incrementally.

That’s why the SaaS concept has caught fire and continues to spread.

“The SaaS movement is fundamentally reshaping the software industry,” says Jeffrey M. Kaplan, managing director of THINKstrategies Inc. and the founder of the SaaS Showplace. “This movement is creating exciting new opportunities for telcos and other service providers to expand their service portfolios to address a broader range of business needs for their customers, and help SaaS vendors manage and deliver their network-based solutions.”

THINKstrategies’ survey research over the past two years, in conjunction with Cutter Consortium, indicates the proportion of organizations that have adopted or are considering SaaS solutions has jumped from 65 percent in 2005 to 74 percent in 2006. More than 80 percent of current SaaS users are satisfied with their on-demand solutions, plan to renew and expand their use of SaaS, and would recommend SaaS to their peers, according to the survey.

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