Don Dodge has a good post anlayzing the economics behind SaaS from the perspective of a SaaS company rather than from a SaaS customers point of view.
For any start-up it is all about how fast can it break-even and cross the barrier to ensure a steady revenue stream. Investors also do not mind the initial high costs if the future payoffs are good.

Microsoft recently has launched a SaaS architecture guidance site on MSDN.

In past companies have created platform to build SaaS application,e.g. NetSuite with SuiteScript and Salesforce with its family of On-Demand solutions, but Microsoft has gone a step further by publishing an architecture that tries to deal with some of the challenges related to creating SaaS solutions.

Here is a good consolidation of the New Rules for On-Demand Software by Deven Parekh and Peter Sobiloff.

Earlier technology would get accepted in the market only after it had been implemented by Enterprises, take for instance ERP. However, SaaS has changed the equation , with enterprises now copying what SMEs have achieved by using On-Demand applications.

A key reason for this to have happened could be due to the the mammoth legacy systems that the Enterprises have built and thus find it much more difficult to adapt new business models to replace their massive legacy systems. Integration with the existing application does pose a challenege. Whereas, small enterprises that do not have this baggage with them find it easier to adapt new technologies and leapfrong their larger counterparts.

Also, the On-Demand business models drastically reduces the cost of the infrastructure required to gain access to latest technolgy and applications. Thus SMEs can function with leading edge IT systems without having to investment huge capital at the onset as well as reduce the operating costs of maintenance and upgrades. This Cost factor has played a major role in makign the SaaS business model popular with SMEs.

With SaaS model being adopted in more and more domains, SMEs have the advantage with them. Further more, the increasing use of Open Source would lead to further reduction in the cost of ownership of these applications. Its no surprise tha large enterprises have started to invest in SaaS now.

Although SMEs have their own challeneges with SaaS , they will still lead the way as far as adoption of SaaS business model till the time large companies gain momentum.

Microsoft – A late entrant, can it take on the show like it did with the Internet Explorer..
It is targetting heavily on the SaaS market and it looks serious as is evident from the views expressed by its top brass. Steve Ballmer’s interview emphasises on Microsoft focus to bring in partners opportunities with its SaaS offerings

Symantec – Another big player taking up SaaS in its new release of the Norton 360 package. It is currently looking at focusing on consumer security domain before extending the security software-as-a-service model across the full enterprise portfolio

Oracle – realised the potential of SaaS early on, essentially due its CRM focus with Siebel it felt the heat with the success of Salesforce and decided to capitalize on the opportunity with the launch of Oracle On Demand 10

SAP – Again a late entrant into the field, launched its One Demand CRM service early this year, but it soon saw the future with SaaS and started expanding its SaaS offering, It made several public announcement within a quarter after it launched On Demand CRM improving the features and acquiring other players as means of expansion.

Business Object – announced earlier this year the On Demand Business Intelligence solution for the SMEs by offering Crystal Reports as a service.

However, there is one trend visible with these Big players entering the market, the real focus is on SMEs as the feeling is that the Adopters of the models would be SMEs. Although this might make sense for the big players, SaaS has potential for everyone, including Enterprises. There is a value offering for everyone in the SaaS business model.
More on this in the coming posts.

Salesforce has dominated the On-Demand CRM space for some time now , but with new players from different domains starting to adopt the SaaS model; it surely is set to take off.

A few markets that have realised the benefits of going the SaaS way are

• Regulatory Compliance – with new regulations often changing, companies are realizing the overheads of maintaining an in-house system.
• Supply Chain Management – Small and Medium Enterprises (SME) in particular have jumped to the idea having the SCM application on the SaaS model. They can now afford the sophisticated system similar to those used by larger enterprises without having to heavy capital investments.
• ERP – is another area where SaaS has great prospects especially for the SMEs
• HR- A large number of hosted compensation/payroll management applications based on the SaaS model have sprung up recently, as companies do not find a value in managing in-house application for such generic requirements.
• Document Management – Hosted document service application targeted towards law firms and corporate legal customers.

These are just a few that are right behind CRM is the place for the top adopters of the SaaS model.

The industry has seen the evolution of the SaaS Business Model from being a Cost Effective Delivery Solution to Transforming the way organization do business.SaaS has a strong potential for companies operating in virtually every domain. The key success driver of the SaaS model has been the combination of Business and Technology factors.

On-Demand  is still not mainstream but soon will be. This blog is essentially to share the latest happening in the SaaS world, the challenges that SaaS providers face, essentially the potential and practicalities of the SaaS/On-Demand Business model.