DATE:  04 MAY 2009

The gradual but definite rise of SaaS

Monday, 04 May 2009, 09:39
The model for capital expenditure associated with the procurement of services from software applications is changing – and rapidly. South African businesses are fast adopting Software as a Service (SaaS), the foundation of which is a global migration from transactional-based capital purchases to a monthly fee inclusive of hardware, software, upgrades, licenses and management.
It would be fair to suggest that SaaS is a major driving force behind local and international ICT infrastructure management and commercial application, writes Robert Sussman, joint CEO of the Integr8 Group.

One of the more pronounced explanations for the steady growth of SaaS and asset based rental is cost efficiency and the challenges of compliance and restricted cash flow.

Many businesses are now focusing on efficiencies and striving for decreased operational costs.  SaaS affords the opportunity for remote workers to gain access to applications over the internet from anywhere in the world.

This is also providing a further advantage as corporations continue to cut budget facilitating the option for office-based users to rather work remotely from home, which also allows for a cost saving for the employee in terms of the ever erratic petrol price.

If we look at the global markets and take the trends that have emerged out of the USA market, we can forecast a more accurate trend for the local South African market – after one applies a factor for our local more restrictive conditions of cost of bandwidth, latency, last mile connectivity and slower adoption rate.

Taking this into account, legislation has seen the focus of companies now looking at compliancy for archive and retention of records.  (Reference can be made to the ECT act and the Companies Act of 2000.)

Previously it has only been the large corporate that could afford email archive, indexing and retention for up to ten years as a result of the cost of large Storage Area Networks (SANs), applicable software and management.

With services such as Preserv8 ( companies can now procure this as a SaaS for around just R59.00 per user per month.

Over and above the legislative compliancy, there is also a resultant decrease provided due to a reduced overhead on bandwidth with all spam, viruses and phishing being filtered.

In a more competitive and global world, we see the introduction of SaaS customer relationship management (CRM) systems into the local market, such as Salesforce ( as well as the Microsoft CRM to compliment their Hosted Messaging and Collaboration platform. Once companies adopt the hosted CRM strategy, a clear direction for hosted portal type applications (like Microsoft’s SharePoint) is eminent.

There is however a clear difference between the current popular SaaS accounting services provided by companies such as QuickBooks in the US and the projected uptake in the local market. This is mainly due to the market maturity differentiation.

With the introduction of increased fibre capacity for last mile access and the undersea cables, we are likely to see a substantial increase in bandwidth, decrease in latency, and improved price point.

The promised benefits of Voice over Internet Protocol (VoIP) are now becoming a reality with inter-branch connectivity, hosted PBX and reduced telephony costs.

Google, widely considered leaders in the Internet space,  are banking on a pure SaaS future. Microsoft are viewed as probably the strongest and most well positioned for true back office business line applications.

I believe that the trend going forwards is for a gradual but most definite increase in demand for SaaS, with an ultimate environment consisting of a hybrid of both SaaS and on-premise hosted computing.