SaaS yet to deliver on promises

Software-as-a-service (SaaS) will have a role in the future of IT, but not the dominant future that was first thought, according to Gartner.

The global research firm warns SaaS may not have completely delivered on the grand promises of cost-effectiveness and reduced complexity made a few years ago. However, it has added choice to the IT industry.

According to David Cearley, vice-president and fellow at Gartner, SaaS does not solve all the challenges of software delivery, but can provide advantages based on the specific circumstances of a deployment, as it's quicker to implement and configure.

From a market perspective, most SaaS spending is being invested in content, collaboration, communication and customer relationship (CRM) markets.

Analysts claim a SaaS model has the potential to address South African challenges such as requiring less highly-skilled IT technicians and lowering total cost of ownership of software licensing.

However, the sluggish broadband penetration is thwarting wide-spread SaaS roll-out in SA. Despite decreasing costs in broadband, it is still not financially viable for many companies to deploy enterprise-wide SaaS solutions.

This is according to Steven Ambrose, MD of World Wide Worx Strategy. He explains that banks and major organisations are still cautious about outsourcing their data centres for financial and security reasons.

Ambrose adds: “Every couple of years, SaaS raises its head and promises to be the next big thing, but in truth it is applicable in some instances and not in others. Where it is applicable is externalisation of internal networks for mobile workers needing to access company resources on multiple devices.”

He notes that in most of Europe, US and Asia, enterprises are well positioned in a mature online environment, and can take advantage of SaaS solutions. “If SA wants to stay on top of the technological curve, it will have to play catch-up on the systems it uses.”

Mimecast MD Garth Wittles warns that not all SaaS vendors are equal and companies need to tread carefully. “You won't put your money in a bank that you don't trust, or place your data in a hosted provider whose infrastructure fails.”

He points out that organisations need to evaluate their SaaS vendor, as well as the infrastructure behind the solution, as carefully as it would monitor its own infrastructure.

According to Wittles, business SaaS solutions such as hosted e-mail and CRM applications have been influenced by consumer SaaS applications offered by the likes of Google Docs, Gmail and Facebook.

“There will be massive uptake of SaaS solutions, but in the local context, it will be a hybrid model where SaaS and traditional on-premise software co-exist.

“I think SaaS has got a healthy and solid future,” says Wittles, adding that some local companies may take a slow approach to adopting a SaaS solution, because of security concerns over where their data resides. “I think we will start to see a gradual move by organisations from on-premise software to SaaS over the next five years.”

According to Synaq MD Yossi Hasson, the major adoption of SaaS will only take place when the cost of high-speed bandwidth comes down enough so someone using a SaaS solution feels like they are accessing applications on the local area network.

“Not only does (the broadband) price need to go down, but actual line speed capabilities need to improve dramatically,” explains Hasson. “The average small business is using DSL for their connectivity. At best they have a 4MB download service with 640k upload speeds. By any standard, this is a tiny pipe of bandwidth to have access to for a business of any reasonable size.”

He adds: “Larger organisations that make use of diginet lines typically have 3MB to 5MB lines which again are extremely costly and relative to international standards still tiny pipes.”

Hasson indicates this scenario will change in the not so distant future, following fibre optic cable deployments by Seacom and the West African Cable System. For now, it is still a major limitation to SaaS adoption, he says.

Gartner predicts the global enterprise applications software market will reach $8.8 billion in 2010. In 2009, within enterprise applications, SaaS represented 3.4% of total enterprise spending, slightly up from 2008 at 2.8%.

Gartner forecasts the SaaS market will more than double by 2012, with SaaS revenue reaching $14.8 billion.