SaaS has always been very interesting topic for me. I have been learning a lot about this model by browsing various sites over the internet. It all started when I heard of salesforce.com for the first time.
I am a subscriber of The McKinsey Quarterly and recently I came across an article Delivering software as a service. I liked the way authors have analysed this model in the article. Below are some highlights :-
- Software as a service offers a reduction in total cost of ownership (TCO)
- Providers can now share one application cost effectively across hundreds of companies - a vast improvement on the old client-server model.
- Bandwidth costs continue to drop, making it affordable for companies to purchase the level of connectivity that allows online applications to perform gracefully.
- Many customers are eager for the shift, as they’re frustrated by the traditional cycle of buying a software license, paying for a maintenance contract, and then having to go through time-consuming and expensive upgrades.
- Although software-as-a-service vendors are less profitable than some traditional software vendors today, this gap is primarily caused by a lack of scale. Change in the economics of online delivery is expected as the model gains wider acceptance.
- Probable trends for migrating various categories of applications to SaaS model have been categorized into what they call three waves.
- SaaS is a threat to BPO vendors
