Leadership Talk

SaaS makes sense: 4 of the simplest reasons why

SaaS makes sense: 4 of the simplest reasons why

Technology must pervade, without the need to intrude. While technology itself may be getting more and more complex, the true objective of the IT vendor is to reduce the complexity of transactions for the customer business. A SaaS mode implementation strips the customer of practically all the responsibility of IT, giving the IT provider complete control over the 'how', to implement 'what' the customer has defined as their business goal.

Stakeholders in the IT value chain

From the point of view of a technology partner, the control we gain comes with a great responsibility. Moving to a SaaS model isn't just a question of technology capability but also a significant financial commitment. We effectively invest a large amount of capital upfront on behalf of future customers. In exchange, we accept the probability of a small but steady revenue stream over a longer term. Profits are not made on singular transactions, but depends on longevity of deals and thereby the goodwill of the customer. That is how risk is transferred away from the customer. 

Gartner predicts that the SaaS market will grow by 20.1% this year, and showing a near 100% growth from 2016 to 2020. The share of SaaS in the overall cloud market is expected to remain more or less the same over this period, which means the industry is embracing the cloud on multiple fronts simultaneously. The increased predictability and cost factor are consistently relevant advantages to the buyer of a SaaS offering.  

Year 2016 2017 201820192020
Total cloud market
(in million US$)
209,244 246,841 287,820332,723383,355
SaaS (million US$)38,56746,33155,14364,87075,734

 Leaving the technological jargon aside, here is a deep dive into what it means to the business strategist who seeks simplicity in operations:

1. SaaS puts systems in the hands of those who really use it:

Our products are designed with a basic tenet in mind: complete and accurate information, delivered on demand to the right people in the organization, thereby enabling them to make the right decisions and take the right actions. In other words, the effectiveness of the systems we build relies on providing access to all (and only) those who are supposed to have it. A freight forwarder needs his/her business data to be in the hands of the frontline staff as and when they need it, and not stored away in a monolith server where it will never be of use to anyone without complicated retrieval devices that make scaling a nightmare. 

2. Solves your asymmetric commitment issues:

In the now ancient model, there had to be a major up-front commitment from the buyer before a software deployment, or an upgrade could be implemented effectively. The commitment of the software provider was limited by the strength of the contract, and often the risk would be overwhelming to smaller players especially in the management of mandatory upgrades. The simplicity, ease and predictability associated with SaaS engagements thereby translate into a level playing field in terms of commitment between the buyer and the seller of the software offering. 

3. Eliminates the inertia of migration:

Airline CTOs who are still grappling with their legacy systems refrain from moving to something more reliable primarily because of the huge cost (not just money, but also time and effort) associated with it. With a SaaS offering there is a clear incentive to migrate to new platforms and also shift from one provider to another in case expectations are not met. That means the focus shifts towards real factors like a better user experience, convenient pricing mechanisms and other incentives, even in ongoing engagements.

4. Strengthens your data analytics strategy:

Collecting the right types of data, analysing relationships and creating the right predictive models are all pieces of the same jigsaw puzzle, but not every business has the right combination of tools to get them to fit right, especially in real time. SaaS lays the right foundation for this, based on the data ownership structure. Complementing the technology (for data collection) with sufficient domain expertise (for meaningful processing) is what makes the strategy effective. This is beyond the scope of a simple technology provider, and calls for a more mature knowledge partner to be in charge of both pieces. Think metrics like customer churn, usage churn, etc. which can make or break a travel business; all you need is an effective data strategy. 

Think of it as a low risk strategy with a high pay off. After all, even if a SaaS implementation fails to meet your goals a 100%, it leaves behind no wastage in terms of residual infrastructure or budgetary disasters. I am able to speak from experience, because IBS currently serves customers in the aviation, logistics and hospitality sectors in a SaaS model. 

Jude Kishore is the Senior Vice President & Head of Corporate Planning & Development at IBS. He focuses on building long-term growth strategies for the company. Jude has 24 years of experience, having worked with corporates such as Dunlop, Ford India, Hexaware and Société Genéralé before joining IBS Software Services. He is a qualified Chartered Accountant and Cost & Work Accountant and holds a Bachelor's Degree in Commerce from the University of Madras.

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Saturday, 22 June 2024

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