Written by guest author Ramana Mulpury
A few years ago, if you asked anyone at an emerging software company whether ASP/SaaS/On-Demand (referred to as ASP) solutions were for real, you would probably get a 50/50 response. Over the last year or so, I’ve been seeing a completely different scale of adoption of ASP solutions. This scale of adoption can only mean one thing – SaaS is here to stay. Not only that, small, mid-sized businesses, departments of large enterprises, and to some extent entire enterprises, are clearly embracing ASP solutions today.
Current Trends
A $100 million dollar hi-tech growth company is using anywhere between 10 and 15 different ASP solutions to manage business processes across all departments. The number may be lower or higher depending on the size of the company and industry. Some business areas where ASP solutions are being commonly used are:
- Payroll
- Options Management
- PDM
- Intellectual Property Management
- Facilities Management
- Employee Reviews
- SOX
- Expense Management
- Vendor Qualification
- Meetings & Collaboration
- CRM
An interesting trend now is that some of the established large enterprises are beginning to replace on-premise applications. Recent examples being Cisco (click here for details) and Merrill Lynch – something one wouldn’t have imagined a few years ago!
Why is there such a momentum for ASP/SaaS/On-Demand solutions?
There are primarily three reasons why there is such momentum for ASP solutions:
- Pressure to lower IT Budgets
- Increasingly difficult for IT to address every business need
- Increase in confidence to allow data reside outside the four walls of the enterprise
The pressure to lower IT budgets has always been there but with shifts in markets as well as large scale adoption of offshoring, the cost pressures on IT has been increasing. This trend will not change as there is competition from emerging economies.
While prices of software, resources, and infrastructure have been going down, the complexity has increased exponentially. An IT department has to deal with more tasks at every layer of the infrastructure and business application. An IT department did not have to deal with wireless networks before, now they do; they did not have to deal with open source stacks, now they do; they did not have to deal with the increasingly complex set of security requirements, now they do; they did not have to deal with SOX compliance, now they do! As a result, their constrained resources are stretched and their ability to support business needs has become increasingly more challenging.
The widespread adoption of Salesforce.com has instilled confidence in storing key data outside the four walls of the enterprise. In my experience, the security of applications residing in 90% of the enterprises is far less compared to those offered by established ASP solution providers. Most ASP solution providers now allow the customer to export data out and store them locally in their enterprise.
What is the biggest problem that ASP/SaaS/On-Demand solves?
It takes away complexity and friction. It solves the complexity around implementation, the complexity around hosting, upgrades and resulting delays and the frustration business users have to go through with on-premise applications. Most ASP application still lag in terms of functionality compared to their on-premise counterparts but they solve the critical issue of complexity and friction. This is the one most important factor which I believe is driving their success.
Challenges that ASP/SaaS/On-Demand face today
- User Management
- Lack of support for integrated business processes
- Information Integration
- Unified Master Data Management
Each ASP solution has its own user authentication and authorization model. Imagine getting new employees authorized into multiple hosted applications and ensuring that their accounts are disabled when they leave the company. The same is true with partners who are granted access to applications. With companies moving towards an integrated single sign-on model, the ASP solutions are an odd ball. Currently, I’m unaware of single sign-on solutions for ASP solutions.
Integration of business processes managed in different ASP solutions can be a challenging integration effort. Most ASP solution providers charge an arm and a leg for integration. This is a huge challenge for businesses who want to use systems for managing integrated business processes.
Integrating ASP solutions with back office systems is a challenge. While there are middleware solutions to enable the integration, this continues to be a challenge because ASP solutions reside outside the company’s firewall and data is completely insulated behind the ASP providers firewall.
Lack of master data creates significant challenges for ASP solutions. It becomes even more challenging when the ASP solution becomes the source of master data. Systems that need the master data from the ASP solution do not have an easy way to obtain this information. For example, an employee’s office location may be stored in an ASP Facilities Management system. The internal LDAP/Active Directory may not contain the latest and the most accurate employee location information; therefore, one must somehow obtain the employee’s location information from the Facilities Management system.
Opportunity that ASP/SaaS/On-Demand solutions provide
- User lifecycle management
- Support for canned integrated business processes
- Easier information access
- Master Data Management support for ASP solutions
A simple to use system that can manage the entire user lifecycle from hiring to the termination of employees, contractors, partners, customers and suppliers specifically in the context of managing ASP solution access. Such a system would alleviate the growing pain of companies that increasingly depend on ASP solutions.
Currently, most ASP solution providers provide APIs to integrate with their systems. However, the effort and complexity of integrating on-premise applications with ASP solutions is a major roadblock in the adoption of ASP solutions. There is a large opportunity for providing integrated solutions that enable seamless business process integration. An example would be providing order status visibility in salesforce.com or providing visibility into outstanding customer invoices in salesforce.com
There are several solutions that enable users to query data from their ASP solutions right to their desktop. In fact, several of these solutions are easier to use and more secure than what is available from on-premise applications. However, there are no out of the box solutions in the market that allow users to view and analyze information stored across multiple ASP solutions. The arcane and expensive approaches of pulling data into a datamart or datawarehouse and then running traditional BI tools seem to be the most prevalent.
Deploying ASP solutions on a broader scale in an enterprise is usually an issue due to the lack of master data management systems in most SMBs. There is a significant need to address master data management issues so that ASP solutions can easily use data about products, customers, price lists, vendors etc and, in some cases, be the source of the master data.
A win-win situation for customers and service providers
Companies such as Salesforce.com and RightNow Technologies are proving that the ASP model works. You never hear horror stories about Salesforce.com implementations failing. The single instance model is a lot more scalable, supportable, and profitable in the long run. The non value-add services that companies perform to support multiple stacks such as app servers, operating systems, platforms, software versions etc. should be a thing of the past.
If the business users can deal directly with the ASP vendors, and the ASP model enables them to do so, the entire IT organization can focus on more value add initiatives rather than playing block and tackle with business users.
Final Comments
If you are an independent software vendor that has not started working on an ASP strategy, it’s time to get serious about it. Some may argue you are late but I believe that the ASP era has just started. If done right, it could very well be the tipping point for your company!
