Jason Stamper's Blog

In response, Harry Debes may cast SaaS aside and call it mere ‘hype’, but it is clear that businesses, at any stage, benefit from Software as a Service.

We’ve all heard about the ‘credit crunch’ and fears of an economic slowdown, even a recession. Rising oil and food prices, together with a slowing economy, have put pressure on small businesses – by raising costs, lowering available credit and generating increased competition. The worries and fears created during this time perhaps only highlight the advantages of SaaS and the growing need for such applications, particularly for smaller companies.

SaaS is the secret weapon in the battleground for business.

It removes the need for upfront capital investment as well as upgrade costs, as it allows you to use the latest business-grade software developed specifically to meet your needs, free or on a subscription basis. Dedicated IT support is expensive and labour-intensive – a luxury few small businesses can afford. With SaaS, businesses no longer need to manage and support critical business applications in-house, therefore reducing cost and increasing flexibility.

As a result, UK SMEs can benefit from services previously only available to larger companies – an important factor in today’s current market.

As we know that SaaS in many ways is another word for the traditional ASP service, it could seem a bit surprising that the CEO of the international client/server ERP firm Lawson deems that SaaS will collapse within two years.

The new value that SaaS brings to the customers is a highly scalable price structure where the customers pay as they consume and implicitly reduce their investment risk.

Obviously such a delivery model requires scalable products and services where the marginal costs for new customers are minimal. The IT vendors who have made the necessary investments to adapt to the SaaS requirements see this as an opportunity for growth, while other IT vendors such as Lawson probably see SaaS as a threat. SaaS will cannibalize on their traditional delivery models where customers pay large upfront licenses and yearly maintenance fees.
I believe the SaaS is just another step in the continuous evolution that we experience in the IT industry, driven by technological innovations and strong competition.

As an IT provider to the banking and finance industry, I am aware that in the current market climate, it is not just small to medium sized businesses that can benefit from SaaS. Instead, banks of all sizes are looking closely at their IT budgets and ways of reducing money spent on IT services and maintenance. Amidst these conversations, the Software as a Service model has emerged as a particular favourite, highlighting one way for financial institutions to manage their IT budgets more efficiently. The initial perception was that the market potential only included the smaller banks and building societies. However, with the recent weeks and indeed months of market turmoil, there are now strong signals that this delivery model is highly relevant for all banking segments.

Banks are looking to install the latest software features faster than ever before. In the case of lending, for example, this allows them to better manage their lending portfolios and comply with regulatory requirements such as Basel II IRB. Although SaaS is not yet a mainstream concept, banks can use the model to access highly specialised applications that traditionally only the larger players were able to afford or develop in-house.

Nevertheless, a change in mindset is still needed for SaaS adoption to become more wide-spread. A certain loss of control and having a third party handle the banks’ IT infrastructure can initially be an uneasy prospect. However, the time spent to maintain the software is greatly reduced and the benefits of low entry costs and a pay-on-consumption pricing model make Software as a Service a simple model where banks can focus on their business instead of IT operations.

To borrow Bill Gates’ words, ‘the broad foundations of the internet will make a 'services wave' of applications and software available instantly. This new wave will be very disruptive.’ The upheavals of the past weeks will give the financial services industry an opportunity to completely rethink their IT strategies.