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    Software as a Service in Asia Pacific: Expanding the Reach ... Software as a Service in Asia Pacific: Expanding the Reach ... Document Transcript

    • MARKET RESEARCH REPORT July 23, 2007 Lead Analysts: Ravi Shekhar, Senior Market Analyst Dane Anderson, Vice President, Research Software as a Service in Asia Pacific: Expanding the Reach & Appeal of Software
    • Table of Contents E X E C U T I V E S U M M A R Y ................................................................................................................................. 3 T A X O N O M Y .................................................................................................................................................. 6 What is Software-as-a-Service (SaaS)? ................................................................................................ 6 Who is a SaaS Provider? ........................................................................................................................ 7 R E S E A R C H M E T H O D O L O G Y ........................................................................................................................ 8 Secondary Research.............................................................................................................................. 8 Supply-side Primary Research ............................................................................................................... 8 Demand-side Primary Research ........................................................................................................... 8 O V E R V I E W O F T H E A S I A P A C I F I C S A A S M A R K E T ................................................................................. 10 SaaS vs. Traditional Enterprise Software Applications Market......................................................... 10 SaaS Application Dynamics ................................................................................................................ 11 Vertical Market Dynamics ................................................................................................................... 13 Adoption Trends by Country ............................................................................................................... 14 Key Adoption Drivers............................................................................................................................ 14 Barriers to Adoption.............................................................................................................................. 15 S A A S : P R I M A R Y S U R V E Y R E S U L T S ........................................................................................................... 16 SaaS Awareness.................................................................................................................................... 16 Adoption Drivers and Inhibitors........................................................................................................... 19 Satisfaction Level with SaaS Applications ......................................................................................... 21 Data Residency .................................................................................................................................... 22 Future SaaS Adoption Plans ................................................................................................................ 23 K E Y S A A S D Y N A M I C S B Y A P P L I C A T I O N ................................................................................................. 24 On-Demand CRM ................................................................................................................................ 24 Web Collaboration............................................................................................................................... 26 ERP and SCM Applications.................................................................................................................. 27 On-Demand HR Applications ............................................................................................................. 28 C O U N T R Y P R O F I L E S ................................................................................................................................... 30 Australia ................................................................................................................................................. 30 China/Hong Kong ................................................................................................................................ 32 India ....................................................................................................................................................... 34 Singapore .............................................................................................................................................. 35 S A A S & A S I A P A C I F I C I S V S ................................................................................................................... 42 T H E A S I A P A C I F I C C O M P E T I T I V E L A N D S C A P E ....................................................................................... 44 Salesforce.com ..................................................................................................................................... 45 WebEx .................................................................................................................................................... 45 RightNow Technologies ....................................................................................................................... 46 Oracle .................................................................................................................................................... 46 NetSuite ................................................................................................................................................. 46 Citrix Online ........................................................................................................................................... 47 IBM.......................................................................................................................................................... 47 Microsoft ................................................................................................................................................ 48 Progress Software ................................................................................................................................. 49 SAP ......................................................................................................................................................... 49 Symantec .............................................................................................................................................. 50 S P R I N G B O A R D R E C O M M E N D A T I O N S ....................................................................................................... 51
    • List of Figures Figure 1: Asia Pacific SaaS Applications Market Revenue (US$M) and Annual Growth, 2006- 2010................................................................................................................................................. 10 Figure 2: Asia Pacific SaaS Revenue by Application, 2006............................................................. 12 Figure 3: Asia Pacific SaaS Revenue by Country, 2006 ................................................................... 14 Figure 4: SaaS Awareness among Asia Pacific Companies ........................................................... 16 Figure 5: SaaS Awareness among Asian Enterprises, by Country .................................................. 17 Figure 6: SaaS Adoption among Asian Enterprises........................................................................... 18 Figure 7: SaaS Applications Used By Asia Pacific Enterprises ......................................................... 19 Figure 8: Primary Reason for Adopting SaaS ..................................................................................... 19 Figure 9: Primary Reason for Not Adopting SaaS ............................................................................. 20 Figure 10: Perceived Savings from Adopting SaaS .......................................................................... 21 Figure 11: SaaS Application Satisfaction............................................................................................ 22 Figure 12: Data Residency & Perceived Performance.................................................................... 22 Figure 13: SaaS Applications Being Considered for Deployment in Next 12 Months ................. 23 Figure 14: On-Demand CRM Market Revenue (US$M) and Annual Growth in Asia Pacific, 2006-2010 ....................................................................................................................................... 24 Figure 15: Web Collaboration Market Revenue (US$M) and Annual Growth, 2006-2010 ......... 26 Figure 16: On-Demand Back-Office Revenue (US$M) and Annual Growth, 2006-2010 ............ 27 Figure 17: On-Demand HR Applications Revenue (US$M) and Annual Growth, 2006-2010 ..... 28 Figure 18: Other* On-Demand Applications Revenue (US$M) and Annual Growth, 2006-2010 ......................................................................................................................................................... 29 Figure 19: Australian SaaS Market Revenue (US$M) and Annual Growth, 2006-2010 ................ 30 Figure 20: Primary Reason for Adopting SaaS, Australia ................................................................. 31 Figure 21: Primary Factor Preventing SaaS Adoption, Australia..................................................... 31 Figure 22: China/Hong Kong SaaS Market Revenue (US$M) and Annual Growth, 2006-2010 . 32 Figure 23: Primary Reason for Adopting SaaS, China ...................................................................... 32 Figure 24: Primary Factor Preventing SaaS Adoption, China ......................................................... 33 Figure 25: India SaaS Market Revenue (US$M) and Annual Growth, 2006-2010......................... 34 Figure 26: Primary Reason for Adopting SaaS, India ........................................................................ 34 Figure 27: Primary Factor Preventing SaaS Adoption, India ........................................................... 35 Figure 28: Singapore SaaS Market Revenue (US$M) and Annual Growth, 2006-2010 ............... 36 Figure 29: Primary Reason for Adopting SaaS, Singapore .............................................................. 36 Figure 30: Primary Factor Preventing SaaS Adoption, Singapore .................................................. 37 Figure 31: Share of Direct Sales in SaaS Business by Application ................................................... 38
    • Figure 32: Local Resellers: Necessary or Not When Buying SaaS ................................................... 39 Figure 33: Local Resellers: Helpful or Not When Buying SaaS.......................................................... 39 Figure 34: Areas Local Resellers can Add Value To the Procurement & Installation of SaaS Applications................................................................................................................................... 40 Figure 35: Channel Roles That Can Add Greatest Value................................................................ 40 Figure 36: Asia Pacific SaaS Revenue Vendor Market Share ......................................................... 44
    • List of Tables Table 1: Respondent Breakup By Country & Users/Non Users .......................................................... 8 Table 2: Respondent Breakup by Employee Size ............................................................................... 9 Table 3: SaaS Enterprise Applications by Category......................................................................... 12 Table 4: Vertical Specific SaaS Applications..................................................................................... 13 Table 5: Local Vendors Offering SaaS Applications......................................................................... 42
    • INTRODUCTION The appeal of Software as a Service (SaaS) is growing rapidly in Asia Pacific. Many organizations are deploying SaaS to meet their key IT needs and overcome challenges posed by the rising cost of deploying and managing traditional software systems. Increasingly, SaaS is also creating a new breed of first- time software users, mostly among small and medium enterprises. This trend is encouraging many local ISVs to use the SaaS model to widen their business universe and serve new markets and customers. Focusing on these and many other key trends in the Asia Pacific enterprise SaaS market, this report analyzes the growing adoption of SaaS in the region. A key focus area of the report is to provide an array of market data – including market size and growth forecasts – for key segments of the enterprise SaaS market in Asia Pacific (excluding Japan). Through our survey of 385 CIOs and IT decision-makers at large and SMB enterprises in Australia, China, India, and Singapore, we have assessed the level of awareness, adoption and usage in more depth. We have also analyzed trends in the SaaS business model pursued by local ISVs, in addition to profiling leading SaaS vendors in the region. 2
    • E XECUTIVE S UMMARY The appeal and reach of software as a service (SaaS) continues to grow rapidly among enterprises in Asia Pacific. A substantially increased awareness of the SaaS concept, coupled with a growing inclination among enterprises and business users to try web-based applications, are among the key factors that have contributed to a dynamic regional SaaS market. The success of vendors like Salesforce.com and WebEx in reinforcing the credibility, reliability and sustainability of the SaaS model, definitive announcements by large software vendors like Microsoft and Symantec who have declared their intention to deliver software on demand, and the growing interest in SaaS among local ISVs who have begun to develop SaaS applications, are other factors that have led to market expansion. From a numbers perspective, SaaS market momentum picked up in 2005 and continued in 2006, with growth rates close to what we had projected in our first report on the Asia Pacific SaaS market (The Software as a Service Market in Asia Pacific, 2005 to 2008: Blazing New Routes-to-Market (May 2006). Our six key findings from this research study are provided below: 1. SaaS Market Growth Momentum Will Last for the Long Run: The Asia Pacific SaaS enterprise applications market amounted to US$154 million in 2006, and generated 93% revenue growth over the previous year. The market is projected to grow at a CAGR of 66% from 2006 to 2010. Springboard Research believes that given its current momentum, SaaS will account for more than 15% of the enterprise software applications market in Asia Pacific by 2010. We expect the Asia Pacific SaaS market to reach US$ 1.16 billion at the end of the period under review. 2. Business Users Emerging as Key Drivers of SaaS Adoption: While the IT department remains firmly in control of software deployments in most organizations, especially large ones, business users are emerging as key influencers of SaaS adoption. In many instances, SaaS applications are deployed for business applications without the involvement or knowledge of the IT department, as business users find it easy to subscribe to and use SaaS themselves. Ease of use is also one of the key reasons why SaaS applications are increasingly finding favor with SMBs who do not have IT departments or who have little exposure to IT applications. 3. CRM is One of Many Applications Used in the Asia Pacific SaaS Market: Although customer relationship management (CRM) remains the largest SaaS application segment by revenue, representing 45% of total Asia Pacific SaaS revenue in 2006, Springboard Research data shows that organizations are aware of and use many different types of SaaS applications. The most widely used include desktop office applications (word processors, spreadsheets), e-mail, security/compliance applications, and HR- payroll/workforce management. CRM (mostly salesforce automation (SFA)), collaboration tools (web conferencing & 3
    • messaging), enterprise resource planning (ERP), accounting, and supply chain management (SCM) are next in order of usage. 4. SaaS is Encouraging New Entrepreneurship in Asia Pacific: The success of SaaS is attracting a significant number of local IT professionals and ISVs to the application software market. SaaS is offering new market opportunities for small ISVs that could previously not sell to SMBs without an IT staff. Moreover, partnerships with leading SaaS providers are helping ISVs reach markets beyond their local geographies. 5. Large Vendors Now Have More Definitive SaaS Strategies: Vendors like Microsoft and Symantec have now developed more clear-cut SaaS market strategies. Springboard Research believes that these big players’ entry in SaaS will change the competitive landscape of the market, currently dominated by pure-play SaaS vendors like Salesforce.com, RightNow Technologies and WebEx, among others. The entry of the large vendors into the marketplace is also expected to force mergers and acquisitions, re-alignment of players and emergence of new alliances, as in the case of the recent partnership between Salesforce and Google. 6. SaaS Needs Channels to Grow: The majority of the respondents (71%) Springboard Research interviewed for this report believes the involvement of a local reseller or agent is necessary when buying software-as-a-service applications. However, most SaaS application sales in Asia Pacific are made directly without the involvement of a channel partner. A number of factors, including lack of experience and knowledge of application business processes, as well as low profit margins for SaaS applications are keeping channels away from selling SaaS. In addition to these key findings, other prominent study results are outlined below: The primary factors driving enterprise adoption of SaaS applications are the ease of its use and management, followed by the lower cost of ownership when compared to traditional software. Springboard Research considers “ease of use” as the key factor driving SaaS adoption by both large and SMB enterprises. The primary inhibiting factor to SaaS adoption is lack of perceived business benefit. Many respondents are not deploying SaaS because they believe traditional licensed software is less expensive, and they also view SaaS applications as technologically less mature. Security concerns and a lack of awareness of the concept also prevented many companies from deploying SaaS. Even as leading SaaS vendors like Salesforce.com, WebEx, RightNow Technologies and NetSuite continue to lead the SaaS market, local ISVs and some small US vendors are beginning to find customers in Asia Pacific. According to Springboard Research data, small vendors accounted for 54% of SaaS market revenue in 2006. 4
    • Compared to 2006, there has not been much change in SaaS’ geographical spread across Asia Pacific. Australia is still the most mature market in the region with a 37% share, and China, Korea, India and Singapore are the other leading markets in the region. 5
    • T AXONOMY What is Software-as-a-Service (SaaS)? Springboard Research defines Software-as-a-Service (SaaS) as a software delivery model in which application software is delivered to users via a web browser. Users do not buy the license for the software, but only a right to use it on a subscription basis. A user may subscribe to all the features/functionalities of the software or just a portion of them. Springboard Research also defines the SaaS model as on-demand software and/or on-demand application. The key characteristics of SaaS are: The software application is not owned by the customer, and is only rented for use. The software resides on a central server and not on the customer’s computer. The user accesses the application via a web browser and the SaaS provider is responsible for software maintenance and performance. The primary value delivered by SaaS is the continuous and ongoing support for the application by the service provider. Network-based access allows maintenance, support and upgrades to the software from the provider’s data center. The SaaS provider is 100% responsible for the maintenance and upgrade of the software. The architecture, management and pricing of the application mimic the one-to-many model rather than the one-to-one model. Enterprise software delivered as SaaS include business applications such as customer relationship management (CRM), web conferencing and collaboration applications, HR applications like talent management and payroll, enterprise resource management (ERM) applications like ERP, supply chain management (SCM), product lifecycle management (PLM) and so on. This report excludes software applications or services aimed mainly at the consumer market. While online companies like Yahoo and Google also deliver software as a service, we have excluded them for two reasons: a) those services are mostly used by consumers, which is a distinct market with unique characteristics and, b) their revenue is not exclusively derived from selling software services, but often provided for free or subsidized by advertising. We have also excluded the business of application hosting from the scope of this report since the model does not meet our definition of SaaS. In the application hosting model, the customer has to pay for the software license. The customer therefore owns the software application and is responsible for upgrades and maintenance. 6
    • Who is a SaaS Provider? A SaaS provider is any company that delivers SaaS over the Internet and is accountable for the software’s maintenance, upgrades and associated services. The SaaS provider is responsible for hosting, deploying, customizing, configuring and delivering the software. In our view, there are three broad categories of SaaS providers active in the Asia Pacific region. These are: 1. Net-Native Software-as-a-Service Application Providers: These are SaaS providers with proprietary multi-tenant software applications designed for delivery over the web. These companies have their own data centers that host, manage and deliver SaaS applications. SaaS vendors like Salesforce.com, RightNow Technologies and WebEx fall in this category. 2. Hybrid Software-as-a-Service Application Providers: These providers are traditional enterprise software vendors who primarily deploy on- premise software delivery models that are diversifying into SaaS offerings to supplement their on-premise businesses. Vendors such as Oracle, Microsoft, SAP and Symantec fall into this category. 3. Software-as-a-Service Providers Delivering Third-Party Applications: These providers primarily play the role of application aggregators and deliver SaaS applications over the web using their infrastructure. Application service providers (ASPs), web hosting companies, telecom and Internet service providers who deliver third-party multi-tenant software applications via a web browser form this group of SaaS providers. A prominent example of such a company in the region is Australia-based Web Central. 7
    • R ESEARCH M ETHODOLOGY The research conducted for this report was executed from March to May 2007. The methodology employed included secondary research, and both supply- and demand-side primary research. Additional details on each of these research elements are provided below. Secondary Research The first research phase involved an extensive secondary research exercise to review public information sources on the Internet and other mediums. Key information sources included SaaS vendor websites, earnings statements and white papers. In addition, reports, articles, websites, blogs and journals from other research bodies, associations and government entities were used to create an initial framework of understanding on the SaaS dynamics both globally and in Asia Pacific. Supply-side Primary Research Interviews were then conducted with the heads of Asia Pacific operations for leading SaaS vendors and large traditional software providers. Respondents were led through a structured questionnaire to gather quantitative and qualitative input on their operations, performance, strategies and views on the overall Asia Pacific SaaS marketplace. Data from interviews was consolidated, checked for consistency and accuracy, and then inserted into Springboard’s SaaS data model. Demand-side Primary Research In order to include user perceptions and adoption into the research methodology, a total of 385 CIOs, IT managers and line of business managers from both large enterprises and SMBs were interviewed in Australia, New Zealand, China, India and Singapore. Structured interviews were conducted over the phone to gather quantitative and qualitative information regarding SaaS adoption and usage within the company. A breakdown of survey respondents follows below: Table 1: Respondent Breakdown by Country & Users/Non-Users Country SaaS Users Non-SaaS Users Total Australia 42 40 82 New Zealand 11 10 21 China 50 50 100 India 50 48 98 Singapore 32 52 84 Total 185 200 385 8
    • Table 2: Respondent Breakdown by Employee Size Verticals SaaS Users Non-SaaS Users Total 1-99 54 71 125 100-299 35 29 64 300-499 24 14 38 500-999 18 19 37 1000 & Above 48 73 121 Total 179 206 385 9
    • O VERVIEW OF THE A SIA P ACIFIC S AA S M ARKET The Asia Pacific Software-as-a-Service (SaaS) market continues to grow at one of the fastest rates in the world. A host of factors, primarily a significantly increased awareness of the SaaS concept and a proliferation of new SaaS applications – several of them being developed by local ISVs – have added to market momentum. In almost every way, SaaS is more mainstream than it was a year ago. This is amply reflected in not just the growing reach of the on-demand applications that are being deployed with ease by both large and SMB enterprises across verticals, but also the increasing involvement of business users in influencing SaaS deployment in their organizations. Local ISVs have also grown increasingly interested in providing applications via the SaaS model. Springboard Research estimates show that the Asia Pacific SaaS market (excluding Japan) has been growing along the lines we had projected in our earlier report (The Software as a Service Market in Asia Pacific, 2005 to 2008: Blazing New Routes-to-Market (May 2006). Per our forecast, the SaaS market grew by 93% in 2006 to reach US$154 million. We expect this market to grow to US$1.16 billion in 2010, registering a CAGR of 66% from 2006 to 2010 (Figure 1). Figure 1: Asia Pacific SaaS Applications Market Revenue (US$M) and Annual Growth, 2006-2010 1400 120% 1200 1000 80% 800 600 40% 400 200 0 0% 2006 2007 2008 2009 2010 Revenue (US$M) 154 274 501 785 1165 Growth 93% 78% 83% 57% 48% Source: Springboard Research, 7/2007 SaaS vs. Traditional Enterprise Software Applications Market Springboard Research forecasts that at its current pace of growth, SaaS will gain share rapidly against the traditional enterprise software applications market in Asia Pacific over the next several years. It is noteworthy that while the SaaS applications market, as mentioned earlier, will grow at a CAGR of 66%, the traditional enterprise software applications market will only grow at a CAGR of 11-13% to reach during the same period. We believe that by 2010 SaaS will represent over 15% of the enterprise applications market in Asia excluding Japan. 10
    • From a global perspective, Springboard Research estimates that Asia Pacific accounted for around 10% of the global SaaS market in 2006, up from 8% in the previous year. Springboard Research forecasts for Asia Pacific’s SaaS market size is based on the following key assumptions: • The increased hype surrounding web-based applications, combined with growing Internet penetration and usage among businesses, especially the SMBs, will drive many organizations to adopt web-based applications. We expect most organizations that use enterprise application software to deploy some sort of SaaS application in the near future. • A significant portion of the growth in SaaS adoption will come from SMBs who have very little or no exposure to IT applications. SMBs represent a market that is currently not being served or has been beyond the reach of on-premise enterprise application vendors. Given cost advantages, ease of use and management, SaaS is now likely to be among SMB’s top choices for software. • There will be an increased effort by large application vendors like Oracle and SAP to tap the SMB market by customizing their existing applications to meet SMB-specific IT needs. SaaS will be a key part of their strategy for this market. • There will be a proliferation of new SaaS applications that are more easily available, leading many more organizations to use them. The increase in new SaaS applications will be driven by both local ISVs, as well as leading licensed application vendors. SaaS Application Dynamics As we had indicated in our first study, SaaS is moving beyond CRM. The proliferation of new SaaS applications (detailed in Table 3) has been one of the most noticeable trends in the Asia Pacific market. While many of these new applications have come to the region from US- based vendors looking to gain a foothold in the Asian market, several SaaS programs are now being offered by local ISVs. Additional details on Asia Pacific ISVs and their recent SaaS activities are provided in the SaaS & Asia Pacific ISVs chapter of this report. Springboard Research data shows that organizations are aware of and are using many different types of SaaS applications. The most widely used include Office applications (word processors, spreadsheets), e- mail, security/compliance applications, and HR, payroll/workforce management. CRM, collaboration tools (web conferencing & messaging), ERP, accounting, and supply chain management are next in order. It is important to note that not all of these applications generate revenue. For instance, Google Docs and Spreadsheet – two applications that are gaining popularity among enterprises – are basically free software. CRM remains the largest SaaS application segment by revenue in the region, representing 45% of total SaaS revenue in 2006. However, its share in the overall SaaS market is declining. CRM is followed by 11
    • collaboration applications. Our understanding is that among all the SaaS applications, these two generate the most revenue. As such, even if more organizations are using other types of SaaS applications, these two contribute most to regional revenue (Figure 2). Figure 2: Asia Pacific SaaS Revenue by Application, 2006 Other 7% HR 7% ERP/PLM/SCM 9% CRM 45% Collaboration 32% Source: Springboard Research, 7/2007 Key SaaS applications are illustrated in greater detail in Table 3. Of note is that collaboration is emerging as the most dominant form of SaaS application. That is because even as licensed software applications dominate the software applications category, collaboration software applications, like conferencing, messaging, and document management, are becoming mostly web-based. Table 3: SaaS Enterprise Applications by Category Front IT Back Office Collaboration Desktop Office/BI Infrastructure IT Word CRM ERP Conferencing infrastructure processors management Web Document Remote PC SCM Spreadsheets Analytics Management Access Shared Remote IT calendars, Services Billing PLM contact lists & tasks HR/Workforce Security E-mail Management/Performance management Management Payroll Messaging Accounting Whiteboards Budgeting & Desktop sharing Planning/Expense Management Content Management Source: Springboard Research, 7/2007 SaaS applications are often being deployed in “islands” within an enterprise, in contrast to licensed applications that are usually deployed throughout the enterprise. Despite this, Table 3 shows that 12
    • there is an array of SaaS applications that can be deployed in many different departments across an enterprise. A key SaaS trend has been the proliferation of vertical-specific SaaS applications, some which are mentioned in Table 4. Table 4: Vertical Specific SaaS Applications Application Vertical Vendor Policy & claims administration system for Insurance BIPT property & casualty insurance industry Educational campus Education Campus Management management solution Litigation lifecycle Legal Services CaseCentral management Retail Management Retail CORESense Commerce & fulfillment solutions for retailers & Retail Vcommerce direct-to-consumer initiatives Dealer tracking/management Automobile DealerTrack solution Medical Appointment Scheduling & Electronic Healthcare Medtech patient record, collaboration Healthcare operations Healthcare Working Systems Hi-Tech Manufacturing Sales Information System Platte River Systems (Semiconductor) Hotel reservation Hospitality vSplash TechWorks Derivatives risk Financial Services Pyxis Systems management Source: Springboard Research, 7/2007 Vertical Market Dynamics High-tech businesses, financial services, healthcare and business services (HR, recruiting firms, and legal services), education and the non-profit sector have been the more enthusiastic adopters of the on- demand model. Companies in these verticals have a relatively better understanding of the SaaS model and its benefits. Springboard Research data shows that SaaS is gaining almost equal traction in both large and SMB enterprises in many of these vertical industries. In Australia and Singapore, a significant number of government organizations also have deployed SaaS. In Singapore especially, the government has been a significant driver of SaaS adoption. In one example, the National Council of Social Services, which is the umbrella organization for all social services in Singapore, has deployed justlogin.com, an online software service, in all its departments. 13
    • Adoption Trends by Country Australia remains the largest market for SaaS applications in the region and is the closest aligned to North America in terms of adoption trends. The country has a thriving community of ISVs and other SaaS providers who have helped build awareness and momentum in the market. China, India, Korea and Singapore are other key markets in Asia Pacific. Together with Australia, these countries account for around 77% of the SaaS market in the region. Additional detail on country dynamics in key markets is provided in the Country Profiles chapter of this report. Figure 3: Asia Pacific SaaS Revenue by Country, 2006 Other 23% Australia 36% Singapore 7% Korea 10% China/HK India 13% 11% Source: Springboard Research, 7/2007 Key Adoption Drivers The relatively lower cost of SaaS applications as opposed to traditional software, ease of use, management and implementation are the key factors that make SaaS attractive. Although cost is important, our research has shown that factors other than cost are the primary considerations for the majority of organizations deploying SaaS. Most organizations find SaaS attractive because it can be deployed quickly and easily, which is a dynamic observed in both the SMB and large enterprise market segments. The growing adoption of the Internet as a business tool (or Web 2.0, as some call the trend) by regional enterprises is the key external factor driving SaaS adoption, especially among SMB enterprises. Internet penetration among Asian enterprises has been growing steadily and is increasingly pushing them toward using web-based applications. In a significant number of cases, implementation of web-based applications is initiated by business users without IT department involvement. 14
    • Moreover, many of the region’s SMBs that could not afford licensed software applications because they involved capital and operational expenditures beyond their budget, and also because they did not have IT manpower to manage them, are adopting SaaS applications to enhance operational efficiency and boost productivity. Barriers to Adoption The primary factor preventing companies from adopting SaaS is lack of recognition of the business benefit. Many respondents are not deploying SaaS as they perceive licensed software to be cheaper and also consider SaaS applications technologically less mature. Concerns related to security also prevented many companies from deploying SaaS. All this essentially points toward an inadequate awareness and understanding of the SaaS concept. As such, Springboard Research believes this insufficient awareness and understanding is the most important challenge facing SaaS market growth in the region. Detailed data on the key drivers of SaaS adoption among organizations and the inhibiting factors preventing adoption is presented in the next section of this report. 15
    • S AA S: P RIMARY S URVEY R ESULTS As highlighted in the methodology section of this report, Springboard conducted interviews with CIOs and IT managers in 385 large and SMB enterprises in Australia, New Zealand, China, India and Singapore to assess the level of SaaS awareness, adoption and perception in the region. Vertical industries covered in our survey primarily included banking and financial services, public sector, healthcare, retail, education, manufacturing, telecommunications and business services. SaaS Awareness There has been a substantial increase in SaaS awareness among Asia Pacific enterprises. From our respondent base comprised of both large and SMB enterprises, 75% reported awareness of SaaS with only 25% reporting a lack of awareness (Figure 4). Awareness levels are nearly equal in large and SMB enterprises. It should be noted that in our first survey on SaaS awareness and adoption, we had reported a 41% SaaS awareness rate among the SMB respondents. This dramatic shift clearly demonstrates the gained awareness SaaS is experiencing in the market within just 12 months. Figure 4: SaaS Awareness among Asia Pacific Companies Yes 75% No 2007 25% 41% 2006 59% 0% 20% 40% 60% 80% Q: Are you aware of the concept of Software-as-a-Service or On-Demand Software? N=385 (2007); 210 (2006) Source: Springboard Research, 7/2007 Increased marketing by SaaS vendors, hype generated by announcements from Microsoft and Google, among others, and growing Internet usage among businesses, have all played a key role in building SaaS awareness in Asia Pacific. Furthermore, many respondents, even if unfamiliar with the term “SaaS,” were fairly aware of the general concept. This increasing awareness of SaaS is a key contributor to growth in the market. However, it is 16
    • important to emphasize that awareness does not always equal understanding. Although respondents may have heard of SaaS, some might have an incomplete or inaccurate understanding of the concept, how it works and what benefits it offers (as is reflected in some of the reasons they have cited for deploying SaaS applications). Among countries in the region, Australia has the highest awareness levels while China has the lowest. Nevertheless, SaaS awareness has increased substantially across the four countries that we surveyed (Figure 5). Figure 5: SaaS Awareness among Asian Enterprises, by Country Australia/NZ 92% India 89% Singapore 89% China 72% 0% 20% 40% 60% 80% 100% Q: Are you aware of the concept of Software-as-a-Service or On-Demand Software? N=385 Source: Springboard Research, 7/2006 As with any new technology or concept, a rise in awareness is a positive sign and a foundation upon which the market can be built. From that perspective, the current level of SaaS awareness in Asia Pacific is a very encouraging trend that can be exploited by SaaS vendors to tap the growing opportunities in the regional market. SaaS Adoption Increased awareness and the continuous hype surrounding SaaS have raised the level of penetration of web-based applications among Asia Pacific enterprises. As Springboard Research data shows, 46% of respondents indicated their company had subscribed to SaaS. Once again, survey results clearly demonstrate the SaaS momentum generated in the region over the past 12 months, as the share of adopters in our survey rose from 29% the previous year to the aforementioned 46% in 2007. (Figure 6) A majority of the respondent companies have deployed SaaS in specific departments or for specific business uses. Examples of enterprise-wide deployment of SaaS are few and far between. This is largely because of two reasons. One, organizations are still wary of relying too much on SaaS and prefer to deploy it for non-core functions; 17
    • two, most SaaS applications in the market are function-specific (for instance, SFA, payroll management, etc.). Figure 6: SaaS Adoption among Asian Enterprises Yes 46% No 2007 54% 29% 2006 71% 0% 20% 40% 60% 80% Q: Does your organization currently subscribe to any SaaS applications? N=385 (2007); 210 (2006) Source: Springboard Research, 7/2007 Although CRM remains the largest SaaS application segment by revenue in the region, representing 45% of total SaaS revenue in 2006, Springboard Research data shows that organizations are aware of and use many different types of SaaS applications. The most widely used include Office applications (word processors, spreadsheets), e-mail, security/compliance applications, and HR-payroll/workforce management. CRM (mostly SFA), collaboration tools (web conferencing & messaging), ERP, accounting and SCM come next. (Figure 7) It is important to highlight that respondents were not asked to follow very strict definitions of SaaS applications when identifying the application they use. Although we see high demand for security SaaS applications, we believe the adoption figures from the survey are skewed upward by software application upgrades and renewals done online, which does not fit into our SaaS definition since most of these applications resides on premises. Nevertheless, with Symantec’s impending SaaS release – and those of other security vendors – we expect to see strong adoption of pure security SaaS software throughout the forecast period. 18
    • Figure 7: SaaS Applications Used By Asia Pacific Enterprises Desktop Office Applications 39% E-Mail 33% Security / Compliance 30% HR-Payroll Management 27% CRM 22% Conferencing / Collaboration 20% ERP 18% Supply Chain Management 10% Other 8% 0% 10% 20% 30% 40% 50% Q: What SaaS/On-Demand Software Application are you currently using? N=179 (SaaS Adopters) Source: Springboard Research, 7/2007 Adoption Drivers and Inhibitors The primary adoption driver cited by the respondents is SaaS’ ease of use and management (33%). When combined with ease of implementation and low maintenance, it is clear that the ease with which SaaS applications can be deployed, used and managed are the key SaaS drivers in the region. Collectively, these factors represent over 55% of the primary drivers cited by respondents (Figure 8). Figure 8: Primary Reason for Adopting SaaS Other 9% Ease of use Scalability and 6% management Zero / Low 32% maintenance 9% Easy and quick to deploy 15% Lower cost of Business ownership Benefits 18% 11% Q: What is the primary reason your company subscribed to SaaS? N=179 (SaaS Adopters) 19
    • The lower cost of ownership associated with SaaS applications remains a key driver of its adoption in Asia Pacific. Although only 18% of the SaaS user respondents cited it as the primary factor in adoption, 39% stated it as the second most important factor in their decision to deploy a SaaS application. A significant number of these respondents were first-time users of any enterprise software application. ”Lack of business requirement” is the prime inhibiting factor for 33% of respondents. Interestingly, vendor support and reliability are not significant concerns, even though 12% of respondents still consider SaaS applications less secure. However, when asked if there were any other reason that prevented them from deploying SaaS, a significant number of respondents cited factors like lack of technological maturity, security and difficulty in finding a SaaS vendor. Springboard Research believes that the lack of business requirement is the prime inhibitor due to three key reasons. One, respondents find it difficult to get a SaaS application that meets their business requirements; two, they have inadequate understanding of how a SaaS application can meet their business needs; and three they are not aware if the applications they need even exist. Figure 9: Primary Reason for Not Adopting SaaS No business requirement 34% Technology is not mature 15% Licensed software is cheaper than SaaS 15% Low awareness about the concept 11% Security is an issue with SaaS 11% Centralized decision 7% Finding a SaaS vendor is difficult 4% Reliability is an issue with SaaS 3% Vendor support is an issue with SaaS 2% 0% 5% 10% 15% 20% 25% 30% 35% 40% Q: What is the primary reason your company does not subscribe to SaaS? N=206 (Non-Adopters) Source: Springboard Research, 672007 [[ Bandwidth limitations in some Asian countries and user concern with transitioning mission-critical applications to the SaaS model are the other factors inhibiting adoption in the region. Bandwidth is particularly an issue in China and India where organizations still find it difficult to get quality bandwidth. On the other hand, an increased awareness and understanding of the SaaS concept has had a positive impact on cost perceptions. As such, unlike in 2006, this year has seen a lower number of respondents who believe that buying SaaS software licenses is less expensive. However, 20
    • since 14% of respondents still consider licensed software cheaper, the importance of increasing awareness and market education remains very high despite the fact that not many respondents cite a lack of awareness as a reason for not deploying SaaS. A lower TCO and the ability to easily and quickly deploy SaaS have surely meant significant cost savings for SaaS adopters. Although 40% of SaaS adopters were unable to quantify the amount of money saved by deploying SaaS instead of traditional licensed software, they emphasized SaaS had helped bring down their IT expenses. Overall, 33% of respondents reported a savings of more than 10%, with 23% of respondents reporting a savings of 11% to 25 % (Figure 10). It should be noted that respondents were not guided to provide scientific measurements of savings. Instead, rough estimates were provided by respondents to provide an estimate of perceived savings. Figure 10: Perceived Savings from Adopting SaaS Not Aware 40% Less than 10% 28% 11% to 25% 23% 26% to 50% 8% More than 50% 2% 0% 10% 20% 30% 40% 50% Q: How much (in percentage terms) do you estimate your organization saved by subscribing to SaaS instead of deploying licensed software? N=179 (SaaS Adopters) Source: Springboard Research, 7/2007 Satisfaction Level with SaaS Applications On a scale of 1 to 10 (where 10 represents highest satisfaction and 1 the least), most respondents have rated their experience of using a SaaS application a 7 or higher (Figure 11). The level of satisfaction was highest with security/compliance applications, followed by ERP. CRM and SCM ranked lowest on the satisfaction scale; however, satisfaction for all applications was high in general and when compared to on- premise satisfaction. 21
    • Figure 11: SaaS Application Satisfaction Security / Compliance 7.98 ERP 7.88 Desktop Office Apps 7.81 E-mail 7.79 Web Conferencing / Collaboration 7.79 HR 7.46 SCM 7.39 CRM 7.33 Q: How would you rate your satisfaction with the performance of the SaaS application(s) deployed in your organization? (10 =highest level of satisfaction; 1=the lowest) N: 179 (SaaS Adopters)/Multiple Responses Source: Springboard Research, 7/2007 Data Residency The majority of SaaS users (57%) believe that application performance and reliability is not dependent on data center location. On the other hand, 39% think SaaS applications perform better and are more reliable when hosted at a data center close to the user. The fact that the majority of respondents do not consider data residency as a factor in application performance and reliability can be seen as a manifestation of the growing maturity of the SaaS user as well in the Asia Pacific market. (Figure 12) Figure 12: Data Residency & Perceived Performance Performance and reliability is not 57% dependent on data centre location Performance is better and reliable when 39% hosted in a data centre close to the user Don't know 4% Q: Which of following two statements is more correct: a) SaaS applications perform better and are more reliable when hosted in a data center close to the user b) Application performance and reliability is not dependent on data center location c) Don’t Know; N: 179 (SaaS Adopters) Source: Springboard Research, 7/2007 22
    • Future SaaS Adoption Plans In our interviews with respondents, only a small number (9%) indicated a definite plan to implement one or more SaaS applications in the next 12 months. However, we do not believe this represents a slowdown in overall adoption for a number of reasons. First, previous surveys we have conducted in different areas generally show that Asian enterprises have very little visibility or conviction of the solutions they will deploy looking forward within the next 12 months. Second, application investments are often driven by business needs that arise quickly, and SaaS has clear time-to-adoption advantages versus traditional software license sales. Finally, our survey had a larger representation of IT managers than it did line-of-business (LOB) department heads, and we have found that many SaaS deployments are being driven from the lines of business with little or no knowledge from the IT department. Figure 13 lists the various SaaS applications that enterprises in Asia Pacific are likely to deploy in the next 12 months. The future adoption of SaaS applications contains few glaring differences from the adoption patterns already presented in this document. However, security and compliance ranks further down the list of planned deployments than it does when viewing actual deployments. We are uncertain of the key factors driving this difference, and we believe security SaaS could in fact be a strong application performer within the next 12-24 months. Figure 13: SaaS Applications Being Considered for Deployment in Next 12 Months Desktop office applications 37% CRM 37% Web conferencing / messaging 21% ERP 21% HR-Payroll- Workforce Management 16% Supply Chain Management 11% Security / Compliance 11% Others 11% 0% 5% 10% 15% 20% 25% 30% 35% 40% Q: Which SaaS application are you considering for deployment in the next 12 months? N=20 (Multiple Response) Note: sample size is low, and data should be viewed as indicative only Source: Springboard Research, 7/2007 23
    • K EY S AA S D YNAMICS BY A PPLICATION On-Demand CRM Even though CRM’s share in the Asia Pacific SaaS applications market declined in 2006, it continues to be the leading form of SaaS in the region. CRM not only enjoys the highest mindshare among all SaaS applications, it also contributes most to the market in terms of revenue. Within CRM, salesforce automation (SFA) is the most popular application with business users. A lower TCO, quick deployment time, and ease of use and management have been the key factors that are driving the region’s enterprises to opt for SaaS-based CRM. A large part of the credit for SaaS market momentum also goes to the on-demand CRM pioneer, Salesforce.com, which has done a good job of marketing and delivering its CRM solutions in Asia Pacific. As Springboard pointed out in its previous report, SaaS CRM applications continue to outpace growth of the traditional on-premise CRM applications many times over. According to our data, the on- demand CRM market will grow at a CAGR of 61% from 2006 to 2010, to reach US$460 million by 2010 (Figure 14). A large part of this growth will come from first-time SMB adopters of CRM. Figure 14: On-Demand CRM Market Revenue (US$M) and Annual Growth in Asia Pacific, 2006-2010 500 80% 70% 400 60% 300 50% 40% 200 30% 20% 100 10% 0 0% 2006 2007 2008 2009 2010 Revenue (US$M) 69 116 193 315 460 Growth 68% 67% 63% 46% Source: Springboard Research, 7/2007 ON-DEMAND CRM ADOPTION BY VERTICAL INDUSTRY As Springboard Research indicated in its earlier study, education, healthcare services, telecommunications, consumer packaged goods, business services and the technology sector have been the key markets for on-demand CRM. However, of these, the technology sector, financial services and business services have emerged as the most significant adopters of on-demand CRM applications in the region. The growing use of the Internet as a business tool and the growth in broadband access has helped on-demand CRM find a significant 24
    • foothold in the region’s SMB segment. However, the market still remains a tough challenge for SaaS CRM vendors, as many SMBs still have an inadequate understanding of how the application can help their business. Springboard Research predicts that a substantial portion of the growth in Asia Pacific’s SaaS CRM market will come from the SMB segment. The affordability and ease of use that on-demand CRM offers is likely to encourage many of these businesses to deploy on-demand CRM as an essential business tool. We expect SMBs in Asia Pacific to go for simpler CRM solutions that are not overly complex. This trend in turn will drive CRM vendors, especially the traditional licensed software companies, to either downgrade their on-premise offerings or adopt the SaaS distribution model. ON-DEMAND CRM ADOPTION BY COUNTRY Australia, Singapore, Hong Kong, Korea, India, China and Thailand are the key SaaS CRM markets in Asia Pacific. Of these, Australia remains the top market, accounting for 35% of all SaaS CRM sales generated in the region. A relatively high awareness level, growing use of the Internet as a business tool among companies, and better broadband infrastructure, have helped Australia become the top target market for leading on-demand CRM vendors like Salesforce.com, RightNow Technologies and NetSuite. Similar trends can be seen in India, Singapore, Hong Kong and Korea, where on-demand CRM is finding a growing number of adopters. China shows high-growth market potential, but is turning out to be a challenging market for SaaS CRM vendors due to local market and cultural challenges. ON-DEMAND CRM COMPETITION Springboard Research has identified 5 key SaaS CRM vendors active in the region. These are Salesforce.com, RightNow Technologies, Oracle- Siebel, NetSuite and SugarCRM. Salesforce.com remains the number one player with close to a 50% share of the market. Our research showed that Salesforce.com was the most widely available on-demand CRM vendor in Asia Pacific. Although competition is beginning to take shape in the market, other vendors have a long way to go before they can challenge Salesforce.com’s dominance. Springboard Research believes that two key factors that are going to define the competitive environment in the region are the entry of vendors like Microsoft, Oracle and SAP in the on- demand CRM space, and the emergence of local ISVs who are using the on-demand model to attract SMBs. Both Microsoft and SAP have been actively courting the on-demand CRM market for some time. While Microsoft is launching a SaaS version of Dynamics CRM in the US by the end of 2007 (specific plans for Asia have not been announced), SAP is launching its on-demand suite of business applications (A1S), including CRM, in mid-2008. Oracle has also announced aggressive plans to pursue the CRM SaaS opportunity, with a product launch in the US slated for the second half of 2007. Local vendors including Gate13, Practical Business Systems, Talisma, Sitek Villagemall Pty., 3i Business Solutions, Aldea Infotech, Xtools, 25
    • Woznet, 800CRM, and CRM24x7 are also actively targeting Asia Pacific’s SaaS CRM market. Web Collaboration Springboard Research forecasts that web collaboration will soon emerge as the most dominant and widely-used form of software-as-a- service in Asia Pacific. As business Internet usage increases and as organizations are able to access an abundance of quality bandwidth, a broad spectrum of companies are adopting online collaboration and conferencing tools. We believe that as collaboration is inherently on- demand in nature due to the collaborative power of the Internet, SaaS- based collaboration solutions will emerge as the natural choice for organizations. The flexibility to buy services like web conferencing “at will”, and the power of pay-per-use is already encouraging many organizations to adopt web collaboration SaaS applications. According to Springboard Research, the web collaboration market will grow at a CAGR of 68% from 2006 to 2010, to reach US$400 million by 2010 (Figure 15). The market has been growing due to the strong presence of drivers like an increasing tendency among business users to buy services on an as-needed basis and growth in cross-company collaboration. Figure 15: Web Collaboration Market Revenue (US$M) and Annual Growth, 2006-2010 500 120% 400 100% 80% 300 60% 200 40% 100 20% 0 0% 2006 2007 2008 2009 2010 Revenue (US$M) 50 89 169 270 400 Growth 108% 78% 90% 60% 48% Source: Springboard Research, 7/2007 WEB COLLABORATION ADOPTION BY COUNTRY There is strong demand for on-demand collaboration services and tools, especially web conferencing, in countries like Australia, Korea, India, China and in ASEAN. While large companies have definitely been early adopters, there is a growing demand from SMBs in Australia, New Zealand, India and the ASEAN. ON-DEMAND COLLABORATION TOOLS ADOPTION BY VERTICAL INDUSTRY Web-based conferencing and other collaboration applications have also been gaining traction across verticals. However, high-tech industries, including IT and BPO companies, financial and banking services, manufacturing, healthcare, pharmaceutical, government, 26
    • and education are the more enthusiastic adopters of on-demand collaboration software. One recent trend that has been gaining ground is the growing availability of web services for one-time or occasional users. These services have helped extend the reach and awareness of web-based collaboration tools, especially among small and mid-sized companies. ON-DEMAND COLLABORATION TOOLS COMPETITION Springboard Research estimates that WebEx has a 33% share of the Asia Pacific web conferencing market. Microsoft is the second most important vendor in the region. Other companies with a growing presence in Asia Pacific include Citrix Online and Interwise. ERP and SCM Applications Awareness and understanding of the benefits of SaaS-based ERP and SCM applications is growing steadily in Asia Pacific. Applications like on- demand ERP and SCM are finding a foothold in markets in Australia, China, Hong Kong, South Korea and Taiwan, with a few deployments in India as well. Manufacturing companies, especially in high-tech industries that provide semiconductors, flat panel displays and similar products in China, Korea, Taiwan, Malaysia and Thailand have found the on-demand ERP model appealing. Many companies have reported significant savings, ranging from 10% to 50%, as a result of SaaS application deployment. Springboard Research estimates that the market for these applications will grow at a healthy CAGR of 50% to reach US$70 million in 2010, up from US$14 million in 2006 (Figure 16). Figure 16: On-Demand Back-Office Revenue (US$M) and Annual Growth, 2006-2010 80 70% 60% 60 50% 40% 40 30% 20% 20 10% 0 0% 2006 2007 2008 2009 2010 Revenue (US$M) 14 22 35 50 70 Growth 57% 59% 43% 40% Source: Springboard Research, 7/2007 Despite the healthy estimated growth, these applications will account for a relatively small portion of the SaaS market. In fact, Springboard expects ERP and SCM application market share to decline from the current 9%, to 6% in 2010. This will happen as other SaaS applications like CRM and web collaboration grow at a quicker rate. We believe that the market lacks a choice of applications in the ERP/SCM area. Also, 27
    • unlike the on-demand CRM or collaboration space where vendors like Salesforce.com and WebEx have been able to develop and expand the market based on their pioneering status and innovation, existing on- demand ERP and SCM companies currently lack the stature and appeal that can help them develop the market on their own. Ce2open, GSX, Mitrix and Wesupply, Platte River Systems are some of the on-demand SCM companies present in APAC. Prominent on- demand ERP vendors include Intacct and NetSuite. Local ISVs such as Cosmoshakthi Software Solutions, iWeb Technology Solutions, Octopus eInternational, Spendvision, Villagemall Pty., HRMantra Software, Aldea Infotech and Ramco Systems also provide with on-demand ERP applications. On-Demand HR Applications Applications like HR/workforce management/performance management, payroll management, content management, web analytics, billing, word processing, spreadsheets, security and collaboration-based IT infrastructure management are also gaining acceptance in the Asia Pacific SaaS market. Among these, web-based HR applications are currently the most popular, especially among companies in high-tech industries, consumer goods, real estate and BPO. Springboard Research estimates that the market for on-demand HR applications will grow at a CAGR of 65% to reach US$75 million in 2010, from US$10 million in 2006. Figure 17: On-Demand HR Applications Revenue (US$M) and Annual Growth, 2006-2010 80 100% 80% 60 60% 40 40% 20 20% 0 0% 2006 2007 2008 2009 2010 Revenue (US$M) 10 14 25 40 75 Growth 40% 79% 60% 88% Source: Springboard Research, 7/2007 We believe that the growing number of HR applications developed for the SaaS market and the wide choice this availability affords for organizations will be a key factor in driving the adoption of these applications. Moreover, as the current economic boom in many Asian countries, especially China and India, leads companies to expand their workforce, they will increasingly rely on SaaS-based applications to manage employees. 28
    • In addition, we expect the on-demand model to continue to spread to other applications as the use of Internet as a business tool increases and as organizations are able to access a wide variety of applications. (Figure 18) Figure 18: Other* On-Demand Applications Revenue (US$M) and Annual Growth, 2006-2010 200 240% 200% 150 160% 100 120% 80% 50 40% 0 0% 2006 2007 2008 2009 2010 Revenue (US$M) 11 33 79 110 160 Growth 200% 139% 39% 45% *Includes messaging and email management, security (anti-virus, anti-spam, IDS), and compliance management, web analytics, content management, billing, word processing, spreadsheets, security and collaboration-based IT infrastructure management Source: Springboard Research, 7/2007 Among other applications, security is likely to emerge as the most dynamic segment in SaaS. Recent product announcements by leading security solutions vendors Symantec and Trend Micro are also likely to add to market momentum. While Symantec is launching Symantec Protection Network, a software-as-a-service platform designed to deliver easy-to-use security offerings to small and mid-sized businesses, Trend Micro has announced its usage-based licensing program available in North America through leading IT products distributor, Tech Data. 29
    • C OUNTRY P ROFILES Australia Australia remains the biggest Asia Pacific market for SaaS applications. A high level of awareness combined with superior broadband infrastructure has driven SaaS adoption in the country. The flurry of SaaS vendor activity has also contributed to market growth. Australia is the first important battleground for leading vendors like Salesforce.com, WebEx, NetSuite, Citrix Online and RightNow Technologies. SaaS is also finding growing acceptance among companies, especially SMBs, in neighboring New Zealand. Australia has a thriving community of local ISVs that offer a range of SaaS applications. Moreover, the high-profile involvement of the country’s leading telecom operator, Telstra, and systems integrator, Melbourne IT (which acquired WebCentral), in SaaS has aided market growth. Springboard Research estimates that the Australian SaaS market will grow at a CAGR of 65% to reach US$405 million in 2010, from US$55 million in 2006 (Figure 19). A large part of this growth will come from on- demand CRM applications, followed by web conferencing and collaboration. Figure 19: Australian SaaS Market Revenue (US$M) and Annual Growth, 2006-2010 500 120% 400 80% 300 200 40% 100 0 0% 2006 2007 2008 2009 2010 Revenue (US$M) 55 96 175 290 405 Growth 75% 82% 66% 40% Source: Springboard Research, 7/2007 High-tech industries, healthcare and business services (HR, recruiting firms, legal services, and travel services), retail, education, government organizations and the non-profit sector have been among the significant adopters of SaaS in Australia. The relatively low cost involved in buying and using SaaS applications, the ability to deploy them quickly, clear business benefits and scalability have been among the top reasons for SaaS adoption in these verticals (Figure 20). 30
    • Figure 20: Primary Reason for Adopting SaaS, Australia Zero / Low maintenance 31% Easy and quick to deploy 12% Business Benefits 12% Scalability 12% Lower cost of ownership 10% Ease of use and management 10% Others 15% 0% 5% 10% 15% 20% 25% 30% 35% Q: What is the primary reason your company subscribed to SaaS? N=50 (SaaS Adopters/Australia-New Zealand) Source: Springboard Research, 7/2007 Despite high awareness levels, many Australian companies are still not interested in SaaS. According to Springboard Research data, this reluctance to adopt is largely because companies feel that SaaS applications do not meet their business requirements, are costlier then licensed on-premise applications and are less secure (Figure 21). This again underlines the importance to SaaS vendors of providing more market education to improve awareness and understanding of SaaS. Figure 21: Primary Factor Preventing SaaS Adoption, Australia No business requirement 41% Licensed software is cheaper than SaaS 20% Security is an issue with SaaS 18% Technology is not mature 10% Reliability is an issue with SaaS 8% Vendor support is an issue with SaaS 2% Finding a SaaS vendor is difficult 2% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Q: What is the primary reason your company does not subscribe to SaaS? N=51(Non-Adopters/Australia/New Zealand) Source: Springboard Research, 7/2007 31
    • China/Hong Kong Despite a host of challenges that include high software piracy levels and significant user discomfort associated with deploying third-party hosted business applications (due to security and privacy-related concerns), SaaS is finding increased acceptance among Chinese companies. Springboard Research data shows that the Chinese SaaS market will grow at a CAGR of 72% (2006-2010) to US$175 million in 2010. In 2006, the market amounted to US$20 million or 13% of the total SaaS applications market in the region (Figure 22). Figure 22: China/Hong Kong SaaS Market Revenue (US$M) and Annual Growth, 2006-2010 200 160% 150 120% 100 80% 50 40% 0 0% 2006 2007 2008 2009 2010 Revenue (US$M) 20 43 80 110 175 Growth 115% 86% 38% 59% Source: Springboard Research, 7/2007 Ease of use and management, business benefits, and lower cost of ownership are among the prime drivers of SaaS adoption in China (Figure 23). Figure 23: Primary Reason for Adopting SaaS, China Ease of use and management 28% Business benefits 24% Lower cost of ownership 18% Easy and quick to deploy 14% Zero/Low maintenance 8% Scalability 2% Other 6% 0% 5% 10% 15% 20% 25% 30% Q: What is the primary reason your company subscribed to SaaS? N=50 (SaaS Adopters) Source: Springboard Research, 7/2007 32
    • Increased vendor activity in recent months has helped drive momentum in the Chinese market. One key development in 2007 was the launch of the Chinese edition of Salesforce.com’s on-demand CRM application targeted at small companies. Apart from providing business analytics, Salesforce.com’s CRM model includes features from its flagship Salesforce CRM product, such as “Salesforce Marketing,” which enables companies to capture website leads and to distribute those leads to sales teams; and “Salesforce Automation,” which helps businesses manage sales data and processes. Many Chinese ISVs, large and small, are working to derive gains from the emerging opportunities in SaaS. For instance, one of China’s leading software application vendors, Kingdee, has tied up with IBM to offer SaaS applications. In another example, XToolsCRM, a small vendor, is trying to push on-demand CRM as the perfect option for Chinese SMBs. On the other hand, MNC vendors like Microsoft are also trying to develop the market and are encouraging local ISVs to enter the SaaS business. The software giant has in fact signed a memorandum of understanding with Suzhou Software Park for a software-as-a-service incubator program designed to persuade more Chinese software companies to build SaaS applications. Lack of a perceived business requirement, data security concerns (not many Chinese companies are comfortable with the idea of letting their data reside in an external data center), lack of awareness and understanding of SaaS and the perception that on-premise software is cheaper, are among the reasons that prevent Chinese companies from SaaS adoption (Figure 24). Figure 24: Primary Factor Preventing SaaS Adoption, China No business requirement 36% Security is an issue with SaaS 16% Low awareness about the concept 10% Licensed software is cheaper than SaaS 10% Centralized decision 8% Technology not mature 8% Finding a SaaS vendor is difficult 6% Vendor support is an issue with SaaS 4% Reliability is an issue with SaaS 2% 0% 5% 10% 15% 20% 25% 30% 35% 40% Q: What is the primary reason your company does not subscribe to SaaS? N=51(Non-Adopters) Source: Springboard Research, 7/2007 The highly localized nature of the Chinese software applications market is dominated by local ISVs and is proving to be a market inhibiting factor. Chinese companies appear to be more comfortable with local 33
    • vendors – and not many have the ability to deliver software-as-a- service via a multi-tenancy architecture model. Local ISVs offering SaaS in China face the challenge of realizing subscription payments, and the lack of well-established and accepted on-line payment systems has meant that ISV vendors are not always able to collect payments in time. India India is one of the fastest growing SaaS markets in the region. Springboard Research estimates that the Indian market will grow at a CAGR of 77% from 2006 to 2010 to reach US$165 million in 2010, from US$17 million in 2006 (Figure 25). While web conferencing and other collaboration tools dominate the SaaS market, on-demand CRM and HR applications are also gaining traction. Figure 25: India SaaS Market Revenue (US$M) and Annual Growth, 2006-2010 200 120% 150 80% 100 40% 50 0 0% 2006 2007 2008 2009 2010 Revenue (US$M) 17 27 54 105 165 Growth 59% 100% 94% 57% Source: Springboard Research, 7/2007 Ease of use and management and lower cost of ownership are among the prime drivers of SaaS adoption by Indian companies (Figure 26). Figure 26: Primary Reason for Adopting SaaS, India Ease of use and management 44% Lower cost of ownership 23% Easy and quick to deploy 19% Scalability 4% Business benefits 2% Zero/Low maintenance 2% Other 6% 0% 10% 20% 30% 40% 50% Q: What is the primary reason your company subscribed to SaaS? N=50 (SaaS Adopters) Source: Springboard Research, 7/2007 34
    • Springboard Research is of the view that after Australia, India represents the most significant opportunity for on-demand CRM vendors. Already, vendors like Salesforce.com are finding a growing number of customers in India. The growing use of the Internet as a business tool and improving telecom infrastructure, presence of a large IT community and the increasing focus of Indian companies on global markets are among the factors driving growth in the country’s SaaS market. Springboard Research expects that further availability of affordable and quality broadband access will provide further impetus to the market. SaaS is providing a new business opportunity for local ISVs, with many of them targeting the overseas market by emulating the offshore service delivery model. Large Indian IT services companies have also shown growing interest in delivering software-as-a-service, adding to market momentum. For instance, Infosys is planning to launch its universal banking solution, Finacle, as a service offering along with its other products to expand its market reach. At another level, the largest Indian IT service provider, TCS, has formed a strategic alliance with Salesforce.com to tap the system integration opportunities offered by SaaS deployments. Furthermore, leading SaaS vendors like Salesforce.com and WebEx are increasingly focusing on bringing their SaaS platforms to Indian ISVs. In spite of the opportunities, the Indian SaaS market also has a number of challenges. Despite growing awareness of the SaaS concept, it is not very well understood and that is one of the key reasons that prevents many companies from deploying it (Figure 27). Figure 27: Primary Factor Preventing SaaS Adoption, India Low awareness about the concept 26% Technology not mature 22% No business requirement 16% Finding a SaaS vendor is difficult 12% Licensed software is cheaper than SaaS 10% Security is an issue with SaaS 6% Centralized decision 4% Reliability is an issue with SaaS 4% 0% 5% 10% 15% 20% 25% 30% Q: What is the primary reason your company does not subscribe to SaaS? N=50(Non-Adopters) Source: Springboard Research, 7/2007 Singapore The Singapore SaaS market is expected to grow at a CAGR of 64% from 2006 to 2010 to reach US$80 million by 2010 (Figure 28). Financial services, telecommunications and high-tech companies are early adopters of SaaS in Singapore. The government and non-profit sector 35
    • have also been among the early adopters of SaaS in the country. As mentioned earlier, Singapore’s government has been a significant driver of SaaS adoption. Singapore's highly developed telecom infrastructure, high level of broadband penetration, government efforts to drive technology adoption in enterprises and the city-state's dominance as a regional business hub have played key roles in building the SaaS market. Figure 28: Singapore SaaS Market Revenue (US$M) and Annual Growth, 2006-2010 100 120% 80 80% 60 40 40% 20 0 0% 2006 2007 2008 2009 2010 Revenue (US$M) 11 17 31 50 80 Growth 54% 85% 60% 60% Source: Springboard Research, 7/2007 Lower cost of ownership, ease of use and management, and quick deployment time has led many companies in Singapore to adopt SaaS (Figure 29). Figure 29: Primary Reason for Adopting SaaS, Singapore Zero/Low maintenance 21% Ease of use and management 21% Easy and quick to deploy 21% Lower cost of ownership 21% Scalability 7% Other 10% 0% 5% 10% 15% 20% 25% Q: What is the primary reason your company subscribed to SaaS? N=29 (SaaS Adopters) Source: Springboard Research, 7/2007 36
    • Lack of a perceived business requirement and a perception that SaaS as a technology is not mature, and also that licensed software is cheaper are the primary factors preventing non-adopters from going for SaaS (Figure 30). Figure 30: Primary Factor Preventing SaaS Adoption, Singapore No business requirement 37% Technology not mature 17% Licensed software is cheaper than SaaS 17% Centralized decision 11% Security is an issue with SaaS 9% Less awareness about the concept 4% Reliability is an issue with SaaS 4% Vendor support is an issue with SaaS 2% 0% 5% 10% 15% 20% 25% 30% 35% 40% Q: What is the primary reason your company does not subscribe to SaaS? N=50 (Non-Adopters) Source: Springboard Research, 7/2007 37
    • S AA S C HANNEL IN A SIA P ACIFIC The SaaS channel in Asia Pacific is in its very early stages of evolution, and direct sales remain central to most vendors’ go-to-market strategies. Some vendors have begun building partnerships with local resellers and distributors primarily for demand generation, while others have started tapping partners for providing value-added SaaS implementation, integration and support services. However, at this point, Springboard Research believes that most SaaS vendors do not have a well-established SaaS channel in the region, as most of them appear more comfortable dealing directly with their customers. Moreover, lack of experience and knowledge of application business processes, and low margins on SaaS applications is keeping channels away from SaaS. Given this reality, most users in Asia Pacific are buying SaaS applications directly from the vendors. Over 70% of SaaS applications are being sold directly by vendors either through face-to-face interactions with customers or via their websites or the phone (Figure 31). Figure 31: Share of Direct Sales in SaaS Business by Application ERP 84% CRM 80% Desktop Office Apps 78% Web Conferencing/ Collaboration 74% Email 71% HR 69% Security/Compliance 59% SCM 55% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Q: From which channel did you buy your software-as-a-service application? (% Direct) N=179 (SaaS Adopters) Source: Springboard Research, 7/2007 Of significance is that the need for channel partners (local resellers or agents) is being strongly felt by SaaS users; so although most SaaS users are buying directly from the vendors, the majority of them think the involvement of a local reseller or agent is necessary when buying SaaS applications (Figure 32). 38
    • Figure 32: Local Resellers: Necessary or Not When Buying SaaS No, 29% Yes, 71% Q: Do you believe the involvement of a local reseller or agent is necessary when buying software-as-a-service applications? N=179 (SaaS Adopters) Source: Springboard Research, 7/2007 A higher percentage of SaaS-using respondents feel channel involvement is helpful even if not necessary (Figure 35). This again indicates that users believe local resellers or agents can help them overcome associated with choosing and deploying SaaS applications. Figure 33: Local Resellers: Helpful or Not When Buying SaaS No, 21% Yes, 79% Q: Do you believe the involvement of a local reseller or agent is helpful when buying software-as-a-service applications? N=179 (SaaS Adopters) Source: Springboard Research, 7/2007 39
    • SaaS users also think that local resellers and agents add value through training, face-to-face interaction, product explanation, installation and integration (Figure 34). Figure 34: Areas Local Resellers can Add Value To the Procurement & Installation of SaaS Applications Training 55% Installation 52% Explanation of the offering 51% Adding comfort through a F2F interaction 44% Integration 44% None 6% Other 11% 0% 10% 20% 30% 40% 50% 60% Q: In what areas could a local reseller or agent add value to the procurement and installation of software-as-a-service applications? N=179 (SaaS Adopters) Source: Springboard Research, 7/2007 According to a significant number of users interviewed by Springboard Research, the channel provides the most value through face-to-face (F2F) interaction/comfort & solution explanation and limited value in installation and integration (Figure 35). This poses a problem for the channel (and vendors) because the areas valued most are not typically profitable for the channel. Figure 35: Channel Roles That Can Add Greatest Value Adding comfort through a F2F interaction 23% Training 21% Explanation of the offering 13% Integration 11% Installation 9% None 10% Others 14% 0% 5% 10% 15% 20% 25% Q: Which of these roles do you believe would add the greatest value? N=179 (SaaS Adopters) 40
    • TYPES OF SAAS CHANNELS IN ASIA PACIFIC Springboard Research has identified four types of channel partners that are emerging in the region: Traditional local software resellers or distributors mostly engaged in demand generation Companies who are trying to build online marketplaces for applications (WebCentral/SaaS Central) Companies trying to build a pure-play SaaS delivery, implementation and integration business by aligning with SaaS application vendors (OnDemand Asia, Thailand/3i Business Solutions, Singapore/NetReturn & Insightful/Australia) Telcos and ISPs who are looking at software as a new source of revenue (KAZ and Optus/Australia, Korea Telecom/Korea, SingTel and Starhub/Singapore, Telecom Malaysia/Malaysia, VSNL/India, PLDT/Philippines). Springboard Research believes that channels will play a crucial and very strategic role in the expansion of the SaaS market in the region, and that the failure of a viable volume channel could prevent the SaaS market from reaching the next level of scale. 41
    • S AA S & A SIA P ACIFIC ISV S The software-as-a-service business model is attracting scores of ISVs in the Asia Pacific region, especially in Australia and India, and to some extent in Singapore. Although still in the nascent stage, the trend is gradually picking up in China as well, as a number of local vendors enter the SaaS business. It is important to note that the majority of the local ISVs offering SaaS are very small companies that have traditionally found it challenging to distribute their on-premise software products beyond a limited market. SaaS has also inspired the birth of several local net-native software vendors who are using the web-based software delivery model. Springboard Research data shows that local ISVs are offering an array of business applications that address diverse functions within an organization. These include accounting, business intelligence, collaboration, security and compliance/governance, CRM, ERP, HR- employee management, and payroll management (Table 5). A few ISVs also offer SaaS applications for e-business, document management, content management, digital rights management, project management, office productivity, and derivatives risk management. Table 5: Local Vendors Offering SaaS Applications Application ISVs eAccounts Global, Netapplica, Practical Business Systems, Accounting Villagemall Pty, Saasu NetAccounts, Zara Technology Business Aldea Infotech Intelligence Bluearc, ConferIndia, ConferNet, Cynapse India, JustLogin, Collaboration NewLease, PASR Technologies Compliance/ AC3 Governance CDC Software, Gate13, Practical Business Systems, Talisma, CRM Sitek Villagemall Pty, 3i Business Solutions, Aldea Infotech, Xtools, Woznet, 800CRM, CRM24x7 Cosmoshakthi Software Solutions, iWeb Technology Solutions, ERP Octopus e International, Spendvision, Villagemall Pty, HRMantra Software, Aldea Infotech, Ramco Systems Adrenalin eSystems, Appscale Technologies, CDC Software, HR-Employee Siti Corporation, SOPRANO, Saasu NetAccounts, HRMantra Management software, Employee Connect Adrenalin eSystems, Aussiepay, CDC Software, HRMantra Payroll Software Employee Connect Security MicroWorld Software Services, NewLease AC3, Gen-i, Majitek, vSplash TechWorks, Web Economy Other Technology, Indicium Technologies, Zara Technology, eTrack Applications* Data Management Services, Pyxis Systems Source: Springboard Research, 7/2006 *Other applications include e-business, document management, content management, digital rights management, project management, office productivity applications, and derivatives risk management. 42
    • There is no doubt that SaaS is creating new market opportunities for the small ISVs that earlier could not sell to SMBs with no IT staff. Moreover, partnerships with leading SaaS providers are helping these ISVs reach out to markets beyond their local geographies. And although these vendors still face technical and marketing, and business model-related challenges – and have a long way to go before they can compete with US-based SaaS vendors (Salesforce.com, WebEx or RightNow Technologies) or with their traditional rivals (Oracle, SAP or Microsoft) who dominate the regional enterprise applications market, they are surely making their presence felt in the market, especially in the SMB segment. Springboard Research expects local ISVs to emerge as an important force in the Asia Pacific market and to play a significant role in shaping the region’s competitive landscape. This will especially be the case in China and Australia where local vendors account for a very significant share of the enterprise applications market. These vendors will play a key role in the adoption of SaaS among SMB enterprises. 43
    • T HE A SIA P ACIFIC C OMPETITIVE L ANDSCAPE The competitive landscape in Asia Pacific is beginning to change. Although the regional SaaS market is still dominated by five top vendors – Salesforce.com, WebEx, RightNow Technologies, Oracle and NetSuite – several other vendors, especially local players, are beginning to make their presence felt in the region (Figure 36). As Springboard Research estimates show, the five major vendors accounted for 45% of the Asia Pacific market in 2006, 5% less than their share from the previous year. We believe that the entry of several US vendors and local ISVs in the market has played a key role in the expansion of the market. Despite the challenges these ISVs face in reaching their target customers, many of them have succeeded in attracting a fair amount of customers to their SaaS offerings. For instance, vendors like Australia-based Saasu (accounting applications), Aussiepay (payroll application), Singapore- based JustLogin (collaboration), China-based 800CRM (CRM on- demand) and India-based Adrenalin eSystems (payroll/employee management) are gaining popularity in local markets. Figure 36: Asia Pacific SaaS Revenue Vendor Market Share NetSuite, RightNow, 3% 5% Oracle, 4% Webex, 11% Other, 54% Salesforce, 23% Source: Springboard Research, 7/2007 We expect the competitive landscape in Asia Pacific to become more dynamic in the next few years. Growing interest from large on-premise software vendors like SAP, Microsoft and Symantec will have a significant impact on the SaaS market. Also, as local ISVs mature with their offerings and build marketing strength, they will find more market acceptance. In addition, high-profile business developments such as the Google-Salesforce alliance and Cisco’s acquisition of WebEx, will impact the market. 44
    • The large vendors entering the market like Microsoft, SAP, Oracle and Symantec – who have built their business selling licensed software – are demonstrating their commitment to the SaaS market with definitive SaaS strategies. This entry of large vendors is also expected to force mergers and acquisitions, realignment of players and emergence of new alliances. The top SaaS vendors in Asia Pacific are profiled below. Salesforce.com Salesforce.com is the number one and also the fastest-growing major SaaS vendor in the Asia Pacific region. Riding high on the popularity of its salesforce automation (SFA) application, the vendor registered around 82% growth in its revenue in Asia Pacific in 2006. The vendor offers salesforce automation, marketing automation (marketing and sales application), partner relationship management and analytics applications. The company’s AppExchange, an online marketplace for on-demand applications, allows ISVs to distribute and share their applications with Salesforce.com customers. Not only is Salesforce.com using AppExchange to grow its customer base by offering existing and new customers additional functionality and applications, it is also using AppExchange as a platform for encouraging ISVs to develop new applications that can be used by Salesforce.com customers. The vendor is also actively tapping developer resources in Asia Pacific. It introduced Salesforce Platform Edition, which opens its AppExchange menu of third-party applications to customers that do not have Salesforce subscriptions. The platform aims to give developers incentives to write and host software offered through AppExchange and to get more business customers to use its current applications. Springboard Research estimates that the region generated around US$35 million in revenues for the company in 2006 compared to just over US$19 million in 2005. While Australia is the top market for the vendor, business is picking up significantly in India, Singapore, Hong Kong and South Korea. Among others, China is one of the key market focus areas of the company. The vendor recently launched Salesforce China Edition in simplified Chinese. Key verticals that have adopted Saleforce.com applications in the region include financial services, high-technology and business services. The vast majority of its customers have gone for SFA solutions. WebEx The web collaboration pioneer, which was recently acquired by Cisco, is the number two SaaS vendor in Asia Pacific and leads the regional web conferencing and collaboration tools market. Springboard Research estimates that the vendor grew by around 89% in Asia Pacific in 2006 and reached revenue of around US$17 million. The vendor has a strong presence in Australia, China and India. The vendor is focusing mainly on integrating its web collaboration services with other business applications through partnerships with other on-demand vendors and ISVs. Its WebEx Connect initiative is focused on creating an ecosystem of ISV partners with the objective of extending its core web collaboration services to deliver a suite of 45
    • complementary and collaborative business applications. Launched in September 2006, it has been positioned as an on online marketplace that ISVs can use to sell their on-demand applications to WebEx customers. WebEx Connect also includes a middleware that enables different on-demand or on-premise applications to inter-operate with each other. RightNow Technologies RightNow Technologies is the second largest on-demand CRM vendor in Asia Pacific. Even though it is mostly present in Australia and New Zealand, it also has customers in Singapore, Hong Kong, China and India. Asia Pacific generated around 7% of its revenue in 2006. Australia accounts for the largest portion of its revenue from the region. Its customer base includes companies in high-tech, retail, telecom, higher education, manufacturing, financial services and the public sector. RightNow has built its presence in the market on the strengths of a comprehensive CRM offering. Beside marketing, sales and customer service capabilities, its solutions feature web, interactive voice, e-mail, chat, telephone, and proactive outbound e-mail communications. All this makes RightNow’s solutions one of the most prolific CRM solutions available in the market. Of late, the vendor has been focusing on launching vertical-specific solutions. It recently launched RightNow Telecom, an on-demand CRM solution for telecom service providers and RightNow Retail for retail companies. Oracle The world's largest enterprise applications vendor has been active in the on-demand space for the past few years. Its on-demand delivery model is not entirely built around the multi-tenancy model that has been one of the hallmarks of SaaS delivery from vendors like Salesforce.com and others. For instance, in its latest Release 14 of the Siebel CRM on Demand, Oracle offers customers the option of going for a private, physically separated database vs. a logically separated database offered by the multi-tenant architecture proponents like Salesforce.com. Springboard Research believes that while there is no significant resistance to multi-tenancy in SMB organizations, this strategy might help Oracle gain large enterprise customers interested in an SaaS delivery model but very keen on sharing databases with other companies due to security or compliance-related concerns. NetSuite NetSuite, which entered the Asia Pacific region three years ago, offers an integrated suite of business applications including CRM, ERP and e- commerce targeting small and medium-sized businesses. The vendor considers its strength in on-demand accounting software as its biggest market differentiator. Springboard Research estimates that the vendor generated revenue of around US$ 4million from the region, primarily from Australia where it has a very strong presence. The vendor has a direct presence in Australia and Singapore, but is also active in other key markets in the region 46
    • through channel partners. Expansion of the channel partner base has been one of the key focus areas of the vendor in the region. Currently, direct sales account for the majority of its sales in the region. However, the vendor is expecting more sales through the channel once it succeeds in building its strong network of sales and solutions partners. With its SuiteFlex, which can be compared to Salesforce.com’s AppExchange, NetSuite is trying to extend its reach in the market. ISVs, solution providers and systems integrators can create, customize, extend, and integrate new functionality using the SuiteFlex platform that is built into the NetSuite application. Citrix Online Citrix Online offers a range of online collaboration solutions including one built specifically to facilitate collaboration between technical support professionals. The package is a remote IT service application – Go2Assist – that forms the core of its business in Asia Pacific. It is being used both by businesses (for internal helpdesks) and technical support service providers / large ISPs (who use it to facilitate external customer support). System integrators and software companies are also among the customers of Go2Assist. On the other hand, its remote PC access tool GotoMyPC is also steadily gaining customers in the region. The vendor is also witnessing significant uptake of its other on demand tools – Go2Webinar and Go2Meeting. Citrix’s on demand collaboration tools are finding acceptance among a broad spectrum of companies in Australia, India and ASEAN. Springboard Research believes that the depth and breadth of Citrix Online’s offerings will help it emerge as one of the key players in the Asia Pacific SaaS landscape. The vendor’s focus on SMBs in Australia and ASEAN will be a key factor that will drive its growth in the region. IBM IBM currently works with more than 100 application providers who deliver their solutions in the SaaS model. IBM’s software-as-a-service showcase aims to provide SaaS application vendors with a global delivery infrastructure and tools and technology that can help an ISV transform into a SaaS provider, which the company sees benefiting its hosting business. The showcase currently has application providers offering SaaS applications for four vertical industries (healthcare, insurance, manufacturing and retail) in 13 solution areas including CRM, messaging, collaboration and web conferencing, product lifecycle management, ERP and compliance management. The other aspect of IBM's interest in SaaS is linked to its Lotus collaboration and conferencing tools. Springboard Research believes that with collaboration and conferencing emerging as one of the key elements of the SaaS landscape, IBM will have an increasingly important roll in this space. The other important aspect of IBM's role in SaaS is going to be SOA. With businesses increasingly looking at building dynamic business processes and services, SOA will be critical for them for deploying software-as-a-service within the organization. 47
    • Microsoft After doing it in bits and pieces, the world’s largest software company finally seems to have acknowledged the relevance of the on demand model and the vendor now has a clearer SaaS strategy. However, for Microsoft, SaaS is not software-as-a-service but software + service. Throughout the beginning of 2007, the Redmond headquartered company has been promoting the software + service tagline in an apparent effort to convince customers and competition that on- premise and on-demand will co-exist, but that the former will remain the dominant mode of software delivery. As of now, Microsoft’s play in SaaS is more significant in the collaboration segment. The vendor offers Live Meeting, a web conferencing and collaboration application and a significant presence in the Asia Pacific web conferencing and collaboration market. Microsoft is planning to launch its Dynamics Live CRM service in the first half of 2008 with initial focus on sales force automation. Even though no definite plans for its launch in Asia have been announced, the vendor is likely to bring it to the region’s customers after it is launched in North America. In line with its software + services strategy, Live CRM will be the first Microsoft CRM release based on a multi-tenant architecture, using a single code base to support three types of usage – Live CRM, an on-premise version of the CRM application and a partner-hosted release. Springboard Research believes that Microsoft will continue to enhance its portfolio of on demand offerings in line with its software + service line of thought. Moreover, given Microsoft influence in the ISV community, the vendor will also have a significant role to play in shaping the SaaS ecosystem. The vendor already provides technology, best practices and marketing support to hosting service providers and ISVs looking to develop and deploy SaaS applications through the Microsoft Solution for Windows-based Hosting for Applications Version 1.0, and other ISV- targeted programs. The vendor has also launched a SaaS Enablement Program developed for ISVs offering SaaS or planning to do so. The vendor also launched SaaS Incubation and SaaS on-ramp programs in November 2006, to attract ISVs to SaaS and help them move from the traditional model of delivering software to the on-demand model. It has signed a memorandum of understanding with Suzhou Software Park in China for a SaaS incubator program that is aimed at encouraging Chinese software companies to develop SaaS applications. Microsoft also recently launched the Connected Services Sandbox, a program designed to bring together ISVs, developers, SIs, network equipment providers and telecommunications service providers to develop, test and bring new communications services to market. The Sandbox is aimed at encouraging the creation of “managed network mash-ups” in which Web services are combined with traditional telecommunications offerings, and then offered through the SaaS model and delivered across any type of network or device. 48
    • The vendor also recently issued a new architectural guidance for organizations looking to implement a software-as-a-service system. The Microsoft sample SaaS application is known as LitwareHR, a fictitious human resources application providing recruitment management software delivered as a service. Progress Software Progress Software’s SaaS partnership program has resulted in the development of one of the most successful SaaS ecosystems, attracting more than 200 ISVs. The vendor provides technology, business planning, marketing, selling and application transformation support for ISVs delivering or planning to deliver on-demand applications. In addition, partners can also access Progress’ best practices framework and access training and workshops. A key feature of the Progress SaaS ecosystem is that the vendor does not exercise much control over its partners – many Progress partners arrange their own hosting and the vendor does not keep track of users served by its partners. Progress' SaaS enablement program is aimed at helping ISVs in 3 main areas: business transformation, go-to-market planning and application transformation. In Asia Pacific, the vendor has a presence in Australia and a partner in Singapore. Most of its partners are focused on legal, healthcare, financial services, and manufacturing verticals and offer applications like CRM, ERP, human capital management, and claims/patient management. Just about all of its SaaS providers in Asia Pacific target the SMB market – except for some of the financial applications firms who are targeting the larger banks – but within specialty areas. SAP Even though the German software giant SAP has not appeared to be very focused on SaaS in the past, it is beginning to make significant moves in the market. Springboard Research believes that SAP’s SaaS strategy, at this point of time, is more about giving its customers who might be looking for an on demand option, a choice. However, unlike SaaS vendors like Salesforce.com and RightNow who are proponents of the multi-tenancy model, SAP remains focused on what it calls the isolated-tenancy model as it feels its customers might not be comfortable sharing data with others because of security and compliance related concerns. The vendor launched its subscription-based CRM application in February 2006. In the beginning, its on-demand CRM offered only sales and marketing functionality. Later in September 2006, the vendor added sales automation features for product and quotation management. During the same time, it announced the launch of Service on-demand solution, with functionalities like service ticket management, rule-based escalations and service level monitoring. However, more significant is SAP’s plan to launch SaaS enabled A1S ERP by mid 2008 as part of its strategy to offer customers the choice of both on premise and on demand models. A1S will have the entire stack of ERP, CRM, SCM, and BI in one suite and made available on the SaaS model. Springboard Research believes, once in the market, A1S is going 49
    • to be one of the most comprehensive SaaS application sets in the market. Symantec A recent convert to SaaS, Symantec entered the SaaS market with the announcement of its on-demand Symantec Protection Network, which is a SaaS platform, designed to deliver easy-to-use security and targeted at small and mid-sized businesses at a price they can afford. The vendor is banking on its ecosystem of channel partners to enable businesses to work with the partner of their choice and take advantage of customized service offerings to meet business requirements as they evolve. Businesses also have the option of subscribing to the service directly with Symantec through the web and can manage and monitor their service from any Internet connection. Springboard Research believes that Symantec is likely to emerge as a key factor in the on demand landscape given its preeminent position on the security software and solutions market. As such, the vendor’s progress with the SaaS model will be instrumental in shaping the dynamics of the on-demand security software and solutions market. 50
    • S PRINGBOARD R ECOMMENDATIONS Springboard Research recommends that SaaS vendors looking at opportunities in the Asia Pacific SaaS market focus on four key areas – educating the customer, gaining an understanding of the customer’s business processes, localizing their offerings and building a strong brand. Provide education and then more education: Despite a significant increase in the awareness of SaaS, organizations in Asia Pacific still have an inadequate understanding of the on-demand software delivery model. This insufficient understanding, in many ways, is the key reason why many organizations are still not considering SaaS. As such, SaaS vendors who aggressively focus on providing customer education that demolishes unfavorable perceptions and emphasizes the benefits of the SaaS model, will outpace the competition. Although several vendors already offer customer education, Springboard Research believes that those efforts would be more effective if they directly addressed the IT and business challenges faced by customers. Build an understanding of customers’ business processes: As many of the potential SaaS adopters in the region are likely to be first-time IT users, for instance – the SMB companies – they are likely to see immediate or long-term value in deploying a SaaS application only when vendors show an understanding of their business processes and challenges. An understanding of the above can help vendors relate benefits of their applications to the customers’ business goals more clearly and directly. This process should also include providing the ROI that customers can expect with the particular SaaS application that is deployed. Get close to customers and add more local flavor: Localizing SaaS offerings, as Salesforce.com and WebEx did in China by launching Chinese editions of their applications, can be an effective way to build a strong market presence. Targeting a SaaS application to the local market is also accomplished through partnerships with strong local ISVs and SIs. These partners can also be helpful to gaining insight into the needs of target customers. Build A Strong Brand: Springboard Research believes that vendors must focus on building strong brands with trust, reliability, high performance and assured ROI as key attributes. This brand development would be key to overcoming customer perceptions that SaaS applications lack technological maturity, are less secure and reliable. 51
    • C ONCLUSION Software-as-a-service (SaaS) will continue to go mainstream in the coming years and Springboard Research expects more users and organizations to deploy some form of SaaS application in the near future. Much of this adoption will be driven by business users; however, IT departments in large and mid-sized companies will increasingly play an important role in standardizing SaaS procurement, deployment and usage. Another factor driving SaaS market growth is the growing adoption of IT by the SMB segment. In step with this trend, the early part of 2007 saw a series of SMB-focused product launches by many IT vendors including IBM, SAP, Oracle and Microsoft. The proliferation of SaaS ecosystems, like AppExchange and WebEx Connect, that position their platforms as ways for local ISVs to access customers will also change the complexion of the SaaS market. For SaaS applications and vendors, Springboard Research forecasts that only the fittest will survive the market churn that is on its way. The current situation of supply outnumbering demand is likely to continue as the Internet makes it easier to create new applications. We anticipate a blossoming of SaaS providers and applications over the next 2 years to boost adoption, but then a winnowing of the players in the market. Throughout this process, however, SaaS as a software delivery model will continue to strengthen and increasingly challenge the traditional software industry. 52
    • A PPENDIX : L IST OF S AA S A PPLICATION P ROVIDERS Vendor Applications Web Address HQ Accounting, collaboration, CRM, document management, E- 24SevenOffice www.24sevenoffice.com Norway commerce, ERP, messaging, project management 37signals Project management www.37signals.com US 3i Business Solutions NetSuite applications www.3ibizsolns.com Singapore 800CRM CRM www2.800crm.com China Governance, project AC3 management, document www.ac3.com.au Australia management Budgeting, planning and analysis Adaptive Planning www.adaptiveplanning.com US Human resources, payroll, employee and manager self Adrenalin eSystems service, employee work process www.adrenalinet.com India automation and analytical reports Adventnet multiple applications www.adventnet.com India Agile Software PLM www.agile.com US AIE Technologies Microsoft office applications www.Software4Rent.Biz Australia Aldea Infotech BI, ERP, CRM India Communication and workforce appMail www.appmail.com US collaboration Appscale HR management software www.appscale.com/ India Appscale Technologies HR management application www.appscale.com India AppStream Software distribution www.AppStream.com US Apptix E-mail, messaging www.apptix.com US Arena Solutions PLM www.arenasolutions.com US Aria Billing & customer management www.ariasystems.com US Atlantis Computing Storage, collaboration www.atlantiscomputing.com India Aussiepay Payroll www.aussiepay.com.au Australia Authentium Security www.authentium.com US Avalara Accounting www.avalara.com US Governance, risk and Axentis www.axentis.com US compliance Policy and claims administration BIPT system for property and casualty www.bipt.com US insurance industry BIW Technologies Collaboration www.biwtech.com UK Blue Tie E-mail, messaging www.bluetie.com US Bluearc collaboration www.bluearcgroup.com Australia BlueRoads Corporation Channel management www.blueroads.com US Infrastructure, application and IT BMC Software www.bmc.com US management Bscaler CRM, ERM www.bscaler.com US Builder Lynx Channel management www.builderlynx.com Canada Business Objects Business reports www.businessobjects.com US Educational campus Campus Management www.campusmgmt.com US management solutions Captiva Software Information management www.captivasoftware.com US CaseCentral Litigation lifecycle management www.casecentral.com US CDC Software HR/Payroll, CRM www.cdccorporation.net China Cenzic Security www.cenzic.com US 53
    • Citrix System Collaboration www.citrixonline.com US Click Commerce SCM www.clickcommerce.com US CMC Limited System Integrator www.cmcltd.com India CollabNet Collaboration www.collab.net US Compulink SaaS enablement www.compulinkgroup.com India Concur Technologies Expense management www.concur.com US ConferIndia Conferencing www.conferindia.com India ConferNet Conferencing www.confernet.co.kr Korea Coremetrics Web analytics www.coremetrics.com US CORESense Retail management www.coresense.com US Cosmoshakthi Software ERP, CRM www.ixprt.com India Solutions Critical Path Messaging www.criticalpath.net US CRM24x& CRM www.crm24x7.com India crmOrbit CRM www.crmorbit.com India CrownPeak Content management www.crownpeak.com US Cube Route Logistics www.cuberoute.com Canada Cynapse India Collaboration tools http://cyn.in India Import/export custom DarwinSuzsoft www.darwinsuzsoft.com China application Automation management across D-BAM www.d-bam.com US the marcom supply chain Retail solutions for automotive DealerTrack www.dealertrack.com US industry Demandware E-commerce www.demandware.com US Invoice, spend management, Direct Insite www.directinsite.com US business metrics management E2Open SCM www.e2open.com US New eAccounts Global Accounting www.eaccountsglobal.com Zealand Emantra Application delivery www.emantra.com.au Australia eMeta Digital content management www.emeta.com US Employease HR www.employease.com US Employee Connect Payroll, HR management www.employeeconnect.com Australia eProject Project management www.eproject.com US eTrack Data Management Payables management system www.etrack.co.in India Services Everest Software CRM, accounting, payroll www.everestsoftwareinc.com US B2B integration and EAI as an on- Evision www.evision.com.au Australia demand Internet service eVision Messaging solutions www.evision.com.au Australia e-Zest SaaS enablement http://www.e-zest.net India SaaS integration and New FluidViews www.fluidviews.com enablement Zealand Functional Software System management www.fs.com.au Australia Gate13 CRM www.gate13.com.au Australia Genesys Conferencing Conferencing & collaboration www.genesys.com France New Gen-i Office applications www.gen-i.co.nz Zealand GXS SCM www.gxs.com US Halogen Software HR www.halogensoftware.com Canada Hot Banana Software Web content management www.hotbanana.com Canada HRMantra HR & payroll software www.hrmantra.com/ India HRMantra software HR and payroll ERP software www.hrmantra.com India HyperOffice Collaboration, messaging www.hyperoffice.com US HyperSites Corporation Web development www.hypersites.com US IBM System integrator, SaaS delivery www.ibm.com US iKnowWare CRM www.iknowware.com US Image Fortress Corporation Digital archiving www.imagefortress.com US 54
    • Indicium Technologies E-business www.indicium.com.sg Singapore InfoTronics Workforce management www.infotronics.com US Insightful SugarCRM www.insightful.com.au Australia Intacct ERP www.intacct.com US Web collaboration & Interwise www.interwise.com US communications Intuit HR - payroll www.intuit.com US Invoice Insight Telecom expense management www.invoiceinsight.com US iqDynamics HR, ERP, CRM www.iqdynamics.com Singapore iWeb Technology Solutions ERP www.iweb.co.in India SaaS integration and Jamcracker www.jamcracker.com US enablement Janeeva Assurance www.janeeva.com US JustLogin Collaboration www.justlogin.com Singapore Kana E-mail, messaging www.kana.com US Kaspersky Lab Security www.kaspersky.com Russia Kaz Group E-mail, messaging, collaboration www.kaz-group.com Australia Kinaxis Response management www.kinaxis.com Canada Kintera CRM, ERM for non-profits www.kinterainc.com US Kronos HR - payroll www.kronos.com US Lawson (Intentia) ERP www.lawson.com US Lean Logistics Logistics www.leanlogistics.com US MailStreet Messaging and collaboration www.mailstreet.com USA Majitek Digital rights management www.majitek.com Australia MCA Solutions SCM/PLM www.mcasolutions.com US McAfee AntiVirus plus AntiSpyware www.mcAfee.com US Medical appointment scheduling Medtech and electronic patient records, www.medtech.com.ar Argentina collaboration Microsoft Collaboration & communications www.microsoft.com US MicroWorld Software Services AntiVirus www.msspl.co.in India Mitrix SCM www.mitrix.com US Mitrix SCM www.mitrix.com US MMP Software (India) SaaS enablement www.mmpsd.co.in India SaaS integration and Navisite www.navisite.com US enablement Netapplica Accounting www.netaccounts.com.au Australia NetReturn NetSuite applications www.netreturn.com.au Australia NetSuite CRM, ERP, e-commerce www.netsuite.com UK NewLease Security, collaboration, e-mail www.newlease.com.au Australia NexGen ITS SaaS enablement http://nexgen.sg Singapore SaaS business platform, intellectual property management, key performance Nothacker www.nothacker.com Singapore indicator management (Dashboard), learning management system Channel, quote and proposal nSite www.nsite.com US management Octopus e International ERP www.octopuse.com India Omniture Web analytics www.omniture.com US OnDemand-Asia NetSuite applications www.ondemand-asia.com Thailand OpenAir Professional services automation www.openair.com US SaaS integration and OpSource www.opsource.net US enablement Oracle CRM www.oracle.com US osCommRes E-commerce www.osCommRes.com Australia PASR Technologies E-mail, messaging www.pasr.com.sg Singapore Peopleclick HR, workforce management www.peopleclick.com US 55
    • Sales information system for Platte River Systems www.platteriversystems.com US semiconductor companies Practical Business Systems CRM, accounting www.thebooksonline.com Australia Procur Procurement www.procur.at Austria Pyxis Systems Derivatives risk management www.pyxis-it.com India Qualys Vulnerability management www.qualys.com US Radical Networks VB.net, MSSQL, ASP.net 2.0 www.radical.co.in India Ramco Systems ERP www.ramco.com India www.reardencommerce.co Rearden Commerce Employee services US m RedTail Solutions SCM www.redtailsolutions.com US RightNow Technologies CRM www.rightnow.com US RightServe SaaS enablement www.rightserve.com.au Australia Online applications market, SaaS Central payroll, CRM, anti-spam & web www.saascentral.com Australia content filtering Invoices, payments, timesheets, Saasu NetAccounts inventory and process payroll www.saasu.com Australia maintenance HR, collaboration & Saba www.saba.com US communication Salesboom CRM, ERP www.salesboom.com US Salesforce.com CRM www.salesforce.com US Salesnet CRM www.salesnet.com US SAP CRM www.sap.com Germany www.securemycompany.co SecureMyCompany Computer management US m Sitek CRM www.sitek.com.au Australia Siti Corporation HR management application www.siti.com India Smart Online CRM www.smartonline.com US SmartCompany CRM www.smartcompany.net US Information management, SMBLive www.smblive.com US collaboration Web marketing, web productivity Snap Technologies and web content management www.snaptech.ca Canada solutions Sonata Software SaaS enablement www.sonata-software.com India SOPRANO HR management application www.soprano.com.au Australia New Spendvision Expense management www.spendvision.com Zealand Starway Service HR www.starwayservice.com US SuccessFactors Performance management www.successfactors.com US SugarCRM CRM www.sugarcrm.com US TakeCharge Technologies Spend management www.takechargetech.com US Taleo Talent management www.taleo.com US Talisma CRM www.talisma.com India TeamPoint Systems Collaboration www.teampointsystems.com US Tradecard Accounting www.tradecard.com US Corporate governance and entity management Two Step Software www.twostep.com US Ultimate Software Workforce management www.ultimatesoftware.com USA.net E-mail, messaging www.usa.net US Vaakya Technology Technology platform www.vaakya.com India Commerce and fulfillment Vcommerce solutions for retailers and direct- www.vcommerce.com US to-consumer initiatives Venda E-commerce, CRM www.venda.com US Verticalnet SCM www.verticalnet.com US 56
    • VIE Pty Multiple applications www.vie.com.au Australia CRM, order management, Villagemall Pty inventory management, www.villagemall.com.au Australia accounting Visible Path Relationship management www.visiblepath.com US Corporate communications and Vocus www.vocus.com US public relations vSplash TechWorks Hotel reservation software http://hotels.vsplash.com India Watchfire Corp Security www.watchfire.com US Web Economy Technology Content management, ERP www.web-economy.com Singapore Web Global Net SCM www.printdm.com US E-mail, messaging, collaboration, WebCentral www.webcentral.com.au Australia accounting, HR, procurement Web conferencing & WebEx www.webex.com US collaboration WebSideStory Web analytics www.websidestory.com US West Corporation Conferencing www.west.com US WestLake Financial Group HR www.westlakefg.com US Wesupply SCM www.wesupply.com UK WhiteHat Security Security www.whitehatsec.com US Applications for healthcare Working Systems www.ws.com.au Australia companies Workforce management, HR Workscape www.workscape.com US applications Workstream Workforce management www.workstreaminc.com Canada Woznet CRM www.woznet.com.au Australia Wrapped Apps Corporation SaaS Delivery www.wrappedapps.com Canada Sales compensation Xactly www.xactlycorp.com US management XChange Network Messaging, collaboration www.xcnetwork.com US Xinnet.com E-mail www.xinnet.com China Xtools CRM www.xtools.cn China ZANTAZ E-mail archiving, storage www.zantaz.com US Web mail, document library, product catalog management, Zara Technology www.zaratechnology.com Singapore content management, business processes and accounting Zimbra Messaging, collaboration www.zimbra.com US Zycus Spend Data Spend management www.zycus.com US Management 57
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