Excelling in the Evolution of SaaS

January 10, 2008 by Gary McAuliffe

The software industry is changing at a blistering pace. Competition and customer demand are rapidly increasing, pushing software firms to offer the best solutions to stay ahead. Gartnerís recent survey on the SaaS market shows that even now enterprise software firms are seeing the immense benefits of a SaaS deployment. Enterprise software firms are no longer using SaaS deployments to fill in where IT had been backlogged, or where renting services are cheaper than implementing something behind the firewall. Now, they are rolling out mainstream applications. In this industry, when Microsoft speaks, everyone listens. This small take from a recent interview with Allison Watson, corporate Vice President of Microsoft`s worldwide partner group, "The industry will changeĒ is very foretelling into the software giantís plans for the future.

Competition and customer demand are a couple of external issues facing software vendors entering the market. Internal strains and challenges such as more stringent Service Level Agreements (SLA), application development, and delivery of the application pose an entirely different set of issues. Staying ahead of the curve is rapidly going to be a focus of every software firm, enterprise or start-up.

The one great equalizer in this battle of developers is Managed Service Providers. Managed hosting provides numerous benefits, both external and internal. Externally, the right Managed Service Provider can take your product global instantly, while still producing an optimal user experience. Anytime-anywhere access to data is critical to keep pace in todayís software market. In an industry characterized by intense competition and extreme change, there are many limitations which exist that become detrimental to a companyís success. Managed Service Providers engineer infrastructure for reliability, resiliency, and security, in some cases offering 100% network uptimes. In maximizing a customer facing distribution channelís uptime, revenues are able to be met as well as properly forecasted.

Optimal user experience is a key focal point, as providing a customer facing application can be a double-edged sword. With the advancements in technology, anyone can develop a web portal, but customer satisfaction is pivotal in this relationship, especially realizing the lifetime value of a customer. People by nature are resistant to change, thus creating interdependencies between the user and your product can pay a lifetime of rewards, not to mention creating alternate revenue streams from long-term plans of up-selling SaaS accounts into software licenses. Managed Service Providers take congestion issues, technology failures, and skill limitations out of the equation.

Time to market is the other external issue that a Managed Service Provider remedies. Speed is the name of the game in getting a product to market before the competition. As the general public becomes more tech savvy, new competition can arise instantly. Typically, a managed services provider can customize an enterprise class solution to fit your companyís needs. By standardizing their platforms and obtaining licensing agreements from vendors, a Managed Service Provider greatly reduces a SaaS applicationís time to market, consequently giving your organization a vital competitive advantage. Facilitating a smooth and rapid route to market can only increase market share. As the software industry makes large shifts in their distribution paradigm over the next few years, market share is going to become an increasingly important factor.

Internally, partnering with a Managed Service Provider can provide software companies with a plethora of benefits. The capital expenditures to provide and maintain everything the business requires to launch and sustain itself from the application, developers, system administrators, to any commercial software required to run the application, along with a  full infrastructure pose daunting barriers to overcome. A MSP will deliver those harsh capital expenditures over a more tolerable operational cost structure allowing software companies to reinvest their upfront capital into software where it is more beneficial in the overall well being of the firm. As we saw in 2007, 2008 and beyond may have been a springboard for a large number of SaaS companies going public to secure funding for future growth. NetSuite, athenahealth, ConstantContact, and Salary.com all had huge IPOs in 2007, and will give the overall industry momentum on the exchanges. Once public, the bottom line is managed a lot tighter to satisfy investors, and by utilizing a managed service providerís cost effective and predictable cost structure, budgeting and forecasting becomes a lot easier to manage.

Organizational focus is the final way to excel in this highly competitive market. By focusing internal manpower on applications, the overall end product is maximized. By providing a premier back office IT experience, SaaS companiesí focus can remain on the application versus the everyday IT tasks. A Managed Service Provider even maximizes the capability of the organization by providing 24x7 expert support in multiple functional areas. This level of support typically would be too expensive to obtain and maintain. After all, achieving operational efficiency is good for any organization.       

About the author:

Gary McAuliffe is the Vice President of Business Development and General Manager of
Hosted Solutions` Boston Data Center Facility.

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