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Bain trial: cost pressures in the IT is changing the business models of enterprise software provider

In spite of the suggestive end the crisis continues to IT cost pressures is to the companies. The accelerated changes in the IT industry to on-demand services. In future, software will be offered more frequently than online platforms that will change the business model of enterprise software provider sustainable. This is the result of the recent study by Bain & Company "Preparing for the Game On-Demand in the Enterprise Software Industry". Four trends influence this development strongly: 1) Software-as-a-Service (SaaS) licensing revenues distributed to longer periods, 2) increasingly integrated IT provider, the boundaries between hardware, software and services to increase, 3), the service share of IT value increases and 4) open source is establishing itself as a real alternative to traditional software offerings. The success of a SaaS provider to decide a solid platform strategy, the management of software and service partners, and the timely and long-term occupation of the customer interface. 

The economic crisis has led to massive IT budget cuts. Same time, the demand on IT development and redevelopment in the company. The recent study by Bain & Company "Preparing for the Game On-Demand in the Enterprise Software Industry" shows that IT managers in companies respond primarily to the conversion of fixed costs into variable costs. Thus increasingly come on-demand software is used, which is paid to usability and needs no large initial investment. Accelerated this trend by vendors of software-as-a-Service (SaaS) such as Sales Tracking Portal - a specialist in customer Releationship management. In the SaaS model takes over the service provider installation, operation and maintenance of software and servers in its data center and provides the use as a service available on call. Customers do not charge for software licenses, implementation, maintenance and hardware. You only pay the usage-based service fee.
For software companies is about to grow with this development, a revolution that threatened their traditional business model. Because they typically earn first by a royalty on the sale and then long term maintenance, ie the regular troubleshooting and software updates. The annual maintenance cost is an average of 18 percent of the original license fee. For providers of Enterprise Resource Planning (ERP) maintenance costs have averaged 30 percent of sales and 40 to 60 percent of income. "To a result of the crisis increases the risk that many ERP customers negotiate their fees again, do not renew maintenance contracts, or switch to third parties that offer this service for half the price," Matthias Budde, partner and IT expert at Bain & Company. "A price decline in the maintenance of just one percentage point would cost ERP vendors worldwide about 750 million euros and 300 million € income." For this reason, it is for software vendors established even more important to invest in customer loyalty in the they increase the value of their maintenance service for the customer visible.


Four major IT trends will determine the future
The Bain study predicts that the software market over the medium term can not build on past growth rates of ten to 15 percent annually. The growth in 2015 will amount to less than five percent a year. Bain founded the four major trends:
1. SaaS is growing, however, reduce the margins of the software industry: software-as-a-Service enables the acquisition of new customer groups that have not been made complex software. In addition, existing customers can test new features without making large investments have to. SaaS will initially be used primarily on customer relationship management, content management and human resources management. SaaS raises additional revenue potential in new hybrid areas of product and service, but also substituted existing software sales and shares in smaller cash flows. High installation and operating costs for the software provider while price pressures threaten the income of the industry.
2. Back to integrated IT vendors: The differentiation of the industry in hardware, software and service provider begins to dissolve. Companies are, increasingly present in adjacent segments of IT and offer - as Oracle after the Sun acquisition - to integrated IT products. As in the 1960s, when IBM sold its server systems, including software, customers have less and less in the future take care of itself to the integration of components in its own data center. Buy server performance together with the required operating system or completed usable database server, without even match the hardware, operating system and software to another must.
3. Existing IT environments continue to increase the software maintenance costs: Customers who follow the traditional model of separate server architectures and applications that deal with the increasing complexity of their application landscape. Service-oriented architectures could prevail in reality have not felt as leverage to IT simplification. Therefore reinforces the growing complexity of business on the complexity of IT. The cost for the implementation and integration of new software is in relation to the licensing costs continue to rise.
4. Open source is becoming a real alternative: On operating systems and databases has open-source software already has a high double-digit market share. For business-critical and complex applications such as ERP still dominates the closed-source software support and maintenance fee by the provider. But even this model is increasingly under threat from open-source ERP such as Compiere and Openbravo, enabling, in particular in combination with flexible uses on-demand infrastructure services ("cloud"), massive cost reductions and today's enterprise software provider by sales and put pressure on margins. 

Opportunities and risks for software vendors
On-demand software is undoubtedly the next evolution of the software industry. But the model is also associated with significant risks. SaaS requires high initial investment by providers, as initially set up an online platform and marketed to be. These high installation and operating costs are paid by the regular user fees only slowly. Sales Tracking Portal took ten years to be profitable. On average, it takes a year to generate the distribution costs for SaaS customers.
Bain & Company anticipated due to the high investment requirements that the SaaS market will consolidate relatively quickly to a few software providers per segment. The companies will be successful, their existing hardware, software and service customers can turn into productive SaaS customers. Many other IT vendors are suppliers of SaaS providers with a large buying power for servers, network infrastructure, software and systems integration. 

Software vendors have two options in the medium term, to position themselves in the SaaS market: either they are suppliers of a SaaS platform, which is operated by a third party or develop itself into an integrated SaaS provider. Anyone who embarks on the path of a SaaS provider, must build a strong position as a software supplier, not to be replaced in the medium term, for example, by open-source or completely displaced from the market. Those who positioned themselves as SaaS providers need to build infrastructure capacity, or buy and acquire skills for managing a SaaS ecosystem, such as the integration of third-party or usage-based billing. In addition to an aggressive acquisition strategy for new customers, it must also have a migration strategy for existing customers from traditional license and maintenance business to the SaaS model type, aimed at possible long-term commitment to the more profitable, classical model.
IT service companies that want to join the SaaS business need, in addition to their existing skills - provision and management of IT infrastructure - capacity and skills in software development. End, they may enter into partnerships with leading software vendors, or take a software provider. 

"Software-as-a-Service is to establish itself as an important segment in the enterprise software market. As the future landscape looks like and whether prevail primarily software companies or IT service provider, is still completely open, "says Bain expert Budde. In addition to developing start-ups such as Sales Tracking portal of software vendors like Oracle and SAP established in the direction of SaaS, as well as infrastructure and service providers such as T-Systems. "Ultimately the industry will probably develop over SaaS out," predicts Matt Budde. "It is likely that the existing business process outsourcing as a process-as-a-service was resumed and on-demand services. Thus, the SaaS cards would reshuffled. "

SaaS ISV Forum subnet: "Should I or should not I ...?"
For software companies or IT service providers who are faced with the question of whether and how to model business software-as-a-Service (SaaS) to enter this in the offers in the SaaS ISV Subnet forum with valuable information,

Article Source : Kenny Blog

SaaS CRM

What is SaaS CRM?

CRM software is designed to ensure that your relationship with customers is strong. It ensures that, through sales and communication, there is a growing relationship between the various parties. The general hope is that the customer will be comfortable returning to the company time and again for their business. SaaS CRM, then, is the software that you rent this power relationship.
The name of the software as a service shows that the software can take the part of customer service in some cases. In this case, the software takes care of keeping the customers happy. It provides information to the customer. The overall objective is to attract new customers, retain existing customers, convince customers to go above all by reducing marketing costs.

The benefits of SaaS CRM

The benefits of SaaS CRM are great. To begin with, because you pay as you go, you do not have to worry behind the actual software. They can not manage the server. Therefore, the cost of entry is very low. And 'cheap to start using this CRM. Another advantage is that since it is not in management, the program is ready and faster and can be used first. This means more profits. Finally, security of infrastructure and power to put behind the CRM SaaS by the seller has no rivals. So, you've found a very strong product.

SaaS CRM Disadvantages

For starters, you are in rent. While it is cheap to enter and use at first, will be perpetually pay for CRM. If you decide to stop paying, you lose the CRM. If you went with a more traditional formula, you have to buy it, but do not pay a monthly, quarterly or annual fee. Sometimes, you can not go CRM SaaS specific field. If you had an expert working for the company and a traditional CRM, you would be able to specialize the CRM. Unless you have clear objectives, SaaS will be a waste of money. It's not magic. Without goals, it will simply drain resources from society.

The decision to go with whom, however, is fully in society. For the most part, if the company has the funds to run a traditional CRM package, they will. Otherwise, you can choose to go with a CRM SaaS and spend it later.

Article source: Kenny Blog

SaaS

SaaS (Software as a Service) is an application hosted on a remote server and accessed via the Internet.

A simple and concrete example of SaaS are "free" e-mail (also known as web-based e-mail) systems offered on the Internet such as Microsoft Hotmail, G-Mail and Yahoo Mail. Each program meets the basic criteria of a SaaS application: a vendor (Microsoft, Google or Yahoo), contains all the programs, logic and data in a central location and provides access to end users of these data and the software runs and used during the world-wide web.

This "simple" application architecture can be applied to a wide range of software applications for use by companies or firms or individual users.

Two main categories of SaaS

SaaS is often divided into two main categories:

• The so-called "line of business services" which refers to business solutions offered to enterprises and businesses, and sold or made available to these companies on the basis of a subscription. Applications in this category include business processes such as supply chain management programs, applications, customer relationship and other
• Customer-oriented services that are offered to the public in general or on a subscription basis or (more often than not) offered for free but are supported by advertising. Web-based e-mail, such as those mentioned above fall into this general category.

Software Ownership

Traditionally, the user purchases a software package and license by paying a one time fee. The software becomes the property of the person who made the purchase. The software support and updates are provided by the seller or developer under the terms of the license agreement.

SaaS, on the other hand, did not have licenses. Rather than a single price, the payment for the use of software is by subscription. You access and use the software ends when you stop paying the subscription fees. In addition, the software is downloaded to your computer. In this example we used, G-Mail or Hotmail, it is not "resident" on your computer - to access and use over the Internet, but it is uploaded and stored on computer.

The main advantages for the user

• Lower costs. You should not pay a single (usually large) fee for licensing. He just needs to pay recurring subscription fees. An article about how you save money on SaaS implementation.
• Smaller storage requirements. You do not need to store the software or data stored on your computer so you do not need large data storage facilities. There is also the convenience of not having to constantly details backup - storage is the responsibility of the SaaS provider.
• Fewer staff. SaaS reduces the need for specially trained IT staff to manage the maintenance, monitoring and software updates. The SaaS vendor will provide a dedicated team to handle these tasks.

The main advantages for the seller

The main advantage for the vendor is in continuous stream of income that will amount to much more than can be expected in the traditional setup software licenses. Using SaaS also suppliers to mitigate piracy and without the use of software and reduce the losses associated with these  activitie

One example of SaaS in market today is Sales Tracking Portal. Sales Tracking Portal is an Online Sales Tracking Software helping sales professional to track and manage their sales operations. The strong point of this service is their simplicity and affordable. The features is much enough to support most of sales operation while very cost effective.

Article Source: SaaS