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Thursday, November 23, 2006

Asia & SaaS Adoption

Recent estimates suggest that 5% of global software may be delivered as application on-demand. One of the well known players of on-demand, salesforce.com has been ranked as the third largest CRM player in the world. One of the often repeated cliché is that close to 1/4th of the software sold in Asia may be application on-demand in a few years from now. Given the cultural and economic complexity and diversity of the Asia Pacific region, the adoption of SaaS is not uniform across the region. Australia and New Zealand are closer to North America in terms of SaaS adoption trends, and Australia is the largest SaaS market in the region. China and India are seen as countries with the greatest potential in the mid to long term future. Independent research suggest that India may be the fastest growing market in Asia. But in reality, as much as I could see all around in Asia, the pace of adoption of SaaS is indeed slow. The cynical may see the pay-as-you-use model where licensing & services bundle in technical and operational support as far fetched, but indeed some leading edge companies have successfully demonstrated that atleast lightweight applications can be delivered this way. Most of these applications are aimed at serving large customer base or mobile salesforce. All the marquee names in software are coming out with SaaS models and are actively promoting it as well. Research suggests that when assessed on TCO models, enterprises under 500 employees may find SaaS adoption more economical for certain type of applications like payroll , CRM etc.There is reasonable evidence that for Asian ecosystem where a majority of enterprises are of the small to medium category while measured on a global scale, may find SaaS as a natural fit, the adoption rates seems to be less than promising. The cultural mindset seems to be coming in the way. Unlike most of the western enterprises which view IT as an investment and productivity enhancer, the asian enterprises despite having having global ambitions look at IT, mostly as cost. The enterprises here have just finished one wave of investments centered on internet and IP technologies and are quite cagey abou trying new technology models. This is pretty paradoxical as SaaS can help businesses realize benefits faster then others to start with and help organizations become more efficient by helping focus on running their operations. One of the things that I notice is that business getts more excited than IT when it comes to SaaS and young companies seem to adopt SaaS faster. Asia needs to look at SaaS more closely –at the moment SaaS adoption in Asia Pacific is definitely far behind the potential.

Update : Sriram pointed me to this viewpoint expressed by Oracle, confirming my views on limited SaaS adoption in Asia.

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