Cloud Computing and SaaS

These related concepts have a lot of buzz around them. Of the two, SaaS seems more likely to hit the big time in India

There’s a whole lotta buzz around Cloud Computing. Commentators talking about Software as a Service (SaaS) have generated loads of hype. These two concepts, for that is what they are, not technologies, are similar but they are not quite the same.

Cloud Computing refers to services that sit in the ‘cloud’ on a third-party server and individuals or businesses can tap and use as per their needs. The key here is that Cloud Computing services usually require a do-it-yourself attitude. Think of Amazon’s Elastic Compute Cloud (EC2) or Simple Storage Service (S3), that’s Cloud Computing pure and simple. EC2 gives you a server instance. What you do with it is up to you.

SaaS is more application-centric. Here you have companies such as Salesforce.com that let companies use their hosted applications. Microsoft is offering its Dynamics suite as a hosted offering.

As far as the Indian market goes, I do not see Cloud Computing having much of an impact unless you count Web mail in the mix, in which case it’s already huge. I don’t believe that Web mail is Cloud Computing, however, as it fits better under the SaaS umbrella. The reason I’m pessimistic about Cloud Computing’s prospects in India is that a company going for a service like EC2 will need IT pros with the skills to create server instances and load and run apps on said instances. This kind of service appeals to smaller companies abroad but Indian Small Businesses do not have access to this kind of IT talent.

SaaS on the other hand, will be big in India and the early signs are already visible. Companies such as Elbee Express are already using SaaS (Salesforce.com, HrMantra and Gmail). I expect this trend to pick up with Medium Businesses being the biggest adopters. This is largely because, the big boys have the moolah to roll their own and they will continue to stick to SAP and Oracle. Small Businesses do not really have the wherewithal to buy the fat pipes that SaaS requires though they could do it for mail and they should.

Medium Businesses, however, are ripe for SaaS. They have IT budgets that are sufficient to buy the bandwidth and pay the subscriptions for SaaS but they may not necessarily have the manpower or the money to go for conventional ERP/Messaging. More than the money, the lack of skilled manpower is the factor that is going to tilt the scales in SaaS’ favor in this segment. CRM and Mail seem to be the first applications that companies are adopting through the SaaS route. Over time, I expect that ERP as a service will take off with mid-sized companies.

So should the software giants start to panic? Not just yet, although they do need to get their act together and start rolling out SaaS offerings soon or they’ll miss the bus on this one. While I don’t expect SaaS to dominate mid-market rollouts, it will be increasingly popular in the next year or two. Microsoft’s already sensed this, which is why the company has a hosted ERP offering. Oracle has a SaaS strategy but, with the exception of Seibel CRM on demand, it seems to revolve around customized offerings for wannabe ASPs and companies that are looking for a highly customized solution which is hosted by Oracle. SAP recently decided to delay the launch of its SaaS offering, Business ByDesign.

Gartner’s oft-quoted prediction that more than 25 percent of business software will be delivered as a service by 2011 has everybody scrambling for the finish line. For now, Salesforce.com has the drop on its competition

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