Monday, July 27, 2009

Software as a Service (Saas) - Opportunity in Emerging Markets

Hubert Selevanathan discussed the opportunity for Software-as-a-Service (Saas) in Vital Wave Consulting’s seminar series event last Friday, July 24th. He noted that although SaaS is in the early stages of its evolution, the SaaS business and delivery model has a unique opportunity for explosive growth in emerging countries.

Some key points from his talk…

Local Saas firms emerging
several local SaaS firms have started up in emerging markets. Initially these firms are focusing on serving local markets, but they are increasingly looking towards customers across the globe. Asia Pacific appears to be a leader in SaaS – this could be caused by (or be causing) a high concentration of local SaaS firms – including:
  • India’s HRMantra & Pyxis
  • China’s 800CRM
  • Singapore’s Justlogin & Nothacker

Local SaaS firms are differentiated from international SaaS firms in two main ways:
  1. Have a firm grasp of local dynamics – understand customer nuances, selling environmental and also do not need to “localize” their solutions as they start local. The challenge they face will be to globalize their solutions.
  2. Strength/depth of local partnerships.

Who is using, will use, SaaS?
  • Early adopters of SaaS solutions in emerging markets tend to be regional divisions of MNCs, large local enterprises and in some cases government sponsored initiatives. The government sponsored initiatives tend to be primarily in the health and education sectors and is restricted to those countries that have gov’t mandates to improve health and education.
  • Next wave of SaaS users - the holy grail for SaaS vendors in emerging markets is the SMB segment. India, China and Brazil collectively have more than 20M SMBs.

Several participants asked questions during the session – below are a few of them that we were not able to get to during the session:

What about Unified Communications? Is this one of the top application areas?

  • There is a great deal of interest and excitement about Unified Communications in emerging markets, but it still does not seem to have reached the top 2-3 applications. MNCs will likely deploy it worldwide, so you will see it in satellite offices, but we are not sure that large local firms are adopting it and think it will be a while before higher-end medium-sized firms will adopt it.
How do SaaS vendors overcome area-limited, slow, expensive, and unreliable connectivity conditions prevalent in emerging countries?
  • One example we have seen to overcome some of these issues is with a SaaS firm in Brazil. Their system allows you to work offline and then synchronize when you have connectivity. This way, people can still be productive when connectivity goes down of if it is not present in their current location. We recommend keeping an eye on local firms that understand these issues intimately and are likely considering solutions to them as we speak.

What is the adoption pattern from various vertical industries? e.g. Telco, Public Sector, Life Science, etc?
  • There is not one vertical industry that bubbles to the cop, seems to be country-specific. In China, for example, manufacturing firms are starting to use ERP/SCM and in India the high-tech industry (s/w developers, ISVs outsourcing firms) ar gravitating toward SaaS as well.

Could you please explain the rationale why SaaS would reduce piracy? Pricing concerns? Wouldn't multiple people use the same login and erode margins?
  • Excellent question. The anti-piracy ability of SaaS may be application-specific. For example, CRM software is meant for each individual sales person so that this person can manage individual sales activity. You can indeed share a single name/password, but that would negative the value of managing your our sales funnel. Vendors are also trying to use technical approaches to detect this type of sharing.

An audio recording and the sides from this session will be posted on the Vital Wave Consulting website ( later this week.

In the interim, we invite more comments and discussion on this topic.

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