By the end of 2010, 75% of organisations in Asia Pacific will increase their software as a service (SaaS) investments, according to a survey conducted by Gartner, Inc. Of the organisations surveyed, 80% were currently using SaaS for enterprise applications such as ERP and CRM, with the remaining 20% planning to use it in the next 12 months.
According to Gartner analysts, SaaS has become more widely accepted in the Asia Pacific region in the past two years, with initial concerns about security, performance and availability gradually diminishing as SaaS business and computing models become more mature. The top five most commonly used SaaS enterprise applications, in order, are: financials (accounting); e-mail; sales; expense management; and customer service and support.
However, acceptance of SaaS remains uneven throughout the region, with a large variation in adoption patterns in different countries and industries. Respondents in Malaysia, Hong Kong and Singapore have used SaaS the longest. Australia has the lowest number of users with the longest period of SaaS use, however, there was healthy growth in the number of new SaaS users in the last 2 years. SaaS uptake in India is newer, with more than 80% of respondents using SaaS starting to use it in the past two or three years. Contrary to the belief that China is the least mature market, about 50% of China-based respondents have been using SaaS for four years or more.
“SaaS has high potential in Asia Pacific; however, it is still at the emerging stage. Both SaaS providers and users are still on the learning curve,” says Twiggy Lo, principal research analyst at Gartner. “A lot of fine-tuning is required, for technical issues, pricing and engagement models that comply with legal requirements in Asia Pacific countries. Providers must be more transparent in meeting user expectations.”
According to Lo, many companies in Asia Pacific are looking for enterprise applications that can keep up with their rapidly expanding businesses, requiring a smaller upfront investment and incurring lower ongoing expenses. The biggest drivers to adopt SaaS are the perceptions that it is more cost-effective than an on-premises solution from a total cost of ownership standpoint, and that SaaS is easier or faster to deploy than an on-premises solution.
Organisations in China and Malaysia consider limited capital expense as another big driver, and those in South Korea, Hong Kong and Singapore consider SaaS as having higher user acceptance than an on-premises solution.
However, since SaaS is relatively new, Asia Pacific organisations are still skeptical about the costs that can actually be saved versus using on-premises solutions with low labour rates in many Asia Pacific countries. In addition, the definition of SaaS is not well understood by many Asia Pacific organisations. As a result some vendors are providing hosted software services — which is easier for the customers to understand, and offers more flexibility to customise the software — instead of SaaS.
“Software vendors that are embarking on the SaaS journey will need to change their business model and mind-set to make SaaS attractive to their channel partners and become a profitable business,” notes Yanna Dharmastira, research director at Gartner. “Crafting a detailed SaaS channel partner strategy is essential to succeed in SaaS.”
The main inhibitors to SaaS adoption in Asia Pacific include limited integration with existing systems, instability in the network, limited flexibility, difficulty of customisation, and lack of vendor support capability. Despite this, Asia Pacific organisations are fairly satisfied, with more than 60% experiencing no issues with their SaaS implementation. Australia appears to have the most number of issues raised, and South Korea with the least. In China, some organisations, such as banks and government bodies, require data be kept at servers located in China, which adds to another challenge for SaaS providers that currently do not have servers in China.