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Packaged Software Will Become Obsolete One Day: Steve Russell
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SaaS is a buzz word these days. SaaS or Software-as-a-Service means that there is no software on the computer – applications are delivered over the Internet and can be accessed anywhere, anytime – with only a browser. Read on to see how much potential SaaS holds...
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Saturday, July 26, 2008:
More and more organisations are adopting SaaS technologies these days. But what SaaS holds for the future? How much of market is there in India for SaaS technologies? Does it make any sense for the booming SME sector? How can ISVs or developers take advantage of this platform? These are some of the questions which always come to mind the moment we think of SaaS. We took these questions to Steve Russell, president and CEO, APAC, Salesforce.com. Here is what he has to say:
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EFYTimes: Let's start by asking a bit about Salesforce itself.
Steve Russell: Salesforce.com was founded in 1999 upon a simple business vision - to change the way businesses use applications and develop the concept of delivering enterprise applications over the Internet. Businesses should be able to enjoy what consumers have become used to using websites like Google, Amazon or eBay – applications and services available 24/7 over the web. At Salesforce.com, we believe that packaged software will become obsolete one day - everything is moving online. Just like the client-server software replaced the mainframe during the 90s, we think we are in the midst of another major evolution in technology and SaaS will overtake client server applications. While it is impossible to predict how quickly this will happen, people tend to overestimate what can be done in one year and underestimate what can be done in 10 years.
EFYTimes:Could you please explain what is SaaS and what are its benefits?
Steve Russell: Software-as-a-Service means that there is no software on the computer – applications are delivered over the Internet and can be accessed anywhere, anytime – with only a browser. The SaaS model has a number of benefits - it is easy to use, lowers cost, does not have the maintenance and upgrade hassles of traditional software, and does not require the large up-front investment in software and hardware and is, therefore, lower risk as well. Since companies generally pay on a per-user, per-month basis, licenses do not go unused and shelfware becomes a problem of the past.
The model is very new and hitting an inflection point globally with regards to acceptance and adoption. With many companies tired of wasting time and money on traditional software projects that are difficult and expensive to customise, difficult for users to grasp and that may never get off the ground because they go over time and over budget - companies are looking for alternatives. In addition, with the acceptance and success of consumer web companies like Google, eBay, and Amazon.com (which use a similar technology model to ours), people have become very comfortable using the web for personal transactions, and we think managing your business on the web should be this easy.
The SaaS market is receiving considerable focus from software vendors operating in various spheres of the industry. Global software giants, local ISVs and emerging on-demand software vendors all have a healthy dose of respect for the power of SaaS to disrupt the competitive frameworks of the software industry in the future.
Companies need tools to meet the demands of the business and customers. On one hand, time-to-develop solutions are decreasing while customers are expecting higher functionality at lower TCO. Without an efficient infrastructure and seamless connectivity, none of these targets can be effective. To meet up these challenges, businesses are increasingly moving onto adopting the SaaS model. Using outsourced SaaS services allows companies to procure best-in-class computing environment that is more efficient and less expensive than creating one on their own. This allows organisations to focus on the real technology and business issues that drive the success of their companies.
The future of all business software is on-demand, and salesforce.com is leading the charge with 43,600 customers and 1.1 million subscribers who all believe in that vision. In addition, McKinsey found that the adoption of SaaS among large enterprise grew 61 per cent in 2006. The on-premise, client-server applications of the 90’s have let people down, because they failed to deliver on their promise of increased productivity and customer satisfaction.
EFYTimes: What kind of market do you see in India in terms of SaaS technologies?
Steve Russell:We started our operations in India on 26 September, 2005 and are extremely excited about the potential in the Indian market. India is one of the most attractive markets in the APAC region. India is certainly a very important market for salesforce.com as the momentum of SaaS grows globally and more people are learning about the advantages SaaS has over traditional software.
One thing that is undeniably clear is that the age of experimentation is over-- we are in a time of widespread adoption of SaaS globally that is just taking hold in India. Take your pick of research—Gartner, TripleTree, IDC—they all point in the same direction: CIOs are hungry for the flexibility and efficiency that they can achieve with SaaS in general, and I believe, our model in particular.
This widespread adoption—will inspire even greater levels of innovation by our partners. And our customers are finally dusting off that long list of custom apps that they have wanted to build but didn’t have the budget to deploy or maintain. We feel that the stage is being set for someone out there to be the next salesforce.com, and we can’t wait to see the results.
EFYTimes:What are the factors which make India as a potential market for SaaS technologies?
Steve Russell: India’s broadband capabilities and highly tech-savvy population are good news for SaaS companies like salesforce.com.
The technological mindset of the businesses in India is more developed and people are more receptive to new technologies. The rate of broadband adoption in India’s emerging markets is amazing. And the fact many regions see broadband, mobile phones and wireless, as their jumping-on point to connectivity - bypassing dial-up access or fixed line telecoms altogether - means opportunities are opening up all over the world for SaaS. Of course every country and region is at a different point in development, but we really see the Internet as a means to equalise access not only to information, but also great business applications. The ability to access salesforce.com on mobile devices also provides a major benefit to users in emerging markets where mobile network coverage is as advanced as many Western countries.
As the Internet has matured, cheap, higher-quality bandwidth is widely available, web user interface (UI) technology makes for an excellent browser experience and web services protocols make it easier to integrate software with external applications. According to Internet Service Providers’ Association of India (ISPAI), as broadband availability is growing (currently at over 20 per cent per month), SaaS adoption in India continues to rise.
EFYTimes:What markets do you cater to in India and how much of the market share do you have?
Steve Russell: Salesforce.com has a global customer base of 43,600 that is made up of companies of all sizes and across all industries. In similar fashion, we are targeting both enterprise and SMB customers in India. We are specifically looking at customers in the IT/ITES, media and communication, industry and manufacturing, BFSI, retail, pharma healthcare, health science, travel and transportation, hospitality, and construction markets among others.
EFYTimes:What do you think of the SME segment as a customer base for salesforce?
Steve Russell:According to IDC, “2008 will witness a major expansion of Software-as-a-Service (SaaS) as a way to accelerate SMB penetration and Service Oriented Architecture (SOA) adoption. The role of SaaS delivery platforms will become a key strategy for reaching the SMB market.” There are more than seven million SMBs in India and they have a craving for SaaS technology as it offers ease of use, speed of implementation, affordability, and immediate business benefits. There are over 70 lakh Small and Medium Businesses which are underserved and this is our opportunity to address their needs. For these reasons, SMBs are a key focus for salesforce.com now and in the long term.
EFYTimes:What kind of challenges you see for this segment? In addition what kind of challenges SMEs face when it comes to CRM solutions?
Steve Russell:The problems small and mid-sized businesses face in terms of IT technologies are not new — the enterprise has traditionally been the initial target of new technologies. The problem is that enterprise-grade technology tends to be outside the financial reach of most SMBs, but the features are, nonetheless, what they need in order to enhance their operations and remain competitive.
The old software models required a customer to buy the software, and take responsibility for its ownership and management, with significant investment in infrastructure and time consuming deployments and configurations. In addition upgrades can be very expensive. In a constrained budget scenario mostly among SMB’s it becomes difficult to enhance productivity while lowering costs or avoiding necessary technology upgrades.
SaaS is one such solution that would ensure SMB’s, operationalise and manage necessary tasks without either cost or time overruns. The principal advantage of the SaaS model in total cost of ownership versus conventional on software is striking; Customers share hardware, software and data-centre resources. Unlike conventional software, which has to be designed to run in a variety of different environments, SaaS is delivered over the Web, bringing significant cost and performance benefits. Deployment of SaaS is usually fast and easy, as there is nothing to install, and would let SMB’s test and adopt new applications much more quickly than they could with legacy software. It also enables the customers to always run the latest version of the software. The main advantage is the pay-as-you-go pricing. Up-front costs are low, customers pay only for what they use, and costs can be eliminated entirely by cancelling the service.
EFYTimes:What kind of response do you see from India in terms of SaaS? How different is that from the rest of the world? If it is, what are the possible reasons?
Steve Russell: According to Springboard Research: "The Indian SaaS market will grow at a compound annual growth rate (CAGR) of 77 per cent from 2006 to 2010, to reach $165 million by 2010. The SaaS CRM market in Asia in 2008 is worth US$193 million and is expected to reach US$460 million by 2010.
Analysts say this positions India as the fastest growing SaaS market in Asia Pacific, growing with a CAGR of approximately 71 per cent, and is expected to reach $267 million by 2011 (according to Frost & Sullivan).
EFYTimes:How can an independent developer or a local ISV take advantage of Salesforce platform and build solutions for customers?
Steve Russell: One thing that we are very excited about – and think that the Indian market is ready to embrace, is our Platform as a Service (Paas). Paas represents a significant opportunity for India – there is a highly educated, highly technical workforce and great bandwidth capabilities - the combination of these two things with the power of Paas creates an immense opportunity for local ISVs and independent developers. The only requirements for developers are an internet connection and a great idea.
There are over 6 Lakh developers in India. With Force.com, the world’s first Platform as a Service (PaaS), developers can create and deliver any kind of business application, entirely on-demand and without software. It’s a breakthrough new concept that is making companies radically more successful by letting them translate their ideas into deployed applications in record time. We believe we have the potential to unlock the intellectual capital of India’s software developer community that will in-turn increase SaaS adoption.
Force.com Platform-as-a-Service provides the building blocks necessary to build any kind of business app, simple or sophisticated - and automatically deploy them as a service. The multi-tenant Force.com platform has a complete feature set for the creation of business applications including the ability to create any database on demand, any custom workflow, the Apex code programming language for building complex logic, the Force.com Web Services API for programmatic access, mash-ups, and integration with other applications and data, and Visualforce, a framework to create any user interface. Now we have over 800 applications that have been built on Force.com by customers, partners and employees that are available on the AppExchange.
The Indian market is 'the' market best poised to leverage the opportunity to build and deliver applications in the cloud. There is potential for this to create new economy locally while delivering business application to the global business community.
EFYTimes:Could you point out your five USPs which give you an edge over your competitors?
Steve Russell: We feel there is a lack of serious competition in this market. We have been steadily growing for more that nine years now and have more than one million subscribers. And yet our competitors have yet to mount a credible SaaS offering.
There are two major barriers to entry into the Saas space for traditional software providers. First, there is the technology model. The common shared platform of a multi-tenant on-demand provider like salesforce.com doesn’t require any infrastructure – there is no need to buy, maintain or manage any software - and the customer only needs to be equipped with a PC and an Internet connection to see success. On-demand solutions also allow organisations to get applications up and running in a matter of days compared the possible months it can take for on-premise solutions, providing a much faster time to value.
Secondly, the business model changes the dynamics internally for vendors – sales people brought up in the traditional software model are incented to close big deals – receiving big payouts at the time of closing - and then move onto the next deal. In a Saas model, where customers pay on a per user per month basis, commissions are paid out over the life of the contract. Customers must stay happy and see value from the product or they will leave – it forces vendors to be 100 per cent focused on customer success, not just closing deals.
While the industry veterans continue to battle over issues that don’t help customers like upgrade cycles and supporting old technologies, we remain 100 per cent focused on innovating and driving customer success. We’re on the 26th generation of our CRM suite and we’re winning customers like Ramco, Millipore, Maytas Properties, and Tata Consultancy Services. While the rest of the industry is figuring out how to deploy a single application on-demand, salesforce.com is continuing to enable global innovation by opening its proven on-demand platform to the developer community, making it possible for any application to be delivered as a service, over the Internet.
The biggest reason people choose us is because of our platform, which is made possible by our multi-tenant architecture, meaning all customers run on the same code base – and all of our developer talent can be directed toward a single, continually prioritised list of refinements and improvements to that one coherent body of code. The Force.com Platform-as-a-Service allows us to provide the simplest customisation and integration that will all be maintained through any product updates. And with Apex Code, customers can write their own code that will run on our servers – allowing them to build all kinds of new applications – without needing to buy or maintain any servers. This is a revolutionary way of doing software development.
EFYTimes:How open source pro is salesforce? Do you use any of the open source technologies?
Steve Russell:We see tremendous value in open source and have utilised many of these technologies in building out our infrastructure including Apache, Linux and Lucine.
.-- Swapnil Bhartiya, assistant editor, EFYTimes.com
Swapnil Bhartiya, EFYTIMES News Network
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As things are changing fast, after the subprime crisis, where funds may not be easily available, SaaS provides a low cost solution not only for SMB, but even to corporates. SaaS may have the short comings pointed in the comments of the article, its growth may be unstoppable.
SaaS may even grow to such a level that there may not be any intermediate developers to offer customized solutions based on SaaS platforms. There will SaaS service providers with easily customer configurable modules and end users.
So the requirement of software engineers may come down drastically in the coming days.
V.Kadal Amutham |
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| - V.Kadal Amutham, Chennai, 7/30/2008 11:43:19 AM |
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I would beg to differ with Mr Russel on several points:
1. There will always be 'installed' software on any machine -- you will always need a browser to be installed.
2. SaaS locks vendor into their cloud and application. In case of any disaster when Internet services are disrupted, the user is left high and dry as nothing is on its own hard drive or server.
3. In case of some political issues there can be possibilities of services banned in a country, in that case only locally running applications will save the client....here SaaS loses significance.
4. What about terms of licencing? What if a country bans using services of a company inti another country, do you ensure that users should be able to use services, if NOT, do you mention this in your licence? If not don;t you think you leeve a loophole?
If he can address those issues then only it makes sense.... |
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| - Kurt Benedict, Belgium, 7/29/2008 2:10:59 PM |
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| While I think Mr. Russell has the general idea and direction of the future correct, there are a few problems in his argument. First, while SaaS is a great delivery model for most, it does not address the needs of those that do not have broadband connectivity all the time. Until we can guarantee connectivity at all times, there will still be a need for "local" applications. I can't tell my salespeople that they must enter all communications with our clients into a CRM application, and then tell them that the application will only be available part of the time. This is also an issue for our colleagues in India, as they have bandwidth and other infrastructure issues on a regular basis. On a recent trip to Bangalore, the power went out on average 4 times per day, and stayed out up to an hour. My developers complained about using U.S. development servers, as their bandwidth was too expensive and took too long to install, so they had to suffer with inadequate transfer speeds and dropped data packets. Again, I think SaaS is a great delivery platform, and will be a boon for cost savings in the IT area, but like any other technology or process, it is not the panacea that everyone is claiming, just another tool, if used properly, in the IT professional's arsenal. Believe me, as the CTO of a SaaS company, I want it to be successful, but I want people to see it for what it is, or we will go through the "bubble and burst" the internet when through in the early 2000's. |
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| - Kelvin R. Hubbard, Overland Park, 7/28/2008 9:43:44 PM |
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Dear Mr Russell, you are very correct that future belongs to online applications. But companies like Microsoft, who has been ignorant to recent developments, say that desktop bases applications will always be there.
Whereas companies like Google are stealing the thunder. Another aspect is hardware....to keep selling, Intel and AMD were creating FUD that you need more powerful machines to enter the web-driven world, where as ASUS' EeePC has shown that Netbooks are the next big thing without "too" much of power...
Great interview...thanks.... |
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| - Sudhir Sharma, Bangalore, 7/26/2008 12:54:10 PM |
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