Understanding the SaaS Market and Seizing the Opportunity

SaaS has revolutionized how the software industry operates. Learn how Progress is empowering our OpenEdge Application Partners to capitalize on this paradigm shift.

There is no doubt about it: Software as a Service (SaaS) is an unmistakable opportunity for today’s ISVs. The model has completely upended the software industry and redefined how many companies are buying, building and using applications today. To help our ISVs capitalize on this paradigm shift, we’ve developed our own programs and resources that enable OpenEdge Application Partners to embrace SaaS and the profitability it offers.

To take a deeper look at SaaS and how ISVs can take advantage of new SaaS opportunities, we’re kicking off a seven-part blog series. As the first entry into this series, this blog will serve as an introduction to the SaaS market and explore some of the intricacies of delivering SaaS.

Today’s SaaS Market

While IT budgets continue to decrease, the demand for innovation and complex systems is only increasing, and as such, the cloud has become a major component for delivering business transformation. According to IDC, organization adoption of cloud technologies has exploded across industries by 137% from 2015 to 2016. Companies that were once “light users” of the cloud are now relying heavily on cloud-based solutions, and new adopters are jumping on the bandwagon in record numbers. This surge in adoption has lessened the need for customized on-premise offerings significantly and cloud vendors are growing as much as 12 times faster than traditional software vendors as a result.

The driving forces behind the adoption of cloud-based solutions—and in particular, SaaS—include:

• Demand placed on IT to deliver line-of-business (LOB) applications is intense and unrealistic. When IT can’t meet the demand, business owners seek alternative solutions. As such, IT organizations have accepted that instead of building and managing apps, they can lend consultative support.
• Applications that drive specific business processes need to scale quickly and efficiently, and cloud-based apps meet both of those requirements.
• Open-source technology decreases costs and increases innovation.
• The cloud provides some much-needed speed and flexibility to app deployment and cost.

In addition to the operational benefits, delivering applications in the cloud offers several perks for application end users, including improved IT productivity and business agility, reduced IT budget and faster time to market. With the cloud, the ISV can expand its footprint to new customers that previously faced barriers to entry such as pricing, geographical boundaries, a lack of resources and so on.

Despite the benefits of cloud-based software delivery, SaaS providers must address numerous concerns about security, compliance and integration as they adopt the SaaS model. They must be able to measure and record application usage and customer information in order to satisfy government sanctions for IT systems. And, they must tackle any potential difficulties integrating their cloud-based offerings with existing systems as well as other cloud offerings deployed throughout a customer’s organization. Downtime caused by security breaches or other issues affect the customer experience and could result in substantial revenue loss, as customer loyalty can change quickly and easily.

SaaS vs. On-Premise

SaaS is an alternative approach to software delivery that incorporates the business application with the utility and value of a managed service offering. The SaaS delivery model is different from traditional on-premise app delivery in the following ways:

• Applications developed for SaaS delivery can accommodate multiple customers within a single production instance (known as multitenancy).
• SaaS offerings leverage the internet to deliver content. Many SaaS offerings require only a web browser to access and use the application, dramatically simplifying the distribution of the offering.
• SaaS applications are typically offered through a subscription rather than a license fee. The subscription fee is often based on a business value metric, such as the number of subscribers served, number of business transactions processed or usage off the application itself.
• SaaS offerings typically include the use of the application, hosting, ongoing maintenance and upgrade and update services provided in exchange for a subscription fee paid by the customer. The industry has seen the SaaS model evolve over the last several years into its current form, and Progress partners have benefited due to the power and reach of the OpenEdge development platform.

Moving forward, SaaS ISVs are no longer creating packaged software products for customers to install. Instead, ISVs create functional software-powered services and applications for customers to use, delivered to agreed-upon performance levels, throughout the life of the service contract or commitment. This presents a new challenge for software vendors, as they need to shift gears from being a product company to a service provider.

In the next blog in this series, we’ll speak extensively about how the business model for ISVs has shifted as they transition to becoming services providers. This transition requires ISVs to rethink not only their business model, but their entire foundation and strategy as a company.

Until then, feel free to check out our programs and resources for ISVs looking to embrace SaaS, such as:

Seizing the SaaS Opportunity—A new ebook that covers the transition to a SaaS model

Progress SaaS FastTrack—A program that helps Progress Partners create and execute a SaaS strategy

SaaS Resource Center—A repository of various videos, blogs, whitepapers and other content dealing with everything SaaS