Software as a Service (SaaS) may seem like another bit of that wonderful jargon the IT industry throws out every once in a while but it’s actually the generic term for the delivery of computing power as if it were a utility like electricity.  Plug in your computer to the mains and also into the network or phone socket and away you go. 

At the other end of the internet connection is a company that manages and delivers the application – you effectively rent time and space in it.   And while not a new concept it is one that in the last few years has taken off and is building up to critical mass.  One analyst estimates it will be worth $11 billion by 2009 and its poster child, the US company salesforce.com, is on track to make half a billion dollars worth of sales this year.  That will put it into the higher echelons of the software world. 

So why is SaaS rising dramatically in popularity?  One of the main reasons is it does away with high capital costs – you don’t need to buy lots of expensive hardware and software licences up front - instead you rent the application on a monthly basis. A collateral effect of this is businesses have the application up and running in a much shorter space of time and often without the expense of consultants.   It has also come about because application technology has made it so and people are now familiar enough with computers and the internet to use it and no longer be intimidated by what might once have been considered a disruptive technology.

The process may sound a bit like outsourcing or traditional application service provision but as Keith New from applications company Aspective explains they are significantly different.  ‘There is a difference between hosting a solution and delivering a solution as a managed service.  Hosting ensures the servers are alive and running, managed services ensure the business is getting the service they expect from the system’.   So in the former the host runs an application on your behalf so the hardware and software still needs to be paid for, set up and implemented.  In the latter the application already exists and the user can rent it on a “per user per month” basis.

This growth of SaaS represents a change in the way organisations regard IT.  Not that long ago a key competitive difference for a business was having a unique, bespoke application or a powerful IT team, now the critical difference is what you do as a company – your processes - and now the job of IT is to serve and support those processes not themselves.  As New says:  ‘Functionality is only useful and delivering value when it is implemented and supporting an active business process.’   

This may help explain why SaaS is growing in popularity - particularly in the sales force automation area where salesforce.com started - but does it have a future in the field service arena?  Colin Brown, the managing director of best of breed service vendor Tesseract says that although this sector has not been one of the early adopters it has similarities with those that were. 

‘I think it is no accident that one of the first hosted solutions to take off in the US is a sales/CRM (customer relationship management) solution,’ he says.  ‘Sales, CRM and SMS (service management systems) all have a remote communications element to the overall functionality and these packets are ideal for hosting as you get a double win; not only do you have the financially efficient “pay as you go” but the added attraction of a 24/7 IT environment allowing remote communications without cost or effort.’

The technical director of the pioneering salesforce.com, Tim Knight, adds: ‘Hosted solutions are a serious option for any requirement to deliver and manage information.’   One worry for small businesses might be scalability – can this system grow with me?  Knight says it is a lot easier with SaaS than conventional software. 
 
‘The benefits of an on-demand model allow for highly functional, scalable, resilient and secure solutions to be delivered at a low cost and with a low risk. This, coupled with the advantage of direct integration with existing CRM data and easy deployment to mobile devices, makes a hosted solution an excellent choice for field service organisations,’ he says.

One of the other new players – new, despite being eight years old – is NetSuite.   Craig Sullivan, senior director for product management at NetSuite observes: ‘Field service organisations and hosted solutions are a perfect pairing. With geographically dispersed employees needing access to up to date, accurate customer and job information in order to perform their jobs a hosted solution can provide what they need without the overhead and complexity of additional IT infrastructure and resources.’

The explosive growth in SaaS has been mainly in small companies or on a departmental level.  
Neville de Mendonca of service software company IEA sees it as a useful way for small service companies to set about exploiting IT in their business.

‘Hosted solutions are probably the best route forward to transforming the smaller field service organisations to achieve the cost benefits that these systems can bring simply because this allows them to have the levels of visibility and traceability without having to create and maintain their own infrastructure,’ he says. 

He adds that: ‘Creating and maintaining a field service solution is at present a very fragmented and complex procedure that detracts from the core business goals and as such often deters potential investment in these systems despite their proven advantages due to the broad range of new skills required for the PC, database, communications and handheld components. A one stop shop to deliver and maintain all of these irrelevant issues in order to get the job done is all most companies want, however the logistics of finding a provider whose systems are sufficiently flexible to match the companies’ requirements rather than bending the company to match the standard offering without breaking the bank to avoid additional costs has been difficult for the smaller business.’

The challenge of application integration into office systems has always been a challenge with traditional client server computing and this problem could be exacerbated when the main data needs to be housed half way round the world.  NetSuite’s answer to this has been to build an enterprise SaaS solution including an SMS. ‘The full-featured service management offering provided by NetSuite means that not only do field service reps have access to the information they need but they are also able to update the system to track their interactions with the customer and log billable activities without needing to submit paper-based reports or wait until they have access to the corporate network, hence improving the speed and efficiency of reporting and billing cycles’ says Sullivan.

Salesforce.com has taken a different approach and launched a platform called AppExchange that allows other software developers to produce applets of functionality such as Time Tracking for measuring the hours worked by engineers, that can be bought/sold and added or removed almost at will.   ‘The AppExchange platform is a clear differentiator for salesforce.com customers, which enables them to select from a range of field service offerings,’ says Knight. ‘The AppExchange marketplace gives customers the choice of using the existing functionality from Salesforce.com, or selecting pre-integrated field service solutions from our partners.’

This also helps address one of the concerns potential buyers might have about being locked into a proprietary system.  These applets are designed by a range of software houses to work with the main system and any other AppExchange applets.

‘The debate should not be about being locked into one monolithic vendor and all the restrictions and lack of innovation that would bring,’ says Knight. ‘It should be about buyers having the choice and flexibility to use capabilities from vendors that have experience in field service.’

Andrew Yeoman, vice president for mobile resource management software company, @Road Europe, believes the hosting solution will be popular with the smaller field service businesses for two main reasons. ‘There's a lower cost of entry for smaller businesses because they don't have to spend large amounts of money on supporting IT infrastructure and software licenses. Hosted MRM applications are also attractive for small- and medium-sized businesses because they lack the IT expertise to build and maintain complex in-house systems.’ 

Tesseract’s Colin Brown adds to the testimony of how valuable hosting can be to customers: ‘I have several customers who have actually paid for the software but have then asked for it to be hosted thereby avoiding any complicated IT issues. And this does show the two elements of hosting, renting the software and running it on a third party secure 24/7 platform, and to me it is the platform that is more attractive than the software rental,’ says Brown.

It is clear that SaaS is not a software application sector in itself but a means of delivering applications.  Those applications could be anything from a spreadsheet to an enterprise system and so all the traditional issues of functionality and vendor selection still apply.  However integration should be less of an issue because that is already done by the vendor and applications are built to work together and this means they offer more value to users. 

‘The affordable delivery model of software as service is a key differentiator,’ says Knight.  ‘In the next few years we will see mobility having a huge effect on field service delivery, and through the hosted service provided by salesforce.com, mobility is already delivered as part of the fundamental service offering.  Our customers are already reaping the benefits of this.

‘It is critical for SMS to integrate with other business functions in order for it to be successful. Complete customer lifecycle management should enable companies to understand and manage every interaction point with their customers - from the initial lead generation, through the sales process and into the after-sales service and support.’

But the business world is not universally in favour of hosting.   Many commentators observe that different types of business and markets require different types of solutions and while hosting will suit many it will not suit all. Rob Parkinson, projects director at specialist field service consultancy Armstrong is one of those less than enthused.

‘There has been much discussion regarding hosted solutions but so far nothing has happened’ he says.  He says large scale products have been offering hosting for several years but there has been very slow take up by clients and he doesn’t believe the market will not go that way because of a number of disadvantages.

‘There’s and over reliance on telecoms, they are inflexible as the solution is not in-house, the user interface is often more simplistic (as in web browser) and integration to other systems such as eg accounts can be difficult as accounts are normally local and SMS is remote,’ he says. 
 
One of the big concerns that is often cited by big companies is reliability – IT systems are critical and they can not afford for them to be off line.  The main vendors reference their stats that report 99-100% reliability but outages at salesforce.com in particular gain a high profile – with the media enjoying the “egg on the face” of its cheerleading CEO Marc Benioff.  

The other issue is security – big companies are notorious for hoarding their data and not trusting it to third parties.  The Benioff response is that most data threats come from inside a company so, in fact, the data is a lot safer in the third party that lives or dies by the quality of its security procedures.

This is something likely to appeal to smaller companies – getting the protection, reliability and power of high budgets systems at a relatively low monthly fee of around £40 a month.  

‘Vendors offering fully managed serviced solutions are able to ensure the range of expertise required is always available, which smaller internal IT organisations would find difficult to provide,’ says Aspective’s New.

‘Managed services give customers certainty of future costs with guaranteed service levels and none of the administrative and management issues involved with running the systems.  For customers in changing business environments it also means they pass the challenges and efforts of adapting the scale of the system to their changing business over time without having to deal with the underlying technical aspects of how it gets done.’

SaaS has brought about a great deal of change that is affecting both the IT department and the very way applications are delivered.  SaaS may not be a panacea but neither can it be ignored.