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Buying and Selling Software as a Service: A View from the Trenches

October 6, 2005

By Chris Miranda, Vice President of Sales, eMeta Corporation

By now, I’m sure you’ve heard all the noise surrounding Software as a Service, or SaaS as it’s becoming more commonly known. As Vice President of Sales for eMeta Corporation — a SaaS provider, SaaS user and SaaS enabler — I have been immersed in the buzz.

In the last six months, I have attended the SIIA’s Software as a Service Special Interest Group and spoken on a panel discussion at their SaaS-focused Enterprise Software Summit in Universal City, participated in the inaugural ISV Transformation Summit sponsored by Tier1 Research, and joined more than 350 others at the SDForum SaaS event in March. I have also participated in countless conference calls and technical meetings with ISVs looking for more information on how to implement, or migrate to, the SaaS model.

What have I learned from all of this? Well, for one, SaaS is not just a flash-in-the-pan. The benefits are clear, and while SaaS may not be for every independent software vendor (ISV), it’s a business model that many ISVs should and will consider. Because the service model concepts are still fairly new to the software world, there’s some confusion over topics such as piracy, licensing, billing and the ubiquitous “buy vs. build” debate. Here’s my view “from the trenches” to help answer some questions.

Traditional Enterprise Software and Niche ISVs Lead the Charge

Traditional enterprise software companies and niche providers are realizing that they are well positioned to gain from the SaaS model.

Enterprise and niche applications are typically technologies that are high-dollar. Often only the largest customers can afford these applications. When ISVs provide multi-tenant, shared applications as a service, they can expand their target market to include small and mid-sized companies due to the efficiencies of creating and supporting one application.

What’s happening with ISVs is similar to what happened with online content providers. The first organizations to deploy sophisticated online initiatives were the STM (Science, Technical, Medical) providers — organizations like the IEEE and companies like Celera Genomics. Such technical, non-glamorous entities were first in line because they needed to solve complex problems, such as tiered security and complex licensing across multiple distribution partners and channels.

Within the software vertical, the players who have specific and complex problems to solve have come first, as well as start-up, net-native software players. The mainstream ISVs will be next as the upstart SaaS providers challenge their turf in the same way has given enterprise CRM a run for its money.

The Beauty of One Customer

One of the most difficult aspects of dealing with software companies is simply that they’re software companies. ISVs experience constant demand to add new functionality and release new versions and often multiple builds, depending on the size and strategic importance of the customer. The process is often reactive, with new features and development schedules being created based on just a few (but very significant) customers’ needs.

A key reason why ISVs must consider SaaS is the concept of one customer. There is one application instance, and one upgrade. Fundamentally, a software company will be most efficient if its application is made available in this way. Additionally, software quality will likely increase industry-wide, due to the heightened competition that should result from lower switching costs. Both vendor and customer win with the service model.

Page 2: Access Control and Other SaaS Issues

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