Business applications, SaaS and SMB market

The theory of constant evolution changes every model to ensure that only the best survives and thrives. Take this well accepted first principle and project it over business applications market, results are quite interesting to ponder.

The companies can be divided into large (one can also differentiate this segment into giants and large companies) and SMB (small and medium business). It is widely accepted that no company (big, medium, small) can grow without best practices, clearly defined processes and hence business applications are the lifeline of any well run business. As most of the large companies have bought business applications and the rate of growth in that market is slowing down, it’s the SMB market that will drive the growth in near future.

Let me take an analogy here. If you look at the growth of the world in last 200 years or so, most of the western world grew and transitioned from Developing to Developed status. Currently most of the growth is happening Asia with China and India leading the world growth. It’s quite a common practice among human beings to follow already proven models. So the growth pattern in Asia has lot of similarities to the growth pattern in western world and at the same time, there are differences.

Let me discuss these similarities and differences from the growth patterns in world and then I will connect this to the domain of business applications. There are always two sides of any aspect; cause and result, action and reaction. As human beings tend to replicate the already successful model and you can only replicate your actions with some degree of predictability, so it’s the causal element which gets replicated. Making it simpler, countries and their respective governments in the eastern world are trying to replicate the proven infrastructure model of the west.

On the differences side, it’s the usage of the underlying infrastructure in the eastern world which is fundamentally different from the western world. The impact of telecom in India especially in rural area has been big with spectacular results. And there are lots of other examples such as roads, IT, education.

If we take the same line of approach for large and SMB companies, the analysis is strikingly similar. Most of the large companies have achieved reasonable state of development and their growth pattern at best is moderate. It’s the SMB segment that is the new kid around the block and getting all the attention.

Even for business applications, most of the future growth will come from SMB market. The similarity is the infrastructure (e.g. IT, networks, and business applications) but the usage is going to be vastly different. I discussed the huge impact of telecom in Indian rural market. The model of mobile instead of fixed line telecom has become popular in Indian rural market is because of the shared cost model and low TCO for the end user.

In the context of business applications for SMB segment, I bet its going to be the same result. For the SMB segment, shared cost model and low TCO (Total Cost of Ownership) will drive the mass adoption of business applications.

And there comes SaaS (software as a service). SaaS model will be a mass enabler of business applications for SMB the way mobile telecom has been for rural markets. SaaS offers similar benefits, shared infrastructure cost as it’s shared among thousands of companies and low TCO as the company does not have to operate the infrastructure.

Look at Microsoft Study on SaaS, it projects SaaS adoption in SMB to grow by 86% in 2009. Here is another interesting read from NASSCOM Product Enclave and Expo 2009.

From the consumer side, SaaS is about software outsourcing where the consumer does not have to invest resources (time, people and space) for the outsourced business functions. Like Microsoft Office suite provided a set of 4-5 office productivity tools, there will be a suite of SaaS applications which will provide business processes productivity tools for SMB.

With this offshore software development company (development, deployment, operational) to SaaS vendor, SMB business can benefit significantly. There is still a key issue of data security, when the data is residing outside the company. The answer will be a pragmatic mix of technology and legal frameworks.

About the Author:
Rohit Chopra is a veteran in IT industry with a focus on offshore software development India(http://www.extendcode.com). Rohit has enabled solutions for Health Care, HR and Media verticals and written article on business application development for offshore software development company.