Why small and medium enterprises will be the main market for SaaS

Why small and medium enterprises will be the main market for SaaS

Sandeep Kumar, Sr.VP & Head Global Consulting, ITC Infotech.

The Covid-19 pandemic has put software as a service (SaaS) back in the spotlight. SaaS adoption has come a long way over the past two decades since Salesforce launched its customer relationship management (CRM) platform in 1999, the first revolutionary cloud-based SaaS service that opened the doors to other similar offers. However, more recently, just before reaching full ubiquity, SaaS had started to stall.

The pandemic has changed that. The seemingly endless pandemic has pushed organizations to implement work-from-home (WFH) policies, and SaaS has been instrumental in catalyzing change. The recent Gartner survey shows that 88% of organizations have encouraged or required employees to work remotely. However, remote working is unlikely to remain a temporary trend. Organizations are already moving to an always-on work-from-anywhere (WFX) model and, in an effort to become more resilient, they will show renewed interest in SaaS.

Market forecasts confirm this. Between 2020 and 2025, the software as a service (SaaS) market is expected to grow globally. The United States is projected to see the largest increase, rising from €92 billion to €191 billion in 2025. Certainly, this growth will also be fueled by the twin forces of a growing skills gap in service management. on-site software and improved automation. offered by SaaS for repetitive tasks. The automation aspect is appealing because it frees up time for employees to invest elsewhere.

The reasons that have made SaaS solutions popular for CRM, ERP, HRM, project management, marketing, purchasing, content management, email, collaboration, e-commerce, etc., are also, ironically, the reasons that have slowed down the growth in recent years. a few years. SaaS products are like a utility. They are designed for plug-and-play convenience. Organizations that wanted to gain horizontal enterprise capabilities at scale have opted for SaaS. They also appreciated the added benefit of SaaS: they didn’t need to spend huge amounts of time and money developing these capabilities or maintaining specialized skills to manage their systems.

However, a “public service”, with its standardized and commoditized approach, directly conflicts with the idea of ​​competitive advantage. SaaS products also prove difficult to integrate after customizing enterprise systems. Invariably, large organizations that allow themselves the luxury of large budgets customize their systems to gain a competitive advantage. This makes their systems complex. SaaS implementations in such environments become unnecessarily tricky. These organizations can only take advantage of SaaS if they are willing to redesign their systems and processes. But the pain of undertaking such dramatic changes is often not worth it.

The effort to reinvent processes would be worth it if SaaS offered a significant competitive advantage. But this, as already said, is not the case. Take, for example, an online or mobile payment service like Alipay or Razorpay or a vendor relationship management platform in a SaaS model. These processes are standardized and trivialized. Anyone and everyone has access to it. An organization cannot derive a competitive advantage from these services.

What does this tell us about the future of SaaS, and who will be rushing to adopt it? All the evidence indicates that small and medium-sized enterprises (SMEs) are the most immediate market.

Thanks to the pandemic, SMEs are evolving. They are nimble and respond to market needs faster than the big brand competition.

SMBs would do well to choose SaaS. It presents a low barrier to entry with enterprise services available in an affordable usage-based operating model or user-based pricing. Since the technology used by most SMBs has not been customized, it is neither rigid nor complex. This means SMBs can integrate SaaS with virtually no friction. From an SMB perspective, the built-in security offered by SaaS vendors is also an attraction.

Two trends in the SaaS industry are key to attracting interest from SMBs. The first is that most SaaS services are available with a free trial period. This reduces the risk of riding on a platform that lacks required features or is over-provisioned with features (which confuses users). The second is that SaaS vendors offer attractive purchasing options. Discounts are typical in the industry and can be up to 30%.

In comparison, large organizations considering next-gen transformation will align with SaaS. These organizations have a case for transformation. As a result, they are willing to re-engineer their processes and can reap the cost, scale, efficiency, and security benefits that come with ease of use.

One factor runs through all businesses. Every business is on the lookout for new and unexpected growth opportunities as they navigate the pandemic. The flexibility offered by SaaS will ensure that these companies do not miss out on these opportunities for growth and creating new value.

The reasoning behind SaaS is clear. The next step is not so simple. While the adoption model should be based on OPEX, creating the shortlist of features to opt for is much trickier. Budget-conscious and waste-sensitive SMEs will want expert advice. They should seek out a technology partner that does not display implementation experience for large organizations. This experience is irrelevant. Instead, a sensible SME will seek a thinking partner for a modest but ambitious company. This approach will result in two much-needed outcomes: faster time-to-market and features that help the SMB outperform its most immediate competitors.

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