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Why buy software, when you can rent it?

As bandwidth gets better and features richer, it might make more sense for firms and individuals to work from software placed on the Web, writes Puneet Mehrotra.

india Updated: Oct 19, 2007 00:33 IST

You have probably done it without giving it a name. Every time you get on to the Internet and use a Web-based email service like Hotmail or Gmail, you are actually “borrowing” some software that is placed on the network computers, or servers, that companies like Microsoft or Google own. The same goes for chat applications or photo-sharing.

Now, imagine a scenario when a company does the same to run its businesses like human resource management or accounting. Or a situation where an individual makes presentations or spreadsheets without using software installed in a personal computer.

That is increasingly getting smarter, easier and even cheaper. A bit like renting a serviced apartment.

Gone are the days when in order to run software you needed to own the software and have huge setup infrastructural costs for the same. We have now entered an era where you pay nothing to own software but pay simply for using it. There are no huge setup costs. The model for delivering this service is commonly known as Software as a Service (SaaS) and as the industry as a whole is now taking the SaaS route. The philosophy of SaaS is a low-cost way for businesses to obtain the same benefits of commercially licensed software without the associated complexity and high initial costs.

The working of SaaS is simple. There is no hardware, no server, no professional costs even. All that is required is just a simple subscription. The software provider is responsible for its availability, maintenance, scalability, disaster recovery and other support operations. SaaS has its roots in the ASP model (application service provider) that was hot about seven or eight years ago in terms running a turnkey application on behalf of their clients. As a concept, it was only in March 2005 that SaaS got recognition. In less than two years the who’s who of the industry is moving the SaaS way.

Microsoft’s Indian unit announced in August the launch of its ERP (enterprise resource planning) solution going the SaaS way. Currently the solution is available for three users at Rs.25,000 a month, five users at Rs.35,000 a month and 10 users for Rs.60,000 a month. There is no separate hardware, no software and no human resource cost required besides this. Compare this with the traditional model where a company had to pay Rs. 10 to 15 lakhs upfront to buy software to run activities like payrolls, accounting and inventories – besides spending on hiring and training software staff to support it all.

Oracle, which makes business software, has one of the broadest portfolios of services, covering 360 solutions, 2,200 organizations and around 1.7 million users globally. Oracle claims a saving between 30 to 80 per cent in ownership costs for customers as a result.

Citrix has applications such as GoToAssist for technical support, GoToMeeting for web conferencing solutions, GoToMyPC remote access to a personalised “virtual desktop” that functions like a home PC, in addition to GoToWebinar for online events. German ERP software giant SAP’s SaaS solution ‘Business By Design’ is set to launch in India in 2008.

"SaaS as a concept and for investment is fast emerging in India. Indian enterprises, whether small, medium or large have started to notice and are considering SaaS solutions, as they realise the need to focus more on their company’s strategic initiatives, core competencies and growth,” says Sanjay Mathur of Oracle India, who says SaaS, billed on a per user/per month basis, can help customers manage IT expenses much better and not worry about spending on upgrades.

Microsoft’s Rajeev Mittal says it is right for small and medium businesses (SMBs)

“We are confident that the SMB segment in India will benefit from the accessibility to ERP solutions that this model offers, and that it will in turn accelerate the already healthy pace of IT adoption in the SMB community,” he says.

SaaS model offers an opportunity for Indian IT firms to enter the software product space in which they have not been able to make a mark.

Customer relations management (CRM) software firm Infogain sees the SaaS platform as a huge opportunity for India. “With overall growth of Indian economy we can see the rising awareness and adoption of SaaS across the region,” says Eddie Chandhok, President, Global Delivery, Infogain Corporation.

(The author is an independent writer on business and technology issues)