Today’s ‘On-Demand’ Market Realities

A confluence of market forces are driving businesses and consumers to adopt a new generation of ‘on-demand’ services to meet their changing needs.

The success of e-commerce websites such as Amazon and entertainment services such as Netflix, have inspired a new generation of ‘shared services’ such as Airbnb and Uber.

Mobile technology has given consumers and corporate workers immediate access to on-demand consumer services and business applications.

And as the pace of innovation accelerates, corporate and consumer customers are less inclined to purchase technology and software that could become obsolete quickly. Instead, they are choosing to acquire their applications and compute power on a ‘pay-as-you-go’ basis.

Rather than continue to invest in costly applications and support systems that have proven to be difficult to deploy, costly to scale and unable to quickly adjust to the increasingly dynamic needs of today’s marketplace, organizations are seeking to leverage more flexible and user-friendly software services that can keep pace with their changing needs.

These trends are fueling the demand for a new generation of SaaS solutions and encouraging organizations to move away from traditional, on-premise software and systems and toward a cloud delivery model.

The migration from on-premise enterprise applications to SaaS is clearly illustrated by IDC’s market estimates for the customer relationship management (CRM) segment of the software industry:

Worldwide CRM Applications Revenue Share by SaaS and On-Premise, 2013-2018 Chart (SaaS rising and On-Premise declining)

SaaS solutions have gained broad-based corporate acceptance because of their ease of deployment and the pay-as-you-go subscription service fees which lower the implementation and financial risks of software adoption while accelerating the return on investment (ROI). 

Beyond these upfront benefits, SaaS solutions are also better designed to respond to the dynamics of a turbulent market and an increasingly dispersed workforce.

The SaaS solutions are not only more elastic, but they provide end-users real-time access to the applications from anywhere at any time. These benefits are particularly appealing to organizations that are facing unprecedented challenges and have to be more nimble.

As a consequence, IDC recently predicted:

“By 2018, most software vendors will have fully shifted to a SaaS/PaaS code base. This means that many enterprise software customers, as they reach their next major software upgrade decisions, will be offered SaaS as the preferred option. Put together, new solutions born on the cloud and traditional solutions migrating to the cloud will steadily pull more customers and their data to the cloud.”

Stay tuned next week where I’ll explore “The New SaaS Company Realities” and how the rise of SaaS has created new challenges for the software vendors providing on-demand solutions.

This is the second in a multi-part series on “Executing a SaaS Strategy: The Role of the Database.” You’ll see a new post from me every week for the next several weeks on the topic, but if you’d like to access the entire series now, you can download it here

Jeff KaplanJeff Kaplan is the managing director of THINKstrategies, the only strategic consulting firm focused entirely on the business implications of the transition of the technology industry from product-centric to services-driven solutions, including software as a service (SaaS), cloud computing and managed services. Follow Jeff on Twitter @thinkstrategies.

 

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