Software as a service. Cloud services. If you believed the hype, you’d think all managed service providers (MSPs) need to completely shift their customers from on-premise solutions to online solutions. But many of the strongest SaaS proponents still launch on-premise solutions for MSPs. Why? Because 80 percent of the software market will involve on-premise IT for years to come.
Just yesterday, Zenith Infotech launched an on-premise business continuity appliance that stores 48 hours of backups at 15-minute intervals, 14 daily backups, 5 weekly backups and 30 day backups. The appliance arrives even as Zenith continues to evangelize its SAAZ managed services platform.
Similarly, Datacastle Corp. is pushing forward with a data protection strategy that features on-premise and SaaS solutions. (Stay tuned for more news within the next few weeks.)
And Fonality — which specializes in IP PBXes — has actually trademarked the term “Hybrid-Hosted” as a way to describe the company’s blend of on-premise and hosted services.
Simple Math
No doubt, SaaS and cloud services are fast-growth markets for MSPs and VARs. But the SaaS pond is far smaller than the on-premise ocean.
Consider this: SaaS represented only 6 percent of the overall software market in 2007, though SaaS will grow to represent about 18 percent of software sales by 2013, Gartner estimates.
So I ask you this: If SaaS does grow to command 20 percent of the software industry, can you really afford to ignore the other 80 percent of the software market?
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Posted In: On Premise | Software as a Service and Hardware as a Service
Tags: Datacastle Corp. | Fonality | SaaS | SaaS and Managed Services | Software as a Service and Hardware as a Service | Zenith Infotech
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Joe,
Im going to disagree on this one. I think the Gartner statistics are misleading. I would assume that the overall software market includes O/S’s, Office, etc. Does it also include the software running in Datacenters or through the MS SPLA?
I would cite a recent article today that points to the opposite:
http://tiny.cc/Ij3bb
I think today’s economy provides ample acceleration to the Cloud or SaaS computing trend.
Hope your well!
Nick: Healthy debate drives the market forward. And strong, conflicting opinions will always be welcome on MSPmentor. Good to hear from you.
My take on SaaS vs. on premise: The vast majority of enterprise software providers (Oracle, SAP, Microsoft) are still on-premise for the most part. Those three companies alone likely represent more than $100 billion in annual revenues. (Sorry, I don’t have the data at my fingertips.)
Meanwhile, Salesforce.com is a SaaS market leader … but a $1 billion toddler compared to those older, bigger giants.
SaaS will grow super-fast. But the legacy guys are giant.
I’m leaning towards what Joe says. Large, Fortune companies want control over their own software and therefore gravitate towards the In House model, where as SMBs may not have the resources available to justify the time and costs, and go for hosted solutions. As a “service provider” the viable solution is to consider the market you want to go after and cater your needs to it.
The old saying “You can’t please all the people all the time” holds true. Know your market and your competition and develop the strongest solution you can and take lots of feedback from your customers.
SaaS is on the rise. At Karisoft we’ve got both models available of our IT Pro Dashboard.
We deal largely with the VSB (<20 seats) market these days, and SaaS is the new buzz at that level. I think that SaaS will really grow at that level, given its low pricepoint (at least short term) but agree that the enterprise will still hold a lot of on-premise apps, as Nick points out.
Don’t discount the VSB market though. They’re a huge part of the economy, and their role is shifting as technology enables them to do more…
Jim Van
Logicomm, Inc.
http://www.logicomm-inc.com
Jim, Team: I agree that large enterprises will stick mostly with on-premise apps rather than SaaS. However, those large enterprises are using a range of managed services — particularly managed security and increasingly managed unified communications — from big service providers…
Excellent points, and please note I am referencing the SMB market only, and more specifically service based industries with less than 250 employees.
To clarify my point, MSPs largely make the majority of their revenues by managing the complexity of systems. An exchange server for example commonly is managed at a higher fee than a file/print server. On premise software will continue to exist but the advanced services of Exchange, Sharepoint, Vertical Apps, OCS, CRM, etc will continue their migration into the cloud for the well known reasons presented in the SaaS vs On Premise argument.
Therefore, unless your business model consists of supporting firewalls, PCs, and intelligent NAS devices you will see a substantial drop in revenues.
I firmly believe that cloud computing represents a vast and deep shift that is far more significant and permanent of an impact to our industry than the shift from T+M to MSP.
If they can successfully bring gaming from the cloud (OnLive), then we’re really in for a whole new world…
Nick: We’ll, I can’t debate you on the SMB space. Our own company is a small but growing business, and 90 percent of our applications live in the cloud.