SAAS by definition lets a company outsource it’s IT operations and use software as a service. Now, what happens if the SAAS vendor is from one of the countries that specialize in outsourcing? Well, I call it OutSAASing just for the heck of it (I just googled and not a single result for this word, so I can probably say that I am the first to come up with this word, even if it’s stupid :)).
But most importantly, this article on Zoho indicates what it means to have the option of OutSAASing
“Marc Benioff, chief executive of Salesforce.com, has made an offer to buy Zoho for an undisclosed amount. Benioff seems appropriately nervous, since Salesforce.com’s sales and administration costs are high, eating up most of his earnings. Can he afford to compete if Zoho undercuts him at such a dramatic scale?”
A SAAS provider can typically expect to make decent margins by pooling resources and provide service to multiple customers. When I mean pooling resources, for a developer this could be using a single database, using a single middle-tier for multiple customers. For COOs and higher ups, it could also mean using a fewer DBAs, fewer Network admins and fewer people pooled to provide the service.
Recently Oracle announced a Single Tenant OnDemand CRM. For those familiar with web hosting models, this is like having your own server that you can reboot anytime you want and do whatever you want. Essentially it comes with a separate database and midleware for a single customer. Oracle’s move into virtualization in 2006 is perhaps with the intention of being able to provide single tenant model through virtualization.
But anyway, coming back to the OutSAASing, some of the recent developments in India regarding SAAS is what prompted me to write this article in the first place. First of them is NIIT’s announcement of offering ProcureEasy which can be a competitor to other SAAS providers in this space such as Coupa. The next is NIIT and Ramco Systems announcement of partnership to provide OnDemand ERP which is a competitor to NetSuite and may be Compiere when it gets to that stage.
Thing is, while Oracle’s single tenant system makes things “virtual private” infrastructure resources, the OutSAASing companies can simply choose to offer dedicated DBA, dedicated Sys Admin and if required, even a few developers into the mix in their overall offering to a few large customers and still maintain their margins. Now all of a sudden, instead of just “Software As A Service”, it becomes “IT Department As A Service”. Ofcourse, large MNCs are already having a lot of presence in India and China and wherever there is quality labor available cheaply and can follow the suite. But, with manufacturing gone outside the US in the past decades and services replacing it, SAAS being an internet oriented offering and hence can be delivered from anywhere, even SAAS is likely to slip away from the US. Ofcourse, it’s not easier done than said. When companies like Amazon itself have outages to their popular platform web services such as S3, the key for the success of OutSAASing is precise execution like what Japanese did with quality and cars. Providing better SLAs, quick response times and six-sigma precision.
On the other hand, inspite of throwing additional cheaply available personnel, powercuts and even internet outages make it difficult to centralize the infrastructure at a single place. So, the infrastructure should perhaps be distributed closer to the customer countries while the operations can be centralized.