The potential of software as a service/hosted application services is huge. And the market is growing rapidly. nFold's local software research so far shows that almost 30% of companies now prefer to rent, lease or subscribe to software as a service - double the percentage in 2005. Most of our survey respondents agree that this trend is very important, but few have implemented it. The reality in South Africa is that our high cost of bandwidth is preventing local companies from keeping pace with their international counterparts. Ironically, affordable Internet connectivity services to the SOHO market, such as ADSL and HSDPA, have meant that smaller companies are adopting software as a service more rapidly than corporates.
So locally, we tend to see smaller companies able to streamline their operations using robust technology that would have been unaffordable to them a few years ago. This makes it possible for them to conduct business anywhere, anytime. There are no limits to the type of applications that can and are being offered as a service - from the simplest RFP automation system to the most complex ERP system. Current software licensing models are inadequate. Enterprise software suppliers need to partner with hosting companies and may need to redevelop or re-align their solution to suit this model. Many shy away from taking a bigger up-front risk than they have in the past, for the promise of more predictable subscription based revenues instead of purchase and support revenues. Software suppliers ignore this trend at their peril.
nFold has predicted since 2006 that "Anywhere Anytime" and "Payment Flexibility" are important trends in the local software industry. Software as a Service (SaaS) taps into both of these concepts. While the adoption of SaaS is constrained by the high cost of bandwidth in South Africa, the global market seems to be exploding. And according to our software research, local adoption is growing rapidly. SaaS solutions already available vary from point systems (like survey or proposal services) to enterprise systems (such as ERP or CRM services). There are new entrants well-poised to tap into this market, so incumbents in the software world need to beware. I would agree that for the moment incumbents should hedge their bets by offering software services over the Internet as well as more traditional download/install options. Most companies still prefer tradition.
