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MARKETWATCH: Will SaaS ever take off in Europe? There are two propositions to consider in assessing the future adoption of Software as a Service (SaaS) in Europe. The first is that SaaS has not featured notably in the lexicon of Data Centres across Europe, and it appears to be something of an America affair as firms such as Microsoft, Salesforce.com and SAP provision enterprise business software over the Internet to companies who would prefer subscription based services rather than accept large licensed services. This partly has to do with the economics of Data Centres, and their necessary focus on large enterprises, (although telco owned Data Centres have the operational scale and funding to target SMEs successfully) but suggests that the brunt of SaaS deployment still falls on independent software vendors (ISVs) and will therefore be highly fragmented unless channels consolidate. This is accentuated further by the need to adopt the Application Packaging Standard (APS), a key element of the platform, is used to integrate applications seamlessly. Secondly, and what is perhaps the most daunting factor in deploying SaaS across Europe, is the scale of Small and Medium-sized businesses (SMEs). The European Commission estimate that there are around 23 million (defined officially as those with fewer than 250 employees with an annual turnover of less than €50 million). The figure represents 99% of all enterprises. SMEs are widely dispersed across the regions 25 countries, and presents challenges to international marketers of SaaS attempting to breach the chasm. Conflicting evidence too presents an unclear picture of the market potential. Recent research by CMS Watch appears to confirm that adoption of SaaS for web content management is occurring at a slower rate in Europe than in the US which they attribute to national boundaries which limit the service's penetration. This seems an odd explanation. After all, SaaS services are delivered across a borderless Internet. The perspective is apparently contradicted by Saugatrack, the SaaS specialists who have recently reported increased SaaS demand across the region (quoted in OnDemand Blogging, 1 March 2008). Earlier in the year the company averred that SaaS is becoming an international phenomenon, driven by both local demand as well as large multi-nationals who are adopting SaaS business solutions on a global basis. While US SaaS adoption is clearly going “mainstream”, Europe and Asia are only now beginning to experience the steep adoption ramp that the US has witnessed over the past two years. Whereas average US market growth rates will likely slow into the 35-40 percent range in 2008, European market growth rates should exceed 60-70 percent next year. Recent Aberdeen research also suggests that EMEA's SaaS CRM usage levels for example are even with that of North America. One possible scenario will see the telcos dominating SaaS in Europe. NTT Europe Online for example has actively supported ISV’s in developing a SaaS proposition, and points to a series of commercial benefits including monthly revenue streams, accessing new clients who could not previously afford enterprise application solutions, and the competitive advantages of offering web-based hosted solutions that can be ‘turned on and off’ as needed. In addition there is no requirement for upfront capex for any hardware or software just the monthly fee, and in offering flexible solutions, customer churn is reduced. Swisscom IT Services AG, a subsidiary company of Swisscom AG, will offer hosted virtual and dedicated servers to complete their web hosting product portfolio using Parallels products. The addition of VPS and dedicated servers for Linux and Windows completes Swisscom's product set for small and medium-sized enterprises. However new developments suggest that competition in provisioning SaaS is if anything likely to intensify. LPI Level Platforms Inc, has launched a UK-based hosted service, that will enable data centres service providers to install and configure a hosted platform to allow for the provisioning of virtual dashboards for UK and European-based IT solution providers. Notably, the hosted version is fully multi-tenant and scalable with access to a comprehensive suite of features and functionality without the need to purchase add-on modules. The company say that European IT solution providers will benefit from the learning curve already experienced in the US, and leapfrog into managed service provisioning. Investment too in the sector has been brisk, with a series of funding rounds announced. Zuora, Inc., a new company that simplifies online subscription services, has received a USD 6.5 million Series A round of funding led by Benchmark Capital. Triton Pacific Capital Partners, LLC acquired a majority interest in AssetPoint, a provider of integrated Enterprise Asset Management (EAM) and Computerized Maintenance Management Software (CMMS). GeoLearning Inc., a provider of managed learning services and on-demand learning and performance platforms, secured an investment of USD 31 million from Fidelity Ventures. Hosting365 in Ireland also announced recently it is investing €2 million in its infrastructure, which will enable it to offer its customers on-demand IT services such as SaaS. Another emerging trend is hardware as a service (HaaS) which enables subscription based services for customers who wish to use of servers externally rather than try to manage them in-house themselves. As the market begins to absorb the entry of companies
such as Microsoft into the email hosting segment, it can be certain
that the SaaS play in Europe will be interesting, and one to watch in
the coming months.
Have you also seen our other consultant articles? Too Much
Greenwash?
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