Software-as-a-service targets the enterprise

Demand for software-as-a-service (SaaS) solutions has been growing at a considerable rate for some time now, fuelled by rapid expansion among smaller businesses and the growth in ecommerce, which as allowed small and large businesses to compete on a more level playing field.

However, many SaaS products have failed to match their maker's claims that they can scale effectively from a small business to a very big one, while others, such as NetSuite, have concentrated on core markets and vertical niches, rather than pushing a product not designed for a multi-national user into that environment.

With the launch of its One World product, NetSuite is adding functionality to its existing and established product that will allow it to exist and operate in a large, multi-national or multi-division enterprise environment. At the same time the company, which floated in December 2007, is positioning itself and its SaaS product to compete directly with large enterprise software vendors such as SAP, Oracle, Microsoft and even Google at a time when demand for SaaS, particularly in Europe, is growing at twice the rate of conventional client/server software deployments, particularly in the area of CRM.

According to data from IDC, SaaS represented 12 per cent of total CRM software revenue, growing to nearly 14 per cent in 2007, representing more than $1 billion (£500 million) in CRM software revenue alone.

It is that growth that is bringing large enterprise software vendors into the SaaS market, such as Oracle, which recently announced a major push into SaaS based on the many CRM acquisitions it has made in the last few years, in particular Siebel, which already had an on-demand CRM product.

The growth in interest in SaaS from larger enterprises stems largely from the need for integration. As companies grow, acquire and segment themselves, the business usually finds itself with a myriad of software products, and often the software infrastructure is segmented further by geographical region in order to work with local law and tax requirements, or simply to fit with cultural considerations and the need for autonomy for a business unit within the larger global enterprise.

"When a company grows to the level where it has some many different division, whether through organic growth or through acquisition, the business can easily end up with a multitude of different applications, with varying levels of integration between them," said Jay Jones, chief administrative officer of customer service support company Kana at the NetSuite One World launch.

"All too often, data integration and consolidation takes place in spreadsheets, providing a snapshot of a rapidly ageing period in the past rather than a current view of the business," he added.

While data mining and analysis can be perfectly straightforward at a local level, consolidating that data back to a head office for a complete company view or even a global view quickly becomes difficult, as issues of differing systems, currencies, trading practices and time zones begin to cloud the process.

Take the example of ABS-CBN, a broadcast and multimedia company based in the Philippines, but with autonomous business divisions in the UK, US, Middle East and mainland Europe. The company not only deals with things like the acquisition of content but also the retail of goods and services such as pre-recorded media and even phone cards to Philipino ex-pats.

It has opted to deploy the normal NetSuite application to its business units, using OneWorld to handle the consolidation of information for a global view, but without taking away autonomy from the local international businesses.

"We are an SAP user, but we are using NetSuite to support the local country businesses, while still having global control and view over the operations," said Genemar Simpao, chief information officer of ABS-CBN.

The company has deployed the NetSuite SaaS product alongside its SAP deployment in Australia, with a view to rolling it out in Europe, followed by Canada, the Middle East, then the US.

"Europe is the most complex region for us to deploy in, given the differences between local markets in each European state, but doing so should simplify the view of the business," added Simpao.

For software-as-a-service to continue to thrive in large enterprise environments, and to sit alongside or indeed compete with established enterprise software names, vendors need to continue their work to scale their products. They must serve tens or hundreds of thousands of users, and allow them to work within a global business segmented by geographical, economic and industry boundaries.

But they must still remain part of a larger single corporate entity. Companies such a SAP, Oracle, even Microsoft can offer this. Looking at the current crop of successful SaaS providers, the opportunity lies in offering the same functionality, but making it easier to use and deploy, and cutting cost of integration.

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