As a co-speaker at the “État de l’Art” roundtable of the “États Généraux de l’ASP 2007”, a major event organized in Paris by the ASP Forum, I was happy to observe the increasing maturity of the ASP/SaaS business model, although it must be said that major challenges still exist.
From a quantitative perspective, Markess International confirmed the growth of the ASP/SaaS market, about to reach 1B€ in France (nearly 9% of the overall software and service market) and expected to grow at a 24% CAGR over the 2006-2008 period (vs. 14% for the overall software and service market).
From a qualitative perspective, it must be noted that most application software vendors offer an ASP/SaaS delivery channel for their products – and those who are not yet there have the opportunity to leverage the technology and business frameworks promoted by the likes of Salesforce.com, Microsoft or IBM to reduce their time-to-market and investment needs. On the demand side, Mr Didier Lambert, President of the CIGREF and Director of Information Systems at Essilor, reassured that large enterprises were open to work with ASP/SaaS providers, confirming that the ASP/SaaS model should not solely targeted the SMB market.
But let’s have a look at the persisting challenges. About the SMB market first—while the ASP/SaaS model has proven to be an efficient way to deliver application software, it must be recognized that the model does not inherently solve the go-to-market challenge: how to promote and sell cost-effectively to thousands or millions of small and medium sized businesses? Local distributors and VARs are not likely to disappear by tomorrow morning.
Implementing an ASP/SaaS business model also requires specific challenges to be addressed: financing the higher investment/cash needs (caused by the delayed revenue collection and upfront platform/service implementation costs), substituting or inter-working with an existing traditional business model (upfront license, yearly support & maintenance), etc. Although not trivial, these challenges are worth being addressed seriously, considering the value of revenue recurrence and the level of operational profits that can be generated once the critical mass has been reached.
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