software as a service in asia pacific: expanding the reach

Software as a Service in Asia Pacific: Expanding

the Reach & Appeal of Software

MARKET RESEARCH REPORT

July 23, 2007

Lead Analysts:

Ravi Shekhar, Senior Market Analyst

Dane Anderson, Vice President, Research

EXECUT IVE SUMMARY ................................................................................................................................. 3

TAXONOMY .................................................................................................................................................. 6 What is Software-as-a-Service (SaaS)? ................................................................................................ 6

Who is a SaaS Provider? ........................................................................................................................ 7

RESEARCH METHODOLOGY ........................................................................................................................ 8

Secondary Research.............................................................................................................................. 8

Supply-side Primary Research ............................................................................................................... 8

Demand-side Primary Research ........................................................................................................... 8

OVERV IEW OF THE AS IA PACIF IC SAAS MARKET ................................................................................. 10

SaaS vs. Traditional Enterprise Software Applications Market......................................................... 10

SaaS Application Dynamics ................................................................................................................ 11

Vertical Market Dynamics ................................................................................................................... 13

Adoption Trends by Country ............................................................................................................... 14

Key Adoption Drivers............................................................................................................................ 14

Barriers to Adoption.............................................................................................................................. 15

SAAS: PR IMARY SURVEY RESULTS ........................................................................................................... 16 SaaS Awareness.................................................................................................................................... 16

Adoption Drivers and Inhibitors........................................................................................................... 19

Satisfaction Level with SaaS Applications ......................................................................................... 21

Data Residency .................................................................................................................................... 22

Future SaaS Adoption Plans ................................................................................................................ 23

KEY SAAS DYNAMICS BY APPL ICAT ION ................................................................................................. 24 On-Demand CRM ................................................................................................................................ 24

Web Collaboration............................................................................................................................... 26

ERP and SCM Applications.................................................................................................................. 27

On-Demand HR Applications ............................................................................................................. 28

COUNTRY PROF I L ES ................................................................................................................................... 30 Australia ................................................................................................................................................. 30

China/Hong Kong ................................................................................................................................ 32

India ....................................................................................................................................................... 34

Singapore .............................................................................................................................................. 35

SAAS & AS IA PACIF IC ISVS ................................................................................................................... 42

THE AS IA PACIF IC COMPET I T IVE LANDSCAPE ....................................................................................... 44 Salesforce.com ..................................................................................................................................... 45

WebEx .................................................................................................................................................... 45

RightNow Technologies ....................................................................................................................... 46

Oracle .................................................................................................................................................... 46

NetSuite ................................................................................................................................................. 46

Citrix Online ........................................................................................................................................... 47

IBM .......................................................................................................................................................... 47

Microsoft ................................................................................................................................................ 48

Progress Software ................................................................................................................................. 49

SAP ......................................................................................................................................................... 49

Symantec .............................................................................................................................................. 50

SPR INGBOARD RECOMMENDAT IONS ....................................................................................................... 51

Table of Contents

Figure 1: Asia Pacific SaaS Applications Market Revenue (US$M) and Annual Growth, 2006-

2010................................................................................................................................................. 10

Figure 2: Asia Pacific SaaS Revenue by Application, 2006............................................................. 12

Figure 3: Asia Pacific SaaS Revenue by Country, 2006 ................................................................... 14

Figure 4: SaaS Awareness among Asia Pacific Companies ........................................................... 16

Figure 5: SaaS Awareness among Asian Enterprises, by Country .................................................. 17

Figure 6: SaaS Adoption among Asian Enterprises........................................................................... 18

Figure 7: SaaS Applications Used By Asia Pacific Enterprises ......................................................... 19

Figure 8: Primary Reason for Adopting SaaS..................................................................................... 19

Figure 9: Primary Reason for Not Adopting SaaS ............................................................................. 20

Figure 10: Perceived Savings from Adopting SaaS .......................................................................... 21

Figure 11: SaaS Application Satisfaction............................................................................................ 22

Figure 12: Data Residency & Perceived Performance.................................................................... 22

Figure 13: SaaS Applications Being Considered for Deployment in Next 12 Months ................. 23

Figure 14: On-Demand CRM Market Revenue (US$M) and Annual Growth in Asia Pacific,

2006-2010 ....................................................................................................................................... 24

Figure 15: Web Collaboration Market Revenue (US$M) and Annual Growth, 2006-2010 ......... 26

Figure 16: On-Demand Back-Office Revenue (US$M) and Annual Growth, 2006-2010 ............ 27

Figure 17: On-Demand HR Applications Revenue (US$M) and Annual Growth, 2006-2010 ..... 28

Figure 18: Other* On-Demand Applications Revenue (US$M) and Annual Growth, 2006-2010

......................................................................................................................................................... 29

Figure 19: Australian SaaS Market Revenue (US$M) and Annual Growth, 2006-2010 ................ 30

Figure 20: Primary Reason for Adopting SaaS, Australia ................................................................. 31

Figure 21: Primary Factor Preventing SaaS Adoption, Australia..................................................... 31

Figure 22: China/Hong Kong SaaS Market Revenue (US$M) and Annual Growth, 2006-2010 .32

Figure 23: Primary Reason for Adopting SaaS, China ...................................................................... 32

Figure 24: Primary Factor Preventing SaaS Adoption, China ......................................................... 33

Figure 25: India SaaS Market Revenue (US$M) and Annual Growth, 2006-2010......................... 34

Figure 26: Primary Reason for Adopting SaaS, India........................................................................ 34

Figure 27: Primary Factor Preventing SaaS Adoption, India ........................................................... 35

Figure 28: Singapore SaaS Market Revenue (US$M) and Annual Growth, 2006-2010 ............... 36

Figure 29: Primary Reason for Adopting SaaS, Singapore .............................................................. 36

Figure 30: Primary Factor Preventing SaaS Adoption, Singapore.................................................. 37

Figure 31: Share of Direct Sales in SaaS Business by Application ................................................... 38

List of Figures

Figure 32: Local Resellers: Necessary or Not When Buying SaaS ................................................... 39

Figure 33: Local Resellers: Helpful or Not When Buying SaaS.......................................................... 39

Figure 34: Areas Local Resellers can Add Value To the Procurement & Installation of SaaS

Applications................................................................................................................................... 40

Figure 35: Channel Roles That Can Add Greatest Value................................................................ 40

Figure 36: Asia Pacific SaaS Revenue Vendor Market Share ......................................................... 44

Table 1: Respondent Breakup By Country & Users/Non Users .......................................................... 8

Table 2: Respondent Breakup by Employee Size ............................................................................... 9

Table 3: SaaS Enterprise Applications by Category......................................................................... 12

Table 4: Vertical Specific SaaS Applications..................................................................................... 13

Table 5: Local Vendors Offering SaaS Applications......................................................................... 42

List of Tables

2

INTRODUCTION The appeal of Software as a Service (SaaS) is growing rapidly

in Asia Pacific. Many organizations are deploying SaaS to

meet their key IT needs and overcome challenges posed by

the rising cost of deploying and managing traditional software

systems. Increasingly, SaaS is also creating a new breed of first-

time software users, mostly among small and medium

enterprises. This trend is encouraging many local ISVs to use

the SaaS model to widen their business universe and serve

new markets and customers.

Focusing on these and many other key trends in the Asia

Pacific enterprise SaaS market, this report analyzes the

growing adoption of SaaS in the region. A key focus area of

the report is to provide an array of market data – including

market size and growth forecasts – for key segments of the

enterprise SaaS market in Asia Pacific (excluding Japan).

Through our survey of 385 CIOs and IT decision-makers at large

and SMB enterprises in Australia, China, India, and Singapore,

we have assessed the level of awareness, adoption and

usage in more depth. We have also analyzed trends in the

SaaS business model pursued by local ISVs, in addition to

profiling leading SaaS vendors in the region.

3

EXECUTIVE SUMMARY

The appeal and reach of software as a service (SaaS) continues to

grow rapidly among enterprises in Asia Pacific. A substantially increased

awareness of the SaaS concept, coupled with a growing inclination

among enterprises and business users to try web-based applications,

are among the key factors that have contributed to a dynamic

regional SaaS market. The success of vendors like Salesforce.com and

WebEx in reinforcing the credibility, reliability and sustainability of the

SaaS model, definitive announcements by large software vendors like

Microsoft and Symantec who have declared their intention to deliver

software on demand, and the growing interest in SaaS among local

ISVs who have begun to develop SaaS applications, are other factors

that have led to market expansion.

From a numbers perspective, SaaS market momentum picked up in

2005 and continued in 2006, with growth rates close to what we had

projected in our first report on the Asia Pacific SaaS market (The

Software as a Service Market in Asia Pacific, 2005 to 2008: Blazing New

Routes-to-Market (May 2006). Our six key findings from this research

study are provided below:

1. SaaS Market Growth Momentum Will Last for the Long Run: The Asia

Pacific SaaS enterprise applications market amounted to US$154

million in 2006, and generated 93% revenue growth over the

previous year. The market is projected to grow at a CAGR of 66%

from 2006 to 2010. Springboard Research believes that given its

current momentum, SaaS will account for more than 15% of the

enterprise software applications market in Asia Pacific by 2010. We

expect the Asia Pacific SaaS market to reach US$ 1.16 billion at the

end of the period under review.

2. Business Users Emerging as Key Drivers of SaaS Adoption: While the

IT department remains firmly in control of software deployments in

most organizations, especially large ones, business users are

emerging as key influencers of SaaS adoption. In many instances,

SaaS applications are deployed for business applications without

the involvement or knowledge of the IT department, as business

users find it easy to subscribe to and use SaaS themselves. Ease of

use is also one of the key reasons why SaaS applications are

increasingly finding favor with SMBs who do not have IT

departments or who have little exposure to IT applications.

3. CRM is One of Many Applications Used in the Asia Pacific SaaS

Market: Although customer relationship management (CRM)

remains the largest SaaS application segment by revenue,

representing 45% of total Asia Pacific SaaS revenue in 2006,

Springboard Research data shows that organizations are aware of

and use many different types of SaaS applications. The most widely

used include desktop office applications (word processors,

spreadsheets), e-mail, security/compliance applications, and HR-

payroll/workforce management. CRM (mostly salesforce

automation (SFA)), collaboration tools (web conferencing &

4

messaging), enterprise resource planning (ERP), accounting, and

supply chain management (SCM) are next in order of usage.

4. SaaS is Encouraging New Entrepreneurship in Asia Pacific: The

success of SaaS is attracting a significant number of local IT

professionals and ISVs to the application software market. SaaS is

offering new market opportunities for small ISVs that could

previously not sell to SMBs without an IT staff. Moreover, partnerships

with leading SaaS providers are helping ISVs reach markets beyond

their local geographies.

5. Large Vendors Now Have More Definitive SaaS Strategies: Vendors

like Microsoft and Symantec have now developed more clear-cut

SaaS market strategies. Springboard Research believes that these

big players’ entry in SaaS will change the competitive landscape of

the market, currently dominated by pure-play SaaS vendors like

Salesforce.com, RightNow Technologies and WebEx, among others.

The entry of the large vendors into the marketplace is also

expected to force mergers and acquisitions, re-alignment of players

and emergence of new alliances, as in the case of the recent

partnership between Salesforce and Google.

6. SaaS Needs Channels to Grow: The majority of the respondents

(71%) Springboard Research interviewed for this report believes the

involvement of a local reseller or agent is necessary when buying

software-as-a-service applications. However, most SaaS application

sales in Asia Pacific are made directly without the involvement of a

channel partner. A number of factors, including lack of experience

and knowledge of application business processes, as well as low

profit margins for SaaS applications are keeping channels away

from selling SaaS.

In addition to these key findings, other prominent study results are

outlined below:

� The primary factors driving enterprise adoption of SaaS applications

are the ease of its use and management, followed by the lower

cost of ownership when compared to traditional software.

Springboard Research considers “ease of use” as the key factor

driving SaaS adoption by both large and SMB enterprises.

� The primary inhibiting factor to SaaS adoption is lack of perceived

business benefit. Many respondents are not deploying SaaS

because they believe traditional licensed software is less expensive,

and they also view SaaS applications as technologically less

mature. Security concerns and a lack of awareness of the concept

also prevented many companies from deploying SaaS.

� Even as leading SaaS vendors like Salesforce.com, WebEx,

RightNow Technologies and NetSuite continue to lead the SaaS

market, local ISVs and some small US vendors are beginning to find

customers in Asia Pacific. According to Springboard Research data,

small vendors accounted for 54% of SaaS market revenue in 2006.

5

� Compared to 2006, there has not been much change in SaaS’

geographical spread across Asia Pacific. Australia is still the most

mature market in the region with a 37% share, and China, Korea,

India and Singapore are the other leading markets in the region.

6

TAXONOMY

What is Software-as-a-Service (SaaS)?

Springboard Research defines Software-as-a-Service (SaaS) as a

software delivery model in which application software is delivered to

users via a web browser. Users do not buy the license for the software,

but only a right to use it on a subscription basis. A user may subscribe to

all the features/functionalities of the software or just a portion of them.

Springboard Research also defines the SaaS model as on-demand

software and/or on-demand application.

The key characteristics of SaaS are:

� The software application is not owned by the customer, and is only

rented for use.

� The software resides on a central server and not on the customer’s

computer. The user accesses the application via a web browser

and the SaaS provider is responsible for software maintenance and

performance.

� The primary value delivered by SaaS is the continuous and ongoing

support for the application by the service provider. Network-based

access allows maintenance, support and upgrades to the software

from the provider’s data center. The SaaS provider is 100%

responsible for the maintenance and upgrade of the software.

� The architecture, management and pricing of the application

mimic the one-to-many model rather than the one-to-one model.

Enterprise software delivered as SaaS include business applications such

as customer relationship management (CRM), web conferencing and

collaboration applications, HR applications like talent management

and payroll, enterprise resource management (ERM) applications like

ERP, supply chain management (SCM), product lifecycle management

(PLM) and so on.

This report excludes software applications or services aimed mainly at

the consumer market. While online companies like Yahoo and Google

also deliver software as a service, we have excluded them for two

reasons: a) those services are mostly used by consumers, which is a

distinct market with unique characteristics and, b) their revenue is not

exclusively derived from selling software services, but often provided for

free or subsidized by advertising.

We have also excluded the business of application hosting from the

scope of this report since the model does not meet our definition of

SaaS. In the application hosting model, the customer has to pay for the

software license. The customer therefore owns the software application

and is responsible for upgrades and maintenance.

7

Who is a SaaS Provider?

A SaaS provider is any company that delivers SaaS over the Internet

and is accountable for the software’s maintenance, upgrades and

associated services. The SaaS provider is responsible for hosting,

deploying, customizing, configuring and delivering the software. In our

view, there are three broad categories of SaaS providers active in the

Asia Pacific region. These are:

1. Net-Native Software-as-a-Service Application Providers: These are

SaaS providers with proprietary multi-tenant software applications

designed for delivery over the web. These companies have their

own data centers that host, manage and deliver SaaS applications.

SaaS vendors like Salesforce.com, RightNow Technologies and

WebEx fall in this category.

2. Hybrid Software-as-a-Service Application Providers: These providers

are traditional enterprise software vendors who primarily deploy on-

premise software delivery models that are diversifying into SaaS

offerings to supplement their on-premise businesses. Vendors such

as Oracle, Microsoft, SAP and Symantec fall into this category.

3. Software-as-a-Service Providers Delivering Third-Party Applications:

These providers primarily play the role of application aggregators

and deliver SaaS applications over the web using their

infrastructure. Application service providers (ASPs), web hosting

companies, telecom and Internet service providers who deliver

third-party multi-tenant software applications via a web browser

form this group of SaaS providers. A prominent example of such a

company in the region is Australia-based Web Central.

8

RESEARCH METHODOLOGY

The research conducted for this report was executed from March to

May 2007. The methodology employed included secondary research,

and both supply- and demand-side primary research. Additional details

on each of these research elements are provided below.

Secondary Research

The first research phase involved an extensive secondary research

exercise to review public information sources on the Internet and other

mediums. Key information sources included SaaS vendor websites,

earnings statements and white papers. In addition, reports, articles,

websites, blogs and journals from other research bodies, associations

and government entities were used to create an initial framework of

understanding on the SaaS dynamics both globally and in Asia Pacific.

Supply-side Primary Research

Interviews were then conducted with the heads of Asia Pacific

operations for leading SaaS vendors and large traditional software

providers. Respondents were led through a structured questionnaire to

gather quantitative and qualitative input on their operations,

performance, strategies and views on the overall Asia Pacific SaaS

marketplace. Data from interviews was consolidated, checked for

consistency and accuracy, and then inserted into Springboard’s SaaS

data model.

Demand-side Primary Research

In order to include user perceptions and adoption into the research

methodology, a total of 385 CIOs, IT managers and line of business

managers from both large enterprises and SMBs were interviewed in

Australia, New Zealand, China, India and Singapore. Structured

interviews were conducted over the phone to gather quantitative and

qualitative information regarding SaaS adoption and usage within the

company. A breakdown of survey respondents follows below:

Table 1: Respondent Breakdown by Country & Users/Non-Users

Country SaaS Users Non-SaaS Users Total

Australia 42 40 82

New Zealand 11 10 21

China 50 50 100

India 50 48 98

Singapore 32 52 84

Total 185 200 385

9

Table 2: Respondent Breakdown by Employee Size

Verticals SaaS Users Non-SaaS Users Total

1-99 54 71 125

100-299 35 29 64

300-499 24 14 38

500-999 18 19 37

1000 & Above 48 73 121

Total 179 206 385

10

OVERVIEW OF THE ASIA PACIFIC SAAS MARKET

The Asia Pacific Software-as-a-Service (SaaS) market continues to grow

at one of the fastest rates in the world. A host of factors, primarily a

significantly increased awareness of the SaaS concept and a

proliferation of new SaaS applications – several of them being

developed by local ISVs – have added to market momentum. In almost

every way, SaaS is more mainstream than it was a year ago. This is

amply reflected in not just the growing reach of the on-demand

applications that are being deployed with ease by both large and SMB

enterprises across verticals, but also the increasing involvement of

business users in influencing SaaS deployment in their organizations.

Local ISVs have also grown increasingly interested in providing

applications via the SaaS model.

Springboard Research estimates show that the Asia Pacific SaaS market

(excluding Japan) has been growing along the lines we had projected

in our earlier report (The Software as a Service Market in Asia Pacific,

2005 to 2008: Blazing New Routes-to-Market (May 2006). Per our

forecast, the SaaS market grew by 93% in 2006 to reach US$154 million.

We expect this market to grow to US$1.16 billion in 2010, registering a

CAGR of 66% from 2006 to 2010 (Figure 1).

Figure 1: Asia Pacific SaaS Applications Market Revenue (US$M) and Annual Growth, 2006-2010

Source: Springboard Research, 7/2007

SaaS vs. Traditional Enterprise Software Applications Market

Springboard Research forecasts that at its current pace of growth, SaaS

will gain share rapidly against the traditional enterprise software

applications market in Asia Pacific over the next several years. It is

noteworthy that while the SaaS applications market, as mentioned

earlier, will grow at a CAGR of 66%, the traditional enterprise software

applications market will only grow at a CAGR of 11-13% to reach during

the same period. We believe that by 2010 SaaS will represent over 15%

of the enterprise applications market in Asia excluding Japan.

0

200

400

600

800

1000

1200

1400

0%

40%

80%

120%

Revenue (US$M) 154 274 501 785 1165

Growth 93% 78% 83% 57% 48%

2006 2007 2008 2009 2010

11

From a global perspective, Springboard Research estimates that Asia

Pacific accounted for around 10% of the global SaaS market in 2006, up

from 8% in the previous year.

Springboard Research forecasts for Asia Pacific’s SaaS market size is

based on the following key assumptions:

• The increased hype surrounding web-based applications,

combined with growing Internet penetration and usage among

businesses, especially the SMBs, will drive many organizations to

adopt web-based applications. We expect most organizations that

use enterprise application software to deploy some sort of SaaS

application in the near future.

• A significant portion of the growth in SaaS adoption will come from

SMBs who have very little or no exposure to IT applications. SMBs

represent a market that is currently not being served or has been

beyond the reach of on-premise enterprise application vendors.

Given cost advantages, ease of use and management, SaaS is now

likely to be among SMB’s top choices for software.

• There will be an increased effort by large application vendors like

Oracle and SAP to tap the SMB market by customizing their existing

applications to meet SMB-specific IT needs. SaaS will be a key part

of their strategy for this market.

• There will be a proliferation of new SaaS applications that are more

easily available, leading many more organizations to use them. The

increase in new SaaS applications will be driven by both local ISVs,

as well as leading licensed application vendors.

SaaS Application Dynamics

As we had indicated in our first study, SaaS is moving beyond CRM. The

proliferation of new SaaS applications (detailed in Table 3) has been

one of the most noticeable trends in the Asia Pacific market. While

many of these new applications have come to the region from US-

based vendors looking to gain a foothold in the Asian market, several

SaaS programs are now being offered by local ISVs. Additional details

on Asia Pacific ISVs and their recent SaaS activities are provided in the

SaaS & Asia Pacific ISVs chapter of this report.

Springboard Research data shows that organizations are aware of and

are using many different types of SaaS applications. The most widely

used include Office applications (word processors, spreadsheets), e-

mail, security/compliance applications, and HR, payroll/workforce

management. CRM, collaboration tools (web conferencing &

messaging), ERP, accounting, and supply chain management are next

in order. It is important to note that not all of these applications

generate revenue. For instance, Google Docs and Spreadsheet – two

applications that are gaining popularity among enterprises – are

basically free software.

CRM remains the largest SaaS application segment by revenue in the

region, representing 45% of total SaaS revenue in 2006. However, its

share in the overall SaaS market is declining. CRM is followed by

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collaboration applications. Our understanding is that among all the

SaaS applications, these two generate the most revenue. As such, even

if more organizations are using other types of SaaS applications, these

two contribute most to regional revenue (Figure 2).

Figure 2: Asia Pacific SaaS Revenue by Application, 2006


Key SaaS applications are illustrated in greater detail in Table 3. Of note

is that collaboration is emerging as the most dominant form of SaaS

application. That is because even as licensed software applications

dominate the software applications category, collaboration software

applications, like conferencing, messaging, and document

management, are becoming mostly web-based.

Table 3: SaaS Enterprise Applications by Category


SaaS applications are often being deployed in “islands” within an

enterprise, in contrast to licensed applications that are usually

deployed throughout the enterprise. Despite this, Table 3 shows that

Front Office/BI

Back Office Collaboration Desktop IT Infrastructure

CRM ERP Conferencing Word

processors

IT

infrastructure

management

Web

Analytics SCM

Document

Management Spreadsheets

Remote PC

Access

Billing PLM

Shared

calendars,

contact lists &

tasks

Remote IT

Services

HR/Workforce

Management/Performance

Management

E-mail

management

Security

Payroll Messaging

Accounting Whiteboards

Budgeting &

Planning/Expense

Management

Desktop sharing

Content Management

Other

7% HR

7%

ERP/PLM/SCM

9%

Collaboration

32%

CRM

45%

13

there is an array of SaaS applications that can be deployed in many

different departments across an enterprise.

A key SaaS trend has been the proliferation of vertical-specific SaaS

applications, some which are mentioned in Table 4.

Table 4: Vertical Specific SaaS Applications


Vertical Market Dynamics

High-tech businesses, financial services, healthcare and business

services (HR, recruiting firms, and legal services), education and the

non-profit sector have been the more enthusiastic adopters of the on-

demand model. Companies in these verticals have a relatively better

understanding of the SaaS model and its benefits. Springboard

Research data shows that SaaS is gaining almost equal traction in both

large and SMB enterprises in many of these vertical industries.

In Australia and Singapore, a significant number of government

organizations also have deployed SaaS. In Singapore especially, the

government has been a significant driver of SaaS adoption. In one

example, the National Council of Social Services, which is the umbrella

organization for all social services in Singapore, has deployed

justlogin.com, an online software service, in all its departments.

Application Vertical Vendor

Policy & claims

administration system for

property & casualty

insurance industry

Insurance BIPT

Educational campus

management solution Education Campus Management

Litigation lifecycle

management Legal Services CaseCentral

Retail Management Retail CORESense

Commerce & fulfillment

solutions for retailers &

direct-to-consumer

initiatives

Retail Vcommerce

Dealer

tracking/management

solution

Automobile DealerTrack

Medical Appointment

Scheduling & Electronic

patient record,

collaboration

Healthcare Medtech

Healthcare operations Healthcare Working Systems

Sales Information System Hi-Tech Manufacturing

(Semiconductor) Platte River Systems

Hotel reservation Hospitality vSplash TechWorks

Derivatives risk

management Financial Services Pyxis Systems

14

Adoption Trends by Country

Australia remains the largest market for SaaS applications in the region

and is the closest aligned to North America in terms of adoption trends.

The country has a thriving community of ISVs and other SaaS providers

who have helped build awareness and momentum in the market.

China, India, Korea and Singapore are other key markets in Asia Pacific.

Together with Australia, these countries account for around 77% of the

SaaS market in the region. Additional detail on country dynamics in key

markets is provided in the Country Profiles chapter of this report.

Figure 3: Asia Pacific SaaS Revenue by Country, 2006


Key Adoption Drivers

The relatively lower cost of SaaS applications as opposed to traditional

software, ease of use, management and implementation are the key

factors that make SaaS attractive. Although cost is important, our

research has shown that factors other than cost are the primary

considerations for the majority of organizations deploying SaaS. Most

organizations find SaaS attractive because it can be deployed quickly

and easily, which is a dynamic observed in both the SMB and large

enterprise market segments.

The growing adoption of the Internet as a business tool (or Web 2.0, as

some call the trend) by regional enterprises is the key external factor

driving SaaS adoption, especially among SMB enterprises. Internet

penetration among Asian enterprises has been growing steadily and is

increasingly pushing them toward using web-based applications. In a

significant number of cases, implementation of web-based applications

is initiated by business users without IT department involvement.

Other

23%

Singapore

7%

Korea

10%

India

11%

China/HK

13%

Australia

36%

15

Moreover, many of the region’s SMBs that could not afford licensed

software applications because they involved capital and operational

expenditures beyond their budget, and also because they did not

have IT manpower to manage them, are adopting SaaS applications to

enhance operational efficiency and boost productivity.

Barriers to Adoption

The primary factor preventing companies from adopting SaaS is lack of

recognition of the business benefit. Many respondents are not

deploying SaaS as they perceive licensed software to be cheaper and

also consider SaaS applications technologically less mature. Concerns

related to security also prevented many companies from deploying

SaaS. All this essentially points toward an inadequate awareness and

understanding of the SaaS concept. As such, Springboard Research

believes this insufficient awareness and understanding is the most

important challenge facing SaaS market growth in the region.

Detailed data on the key drivers of SaaS adoption among organizations

and the inhibiting factors preventing adoption is presented in the next

section of this report.

16

SAAS: PRIMARY SURVEY RESULTS

As highlighted in the methodology section of this report, Springboard

conducted interviews with CIOs and IT managers in 385 large and SMB

enterprises in Australia, New Zealand, China, India and Singapore to

assess the level of SaaS awareness, adoption and perception in the

region. Vertical industries covered in our survey primarily included

banking and financial services, public sector, healthcare, retail,

education, manufacturing, telecommunications and business services.

SaaS Awareness

There has been a substantial increase in SaaS awareness among Asia

Pacific enterprises. From our respondent base comprised of both large

and SMB enterprises, 75% reported awareness of SaaS with only 25%

reporting a lack of awareness (Figure 4). Awareness levels are nearly

equal in large and SMB enterprises. It should be noted that in our first

survey on SaaS awareness and adoption, we had reported a 41% SaaS

awareness rate among the SMB respondents. This dramatic shift clearly

demonstrates the gained awareness SaaS is experiencing in the market

within just 12 months.

Figure 4: SaaS Awareness among Asia Pacific Companies

Q: Are you aware of the concept of Software-as-a-Service or On-Demand Software?

N=385 (2007); 210 (2006)


Increased marketing by SaaS vendors, hype generated by

announcements from Microsoft and Google, among others, and

growing Internet usage among businesses, have all played a key role in

building SaaS awareness in Asia Pacific.

Furthermore, many respondents, even if unfamiliar with the term “SaaS,”

were fairly aware of the general concept. This increasing awareness of

SaaS is a key contributor to growth in the market. However, it is

59%

25%

41%

75%

0% 20% 40% 60% 80%

2006

2007

Yes

No

17

important to emphasize that awareness does not always equal

understanding. Although respondents may have heard of SaaS, some

might have an incomplete or inaccurate understanding of the

concept, how it works and what benefits it offers (as is reflected in some

of the reasons they have cited for deploying SaaS applications).

Among countries in the region, Australia has the highest awareness

levels while China has the lowest. Nevertheless, SaaS awareness has

increased substantially across the four countries that we surveyed

(Figure 5).

Figure 5: SaaS Awareness among Asian Enterprises, by Country

Q: Are you aware of the concept of Software-as-a-Service or On-Demand Software?

N=385


As with any new technology or concept, a rise in awareness is a positive

sign and a foundation upon which the market can be built. From that

perspective, the current level of SaaS awareness in Asia Pacific is a very

encouraging trend that can be exploited by SaaS vendors to tap the

growing opportunities in the regional market.

SaaS Adoption Increased awareness and the continuous hype surrounding SaaS have

raised the level of penetration of web-based applications among Asia

Pacific enterprises. As Springboard Research data shows, 46% of

respondents indicated their company had subscribed to SaaS. Once

again, survey results clearly demonstrate the SaaS momentum

generated in the region over the past 12 months, as the share of

adopters in our survey rose from 29% the previous year to the

aforementioned 46% in 2007. (Figure 6)

A majority of the respondent companies have deployed SaaS in

specific departments or for specific business uses. Examples of

enterprise-wide deployment of SaaS are few and far between. This is

largely because of two reasons. One, organizations are still wary of

relying too much on SaaS and prefer to deploy it for non-core functions;

72%

89%

89%

92%

0% 20% 40% 60% 80% 100%

China

Singapore

India

Australia/NZ

18

two, most SaaS applications in the market are function-specific (for

instance, SFA, payroll management, etc.).

Figure 6: SaaS Adoption among Asian Enterprises

Q: Does your organization currently subscribe to any SaaS applications?

N=385 (2007); 210 (2006)


Although CRM remains the largest SaaS application segment by

revenue in the region, representing 45% of total SaaS revenue in 2006,

Springboard Research data shows that organizations are aware of and

use many different types of SaaS applications. The most widely used

include Office applications (word processors, spreadsheets), e-mail,

security/compliance applications, and HR-payroll/workforce

management. CRM (mostly SFA), collaboration tools (web

conferencing & messaging), ERP, accounting and SCM come next.

(Figure 7)

It is important to highlight that respondents were not asked to follow

very strict definitions of SaaS applications when identifying the

application they use. Although we see high demand for security SaaS

applications, we believe the adoption figures from the survey are

skewed upward by software application upgrades and renewals done

online, which does not fit into our SaaS definition since most of these

applications resides on premises. Nevertheless, with Symantec’s

impending SaaS release – and those of other security vendors – we

expect to see strong adoption of pure security SaaS software

throughout the forecast period.

71%

54%

29%

46%

0% 20% 40% 60% 80%

2006

2007

Yes

No

19

Figure 7: SaaS Applications Used By Asia Pacific Enterprises

Q: What SaaS/On-Demand Software Application are you currently using?

N=179 (SaaS Adopters)


Adoption Drivers and Inhibitors

The primary adoption driver cited by the respondents is SaaS’ ease of

use and management (33%). When combined with ease of

implementation and low maintenance, it is clear that the ease with

which SaaS applications can be deployed, used and managed are the

key SaaS drivers in the region. Collectively, these factors represent over

55% of the primary drivers cited by respondents (Figure 8).

Figure 8: Primary Reason for Adopting SaaS

Q: What is the primary reason your company subscribed to SaaS?


8%

10%

18%

20%

22%

27%

30%

33%

39%

0% 10% 20% 30% 40% 50%

Other

Supply Chain Management

ERP

Conferencing / Collaboration

CRM

HR-Payroll Management

Security / Compliance

E-Mail

Desktop Office Applications

Other

9%Scalability

6%

Zero / Low

maintenance

9%

Easy and

quick to

deploy

15%

Business

Benefits

11%

Lower cost of

ownership

18%

Ease of use

and

management

32%

20

The lower cost of ownership associated with SaaS applications remains

a key driver of its adoption in Asia Pacific. Although only 18% of the

SaaS user respondents cited it as the primary factor in adoption, 39%

stated it as the second most important factor in their decision to deploy

a SaaS application. A significant number of these respondents were

first-time users of any enterprise software application.

”Lack of business requirement” is the prime inhibiting factor for 33% of

respondents. Interestingly, vendor support and reliability are not

significant concerns, even though 12% of respondents still consider SaaS

applications less secure. However, when asked if there were any other

reason that prevented them from deploying SaaS, a significant number

of respondents cited factors like lack of technological maturity, security

and difficulty in finding a SaaS vendor.

Springboard Research believes that the lack of business requirement is

the prime inhibitor due to three key reasons. One, respondents find it

difficult to get a SaaS application that meets their business

requirements; two, they have inadequate understanding of how a SaaS

application can meet their business needs; and three they are not

aware if the applications they need even exist.

Figure 9: Primary Reason for Not Adopting SaaS

Q: What is the primary reason your company does not subscribe to SaaS?

N=206 (Non-Adopters)

Source: Springboard Research, 672007 [[

Bandwidth limitations in some Asian countries and user concern with

transitioning mission-critical applications to the SaaS model are the

other factors inhibiting adoption in the region. Bandwidth is particularly

an issue in China and India where organizations still find it difficult to get

quality bandwidth.

On the other hand, an increased awareness and understanding of the

SaaS concept has had a positive impact on cost perceptions. As such,

unlike in 2006, this year has seen a lower number of respondents who

believe that buying SaaS software licenses is less expensive. However,

2%

3%

4%

7%

11%

11%

15%

15%

34%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Vendor support is an issue with SaaS

Reliability is an issue with SaaS

Finding a SaaS vendor is difficult

Centralized decision

Security is an issue with SaaS

Low awareness about the concept

Licensed software is cheaper than SaaS

Technology is not mature

No business requirement

21

since 14% of respondents still consider licensed software cheaper, the

importance of increasing awareness and market education remains

very high despite the fact that not many respondents cite a lack of

awareness as a reason for not deploying SaaS.

A lower TCO and the ability to easily and quickly deploy SaaS have

surely meant significant cost savings for SaaS adopters. Although 40% of

SaaS adopters were unable to quantify the amount of money saved by

deploying SaaS instead of traditional licensed software, they

emphasized SaaS had helped bring down their IT expenses. Overall,

33% of respondents reported a savings of more than 10%, with 23% of

respondents reporting a savings of 11% to 25 % (Figure 10).

It should be noted that respondents were not guided to provide

scientific measurements of savings. Instead, rough estimates were

provided by respondents to provide an estimate of perceived savings.

Figure 10: Perceived Savings from Adopting SaaS

Q: How much (in percentage terms) do you estimate your organization saved by

subscribing to SaaS instead of deploying licensed software?



Satisfaction Level with SaaS Applications

On a scale of 1 to 10 (where 10 represents highest satisfaction and 1 the

least), most respondents have rated their experience of using a SaaS

application a 7 or higher (Figure 11). The level of satisfaction was

highest with security/compliance applications, followed by ERP. CRM

and SCM ranked lowest on the satisfaction scale; however, satisfaction

for all applications was high in general and when compared to on-

premise satisfaction.

2%

8%

23%

28%

40%

0% 10% 20% 30% 40% 50%

More than 50%

26% to 50%

11% to 25%

Less than 10%

Not Aware

22

Figure 11: SaaS Application Satisfaction

Q: How would you rate your satisfaction with the performance of the SaaS application(s)

deployed in your organization? (10 =highest level of satisfaction; 1=the lowest)

N: 179 (SaaS Adopters)/Multiple Responses


Data Residency

The majority of SaaS users (57%) believe that application performance

and reliability is not dependent on data center location. On the other

hand, 39% think SaaS applications perform better and are more reliable

when hosted at a data center close to the user. The fact that the

majority of respondents do not consider data residency as a factor in

application performance and reliability can be seen as a manifestation

of the growing maturity of the SaaS user as well in the Asia Pacific

market. (Figure 12)

Figure 12: Data Residency & Perceived Performance

Q: Which of following two statements is more correct: a) SaaS applications perform

better and are more reliable when hosted in a data center close to the user b) Application performance and reliability is not dependent on data center location c) Don’t Know; N: 179 (SaaS Adopters)


7.33

7.39

7.46

7.79

7.79

7.81

7.88

7.98

CRM

SCM

HR

Web Conferencing / Collaboration

E-mail

Desktop Office Apps

ERP


4%

39%

57%

Don't know

Performance is better and reliable when

hosted in a data centre close to the user

Performance and reliability is not

dependent on data centre location

23

Future SaaS Adoption Plans

In our interviews with respondents, only a small number (9%) indicated a

definite plan to implement one or more SaaS applications in the next 12

months. However, we do not believe this represents a slowdown in

overall adoption for a number of reasons. First, previous surveys we

have conducted in different areas generally show that Asian enterprises

have very little visibility or conviction of the solutions they will deploy

looking forward within the next 12 months. Second, application

investments are often driven by business needs that arise quickly, and

SaaS has clear time-to-adoption advantages versus traditional software

license sales. Finally, our survey had a larger representation of IT

managers than it did line-of-business (LOB) department heads, and we

have found that many SaaS deployments are being driven from the

lines of business with little or no knowledge from the IT department.

Figure 13 lists the various SaaS applications that enterprises in Asia

Pacific are likely to deploy in the next 12 months. The future adoption

of SaaS applications contains few glaring differences from the adoption

patterns already presented in this document. However, security and

compliance ranks further down the list of planned deployments than it

does when viewing actual deployments. We are uncertain of the key

factors driving this difference, and we believe security SaaS could in

fact be a strong application performer within the next 12-24 months.

Figure 13: SaaS Applications Being Considered for Deployment in Next 12 Months

Q: Which SaaS application are you considering for deployment in the next 12 months?

N=20 (Multiple Response) Note: sample size is low, and data should be viewed as

indicative only


11%

11%

11%

16%

21%

21%

37%

37%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Others


Supply Chain Management

HR-Payroll- Workforce Management

ERP

Web conferencing / messaging

CRM

Desktop office applications

24

KEY SAAS DYNAMICS BY APPLICATION

On-Demand CRM

Even though CRM’s share in the Asia Pacific SaaS applications market

declined in 2006, it continues to be the leading form of SaaS in the

region. CRM not only enjoys the highest mindshare among all SaaS

applications, it also contributes most to the market in terms of revenue.

Within CRM, salesforce automation (SFA) is the most popular

application with business users.

A lower TCO, quick deployment time, and ease of use and

management have been the key factors that are driving the region’s

enterprises to opt for SaaS-based CRM. A large part of the credit for

SaaS market momentum also goes to the on-demand CRM pioneer,

Salesforce.com, which has done a good job of marketing and

delivering its CRM solutions in Asia Pacific.

As Springboard pointed out in its previous report, SaaS CRM

applications continue to outpace growth of the traditional on-premise

CRM applications many times over. According to our data, the on-

demand CRM market will grow at a CAGR of 61% from 2006 to 2010, to

reach US$460 million by 2010 (Figure 14). A large part of this growth will

come from first-time SMB adopters of CRM.

Figure 14: On-Demand CRM Market Revenue (US$M) and Annual Growth in Asia Pacific, 2006-2010


ON-DEMAND CRM ADOPTION BY VERTICAL INDUSTRY

As Springboard Research indicated in its earlier study, education,

healthcare services, telecommunications, consumer packaged goods,

business services and the technology sector have been the key markets

for on-demand CRM. However, of these, the technology sector,

financial services and business services have emerged as the most

significant adopters of on-demand CRM applications in the region.

The growing use of the Internet as a business tool and the growth in

broadband access has helped on-demand CRM find a significant

0

100

200

300

400

500

0%

10%

20%

30%

40%

50%

60%

70%

80%

Revenue (US$M) 69 116 193 315 460

Growth 68% 67% 63% 46%

2006 2007 2008 2009 2010

25

foothold in the region’s SMB segment. However, the market still remains

a tough challenge for SaaS CRM vendors, as many SMBs still have an

inadequate understanding of how the application can help their

business.

Springboard Research predicts that a substantial portion of the growth

in Asia Pacific’s SaaS CRM market will come from the SMB segment. The

affordability and ease of use that on-demand CRM offers is likely to

encourage many of these businesses to deploy on-demand CRM as an

essential business tool. We expect SMBs in Asia Pacific to go for simpler

CRM solutions that are not overly complex. This trend in turn will drive

CRM vendors, especially the traditional licensed software companies,

to either downgrade their on-premise offerings or adopt the SaaS

distribution model.

ON-DEMAND CRM ADOPTION BY COUNTRY

Australia, Singapore, Hong Kong, Korea, India, China and Thailand are

the key SaaS CRM markets in Asia Pacific. Of these, Australia remains

the top market, accounting for 35% of all SaaS CRM sales generated in

the region. A relatively high awareness level, growing use of the Internet

as a business tool among companies, and better broadband

infrastructure, have helped Australia become the top target market for

leading on-demand CRM vendors like Salesforce.com, RightNow

Technologies and NetSuite. Similar trends can be seen in India,

Singapore, Hong Kong and Korea, where on-demand CRM is finding a

growing number of adopters. China shows high-growth market

potential, but is turning out to be a challenging market for SaaS CRM

vendors due to local market and cultural challenges.

ON-DEMAND CRM COMPETITION

Springboard Research has identified 5 key SaaS CRM vendors active in

the region. These are Salesforce.com, RightNow Technologies, Oracle-

Siebel, NetSuite and SugarCRM. Salesforce.com remains the number

one player with close to a 50% share of the market. Our research

showed that Salesforce.com was the most widely available on-demand

CRM vendor in Asia Pacific.

Although competition is beginning to take shape in the market, other

vendors have a long way to go before they can challenge

Salesforce.com’s dominance. Springboard Research believes that two

key factors that are going to define the competitive environment in the

region are the entry of vendors like Microsoft, Oracle and SAP in the on-

demand CRM space, and the emergence of local ISVs who are using

the on-demand model to attract SMBs. Both Microsoft and SAP have

been actively courting the on-demand CRM market for some time.

While Microsoft is launching a SaaS version of Dynamics CRM in the US

by the end of 2007 (specific plans for Asia have not been announced),

SAP is launching its on-demand suite of business applications (A1S),

including CRM, in mid-2008. Oracle has also announced aggressive

plans to pursue the CRM SaaS opportunity, with a product launch in the

US slated for the second half of 2007.

Local vendors including Gate13, Practical Business Systems, Talisma,

Sitek Villagemall Pty., 3i Business Solutions, Aldea Infotech, Xtools,

26

Woznet, 800CRM, and CRM24x7 are also actively targeting Asia

Pacific’s SaaS CRM market.

Web Collaboration

Springboard Research forecasts that web collaboration will soon

emerge as the most dominant and widely-used form of software-as-a-

service in Asia Pacific. As business Internet usage increases and as

organizations are able to access an abundance of quality bandwidth,

a broad spectrum of companies are adopting online collaboration and

conferencing tools. We believe that as collaboration is inherently on-

demand in nature due to the collaborative power of the Internet, SaaS-

based collaboration solutions will emerge as the natural choice for

organizations. The flexibility to buy services like web conferencing “at

will”, and the power of pay-per-use is already encouraging many

organizations to adopt web collaboration SaaS applications.

According to Springboard Research, the web collaboration market will

grow at a CAGR of 68% from 2006 to 2010, to reach US$400 million by

2010 (Figure 15). The market has been growing due to the strong

presence of drivers like an increasing tendency among business users to

buy services on an as-needed basis and growth in cross-company

collaboration.

Figure 15: Web Collaboration Market Revenue (US$M) and Annual Growth, 2006-2010


WEB COLLABORATION ADOPTION BY COUNTRY

There is strong demand for on-demand collaboration services and tools,

especially web conferencing, in countries like Australia, Korea, India,

China and in ASEAN. While large companies have definitely been early

adopters, there is a growing demand from SMBs in Australia, New

Zealand, India and the ASEAN.

ON-DEMAND COLLABORATION TOOLS ADOPTION BY VERTICAL INDUSTRY

Web-based conferencing and other collaboration applications have

also been gaining traction across verticals. However, high-tech

industries, including IT and BPO companies, financial and banking

services, manufacturing, healthcare, pharmaceutical, government,

0

100

200

300

400

500

0%

20%

40%

60%

80%

100%

120%

Revenue (US$M) 50 89 169 270 400

Growth 108% 78% 90% 60% 48%

2006 2007 2008 2009 2010

27

and education are the more enthusiastic adopters of on-demand

collaboration software.

One recent trend that has been gaining ground is the growing

availability of web services for one-time or occasional users. These

services have helped extend the reach and awareness of web-based

collaboration tools, especially among small and mid-sized companies.

ON-DEMAND COLLABORATION TOOLS COMPETITION

Springboard Research estimates that WebEx has a 33% share of the

Asia Pacific web conferencing market. Microsoft is the second most

important vendor in the region. Other companies with a growing

presence in Asia Pacific include Citrix Online and Interwise.

ERP and SCM Applications

Awareness and understanding of the benefits of SaaS-based ERP and

SCM applications is growing steadily in Asia Pacific. Applications like on-

demand ERP and SCM are finding a foothold in markets in Australia,

China, Hong Kong, South Korea and Taiwan, with a few deployments in

India as well. Manufacturing companies, especially in high-tech

industries that provide semiconductors, flat panel displays and similar

products in China, Korea, Taiwan, Malaysia and Thailand have found

the on-demand ERP model appealing. Many companies have reported

significant savings, ranging from 10% to 50%, as a result of SaaS

application deployment.

Springboard Research estimates that the market for these applications

will grow at a healthy CAGR of 50% to reach US$70 million in 2010, up

from US$14 million in 2006 (Figure 16).

Figure 16: On-Demand Back-Office Revenue (US$M) and Annual Growth, 2006-2010


Despite the healthy estimated growth, these applications will account

for a relatively small portion of the SaaS market. In fact, Springboard

expects ERP and SCM application market share to decline from the

current 9%, to 6% in 2010. This will happen as other SaaS applications like

CRM and web collaboration grow at a quicker rate. We believe that

the market lacks a choice of applications in the ERP/SCM area. Also,

0

20

40

60

80

0%

10%

20%

30%

40%

50%

60%

70%

Revenue (US$M) 14 22 35 50 70

Growth 57% 59% 43% 40%

2006 2007 2008 2009 2010

28

unlike the on-demand CRM or collaboration space where vendors like

Salesforce.com and WebEx have been able to develop and expand

the market based on their pioneering status and innovation, existing on-

demand ERP and SCM companies currently lack the stature and

appeal that can help them develop the market on their own.

Ce2open, GSX, Mitrix and Wesupply, Platte River Systems are some of

the on-demand SCM companies present in APAC. Prominent on-

demand ERP vendors include Intacct and NetSuite. Local ISVs such as

Cosmoshakthi Software Solutions, iWeb Technology Solutions, Octopus

eInternational, Spendvision, Villagemall Pty., HRMantra Software, Aldea

Infotech and Ramco Systems also provide with on-demand ERP

applications.

On-Demand HR Applications

Applications like HR/workforce management/performance

management, payroll management, content management, web

analytics, billing, word processing, spreadsheets, security and

collaboration-based IT infrastructure management are also gaining

acceptance in the Asia Pacific SaaS market. Among these, web-based

HR applications are currently the most popular, especially among

companies in high-tech industries, consumer goods, real estate and

BPO. Springboard Research estimates that the market for on-demand

HR applications will grow at a CAGR of 65% to reach US$75 million in

2010, from US$10 million in 2006.

Figure 17: On-Demand HR Applications Revenue (US$M) and Annual Growth, 2006-2010


We believe that the growing number of HR applications developed for

the SaaS market and the wide choice this availability affords for

organizations will be a key factor in driving the adoption of these

applications. Moreover, as the current economic boom in many Asian

countries, especially China and India, leads companies to expand their

workforce, they will increasingly rely on SaaS-based applications to

manage employees.

0

20

40

60

80

0%

20%

40%

60%

80%

100%

Revenue (US$M) 10 14 25 40 75

Growth 40% 79% 60% 88%

2006 2007 2008 2009 2010

29

In addition, we expect the on-demand model to continue to spread to

other applications as the use of Internet as a business tool increases

and as organizations are able to access a wide variety of applications.

(Figure 18)

Figure 18: Other* On-Demand Applications Revenue (US$M) and Annual Growth, 2006-2010

*Includes messaging and email management, security (anti-virus, anti-spam, IDS), and

compliance management, web analytics, content management, billing, word

processing, spreadsheets, security and collaboration-based IT infrastructure management


Among other applications, security is likely to emerge as the most

dynamic segment in SaaS. Recent product announcements by leading

security solutions vendors Symantec and Trend Micro are also likely to

add to market momentum. While Symantec is launching Symantec

Protection Network, a software-as-a-service platform designed to

deliver easy-to-use security offerings to small and mid-sized businesses,

Trend Micro has announced its usage-based licensing program

available in North America through leading IT products distributor, Tech

Data.

0

50

100

150

200

0%

40%

80%

120%

160%

200%

240%

Revenue (US$M) 11 33 79 110 160

Growth 200% 139% 39% 45%

2006 2007 2008 2009 2010

30

COUNTRY PROFILES

Australia

Australia remains the biggest Asia Pacific market for SaaS applications.

A high level of awareness combined with superior broadband

infrastructure has driven SaaS adoption in the country. The flurry of SaaS

vendor activity has also contributed to market growth. Australia is the

first important battleground for leading vendors like Salesforce.com,

WebEx, NetSuite, Citrix Online and RightNow Technologies. SaaS is also

finding growing acceptance among companies, especially SMBs, in

neighboring New Zealand.

Australia has a thriving community of local ISVs that offer a range of

SaaS applications. Moreover, the high-profile involvement of the

country’s leading telecom operator, Telstra, and systems integrator,

Melbourne IT (which acquired WebCentral), in SaaS has aided market

growth.

Springboard Research estimates that the Australian SaaS market will

grow at a CAGR of 65% to reach US$405 million in 2010, from US$55

million in 2006 (Figure 19). A large part of this growth will come from on-

demand CRM applications, followed by web conferencing and

collaboration.

Figure 19: Australian SaaS Market Revenue (US$M) and Annual Growth, 2006-2010


High-tech industries, healthcare and business services (HR, recruiting

firms, legal services, and travel services), retail, education, government

organizations and the non-profit sector have been among the

significant adopters of SaaS in Australia. The relatively low cost involved

in buying and using SaaS applications, the ability to deploy them

quickly, clear business benefits and scalability have been among the

top reasons for SaaS adoption in these verticals (Figure 20).

0

100

200

300

400

500

0%

40%

80%

120%

Revenue (US$M) 55 96 175 290 405

Growth 75% 82% 66% 40%

2006 2007 2008 2009 2010

31

Figure 20: Primary Reason for Adopting SaaS, Australia


N=50 (SaaS Adopters/Australia-New Zealand)


Despite high awareness levels, many Australian companies are still not

interested in SaaS. According to Springboard Research data, this

reluctance to adopt is largely because companies feel that SaaS

applications do not meet their business requirements, are costlier then

licensed on-premise applications and are less secure (Figure 21). This

again underlines the importance to SaaS vendors of providing more

market education to improve awareness and understanding of SaaS.

Figure 21: Primary Factor Preventing SaaS Adoption, Australia


N=51(Non-Adopters/Australia/New Zealand)


2%

2%

8%

10%

18%

20%

41%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%




Technology is not mature




15%

10%

10%

12%

12%

12%

31%

0% 5% 10% 15% 20% 25% 30% 35%

Others

Ease of use and management

Lower cost of ownership

Scalability

Business Benefits

Easy and quick to deploy

Zero / Low maintenance

32

China/Hong Kong

Despite a host of challenges that include high software piracy levels

and significant user discomfort associated with deploying third-party

hosted business applications (due to security and privacy-related

concerns), SaaS is finding increased acceptance among Chinese

companies. Springboard Research data shows that the Chinese SaaS

market will grow at a CAGR of 72% (2006-2010) to US$175 million in 2010.

In 2006, the market amounted to US$20 million or 13% of the total SaaS

applications market in the region (Figure 22).

Figure 22: China/Hong Kong SaaS Market Revenue (US$M) and Annual Growth, 2006-2010


Ease of use and management, business benefits, and lower cost of

ownership are among the prime drivers of SaaS adoption in China

(Figure 23).

Figure 23: Primary Reason for Adopting SaaS, China




0

50

100

150

200

0%

40%

80%

120%

160%

Revenue (US$M) 20 43 80 110 175

Growth 115% 86% 38% 59%

2006 2007 2008 2009 2010

6%

2%

8%

14%

18%

24%

28%

0% 5% 10% 15% 20% 25% 30%

Other

Scalability

Zero/Low maintenance



Business benefits


33

Increased vendor activity in recent months has helped drive

momentum in the Chinese market. One key development in 2007 was

the launch of the Chinese edition of Salesforce.com’s on-demand CRM

application targeted at small companies. Apart from providing business

analytics, Salesforce.com’s CRM model includes features from its

flagship Salesforce CRM product, such as “Salesforce Marketing,” which

enables companies to capture website leads and to distribute those

leads to sales teams; and “Salesforce Automation,” which helps

businesses manage sales data and processes.

Many Chinese ISVs, large and small, are working to derive gains from

the emerging opportunities in SaaS. For instance, one of China’s

leading software application vendors, Kingdee, has tied up with IBM to

offer SaaS applications. In another example, XToolsCRM, a small

vendor, is trying to push on-demand CRM as the perfect option for

Chinese SMBs. On the other hand, MNC vendors like Microsoft are also

trying to develop the market and are encouraging local ISVs to enter

the SaaS business. The software giant has in fact signed a

memorandum of understanding with Suzhou Software Park for a

software-as-a-service incubator program designed to persuade more

Chinese software companies to build SaaS applications.

Lack of a perceived business requirement, data security concerns (not

many Chinese companies are comfortable with the idea of letting their

data reside in an external data center), lack of awareness and

understanding of SaaS and the perception that on-premise software is

cheaper, are among the reasons that prevent Chinese companies from

SaaS adoption (Figure 24).

Figure 24: Primary Factor Preventing SaaS Adoption, China


N=51(Non-Adopters)


The highly localized nature of the Chinese software applications market

is dominated by local ISVs and is proving to be a market inhibiting

factor. Chinese companies appear to be more comfortable with local

2%

4%

6%

8%

8%

10%

10%

16%

36%

0% 5% 10% 15% 20% 25% 30% 35% 40%




Technology not mature






34

vendors – and not many have the ability to deliver software-as-a-

service via a multi-tenancy architecture model. Local ISVs offering SaaS

in China face the challenge of realizing subscription payments, and the

lack of well-established and accepted on-line payment systems has

meant that ISV vendors are not always able to collect payments in

time.

India

India is one of the fastest growing SaaS markets in the region.

Springboard Research estimates that the Indian market will grow at a

CAGR of 77% from 2006 to 2010 to reach US$165 million in 2010, from

US$17 million in 2006 (Figure 25). While web conferencing and other

collaboration tools dominate the SaaS market, on-demand CRM and

HR applications are also gaining traction.

Figure 25: India SaaS Market Revenue (US$M) and Annual Growth, 2006-2010


Ease of use and management and lower cost of ownership are among

the prime drivers of SaaS adoption by Indian companies (Figure 26).

Figure 26: Primary Reason for Adopting SaaS, India




0

50

100

150

200

0%

40%

80%

120%

Revenue (US$M) 17 27 54 105 165

Growth 59% 100% 94% 57%

2006 2007 2008 2009 2010

6%

2%

2%

4%

19%

23%

44%

0% 10% 20% 30% 40% 50%

Other


Business benefits

Scalability




35

Springboard Research is of the view that after Australia, India represents

the most significant opportunity for on-demand CRM vendors. Already,

vendors like Salesforce.com are finding a growing number of customers

in India. The growing use of the Internet as a business tool and

improving telecom infrastructure, presence of a large IT community and

the increasing focus of Indian companies on global markets are among

the factors driving growth in the country’s SaaS market. Springboard

Research expects that further availability of affordable and quality

broadband access will provide further impetus to the market.

SaaS is providing a new business opportunity for local ISVs, with many of

them targeting the overseas market by emulating the offshore service

delivery model. Large Indian IT services companies have also shown

growing interest in delivering software-as-a-service, adding to market

momentum. For instance, Infosys is planning to launch its universal

banking solution, Finacle, as a service offering along with its other

products to expand its market reach. At another level, the largest

Indian IT service provider, TCS, has formed a strategic alliance with

Salesforce.com to tap the system integration opportunities offered by

SaaS deployments. Furthermore, leading SaaS vendors like

Salesforce.com and WebEx are increasingly focusing on bringing their

SaaS platforms to Indian ISVs.

In spite of the opportunities, the Indian SaaS market also has a number

of challenges. Despite growing awareness of the SaaS concept, it is not

very well understood and that is one of the key reasons that prevents

many companies from deploying it (Figure 27).

Figure 27: Primary Factor Preventing SaaS Adoption, India


N=50(Non-Adopters)


Singapore

The Singapore SaaS market is expected to grow at a CAGR of 64% from

2006 to 2010 to reach US$80 million by 2010 (Figure 28). Financial

services, telecommunications and high-tech companies are early

adopters of SaaS in Singapore. The government and non-profit sector

4%

4%

6%

10%

12%

16%

22%

26%

0% 5% 10% 15% 20% 25% 30%









36

have also been among the early adopters of SaaS in the country. As

mentioned earlier, Singapore’s government has been a significant

driver of SaaS adoption. Singapore's highly developed telecom

infrastructure, high level of broadband penetration, government efforts

to drive technology adoption in enterprises and the city-state's

dominance as a regional business hub have played key roles in building

the SaaS market.

Figure 28: Singapore SaaS Market Revenue (US$M) and Annual Growth, 2006-2010


Lower cost of ownership, ease of use and management, and quick

deployment time has led many companies in Singapore to adopt SaaS

(Figure 29).

Figure 29: Primary Reason for Adopting SaaS, Singapore




0

20

40

60

80

100

0%

40%

80%

120%

Revenue (US$M) 11 17 31 50 80

Growth 54% 85% 60% 60%

2006 2007 2008 2009 2010

10%

7%

21%

21%

21%

21%

0% 5% 10% 15% 20% 25%

Other

Scalability





37

Lack of a perceived business requirement and a perception that SaaS

as a technology is not mature, and also that licensed software is

cheaper are the primary factors preventing non-adopters from going

for SaaS (Figure 30).

Figure 30: Primary Factor Preventing SaaS Adoption, Singapore


N=50 (Non-Adopters)


2%

4%

4%

9%

11%

17%

17%

37%

0% 5% 10% 15% 20% 25% 30% 35% 40%



Less awareness about the concept






38

SAAS CHANNEL IN ASIA PACIFIC

The SaaS channel in Asia Pacific is in its very early stages of evolution,

and direct sales remain central to most vendors’ go-to-market

strategies. Some vendors have begun building partnerships with local

resellers and distributors primarily for demand generation, while others

have started tapping partners for providing value-added SaaS

implementation, integration and support services.

However, at this point, Springboard Research believes that most SaaS

vendors do not have a well-established SaaS channel in the region, as

most of them appear more comfortable dealing directly with their

customers. Moreover, lack of experience and knowledge of

application business processes, and low margins on SaaS applications is

keeping channels away from SaaS. Given this reality, most users in Asia

Pacific are buying SaaS applications directly from the vendors. Over

70% of SaaS applications are being sold directly by vendors either

through face-to-face interactions with customers or via their websites or

the phone (Figure 31).

Figure 31: Share of Direct Sales in SaaS Business by Application

Q: From which channel did you buy your software-as-a-service application? (% Direct)



Of significance is that the need for channel partners (local resellers or

agents) is being strongly felt by SaaS users; so although most SaaS users

are buying directly from the vendors, the majority of them think the

involvement of a local reseller or agent is necessary when buying SaaS

applications (Figure 32).

55%

59%

69%

71%

74%

78%

80%

84%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

SCM

Security/Compliance

HR

Email

Web Conferencing/ Collaboration

Desktop Office Apps

CRM

ERP

39

Figure 32: Local Resellers: Necessary or Not When Buying SaaS

Q: Do you believe the involvement of a local reseller or agent is necessary when buying

software-as-a-service applications?



A higher percentage of SaaS-using respondents feel channel

involvement is helpful even if not necessary (Figure 35). This again

indicates that users believe local resellers or agents can help them

overcome associated with choosing and deploying SaaS applications.

Figure 33: Local Resellers: Helpful or Not When Buying SaaS

Q: Do you believe the involvement of a local reseller or agent is helpful when buying

software-as-a-service applications?



Yes, 71%

No, 29%

Yes, 79%

No, 21%

40

SaaS users also think that local resellers and agents add value through

training, face-to-face interaction, product explanation, installation and

integration (Figure 34).

Figure 34: Areas Local Resellers can Add Value To the Procurement & Installation of SaaS Applications

Q: In what areas could a local reseller or agent add value to the procurement and

installation of software-as-a-service applications?



According to a significant number of users interviewed by Springboard

Research, the channel provides the most value through face-to-face

(F2F) interaction/comfort & solution explanation and limited value in

installation and integration (Figure 35). This poses a problem for the

channel (and vendors) because the areas valued most are not

typically profitable for the channel.

Figure 35: Channel Roles That Can Add Greatest Value

Q: Which of these roles do you believe would add the greatest value?


11%

6%

44%

44%

51%

52%

55%

0% 10% 20% 30% 40% 50% 60%

Other

None

Integration

Adding comfort through a F2F interaction

Explanation of the offering

Installation

Training

14%

10%

9%

11%

13%

21%

23%

0% 5% 10% 15% 20% 25%

Others

None

Installation

Integration

Explanation of the offering

Training

Adding comfort through a F2F interaction

41

TYPES OF SAAS CHANNELS IN ASIA PACIFIC

Springboard Research has identified four types of channel partners that

are emerging in the region:

� Traditional local software resellers or distributors mostly engaged in

demand generation

� Companies who are trying to build online marketplaces for

applications (WebCentral/SaaS Central)

� Companies trying to build a pure-play SaaS delivery,

implementation and integration business by aligning with SaaS

application vendors (OnDemand Asia, Thailand/3i Business Solutions,

Singapore/NetReturn & Insightful/Australia)

� Telcos and ISPs who are looking at software as a new source of

revenue (KAZ and Optus/Australia, Korea Telecom/Korea, SingTel

and Starhub/Singapore, Telecom Malaysia/Malaysia, VSNL/India,

PLDT/Philippines).

Springboard Research believes that channels will play a crucial and

very strategic role in the expansion of the SaaS market in the region,

and that the failure of a viable volume channel could prevent the SaaS

market from reaching the next level of scale.

42

SAAS & ASIA PACIFIC ISVS

The software-as-a-service business model is attracting scores of ISVs in

the Asia Pacific region, especially in Australia and India, and to some

extent in Singapore. Although still in the nascent stage, the trend is

gradually picking up in China as well, as a number of local vendors

enter the SaaS business. It is important to note that the majority of the

local ISVs offering SaaS are very small companies that have traditionally

found it challenging to distribute their on-premise software products

beyond a limited market. SaaS has also inspired the birth of several

local net-native software vendors who are using the web-based

software delivery model.

Springboard Research data shows that local ISVs are offering an array

of business applications that address diverse functions within an

organization. These include accounting, business intelligence,

collaboration, security and compliance/governance, CRM, ERP, HR-

employee management, and payroll management (Table 5). A few

ISVs also offer SaaS applications for e-business, document

management, content management, digital rights management,

project management, office productivity, and derivatives risk

management.

Table 5: Local Vendors Offering SaaS Applications

Application ISVs

Accounting eAccounts Global, Netapplica, Practical Business Systems,

Villagemall Pty, Saasu NetAccounts, Zara Technology

Business Intelligence

Aldea Infotech

Collaboration Bluearc, ConferIndia, ConferNet, Cynapse India, JustLogin,

NewLease, PASR Technologies

Compliance/ Governance

AC3

CRM CDC Software, Gate13, Practical Business Systems, Talisma,

Sitek Villagemall Pty, 3i Business Solutions, Aldea Infotech,

Xtools, Woznet, 800CRM, CRM24x7

ERP Cosmoshakthi Software Solutions, iWeb Technology Solutions,

Octopus e International, Spendvision, Villagemall Pty,

HRMantra Software, Aldea Infotech, Ramco Systems

HR-Employee Management

Adrenalin eSystems, Appscale Technologies, CDC Software,

Siti Corporation, SOPRANO, Saasu NetAccounts, HRMantra

software, Employee Connect

Payroll Adrenalin eSystems, Aussiepay, CDC Software, HRMantra

Software

Employee Connect

Security MicroWorld Software Services, NewLease

Other Applications*

AC3, Gen-i, Majitek, vSplash TechWorks, Web Economy

Technology, Indicium Technologies, Zara Technology, eTrack

Data Management Services, Pyxis Systems


*Other applications include e-business, document management, content management,

digital rights management, project management, office productivity applications, and

derivatives risk management.

43

There is no doubt that SaaS is creating new market opportunities for the

small ISVs that earlier could not sell to SMBs with no IT staff. Moreover,

partnerships with leading SaaS providers are helping these ISVs reach

out to markets beyond their local geographies. And although these

vendors still face technical and marketing, and business model-related

challenges – and have a long way to go before they can compete

with US-based SaaS vendors (Salesforce.com, WebEx or RightNow

Technologies) or with their traditional rivals (Oracle, SAP or Microsoft)

who dominate the regional enterprise applications market, they are

surely making their presence felt in the market, especially in the SMB

segment.

Springboard Research expects local ISVs to emerge as an important

force in the Asia Pacific market and to play a significant role in shaping

the region’s competitive landscape. This will especially be the case in

China and Australia where local vendors account for a very significant

share of the enterprise applications market. These vendors will play a

key role in the adoption of SaaS among SMB enterprises.

44

THE ASIA PACIFIC COMPETITIVE LANDSCAPE

The competitive landscape in Asia Pacific is beginning to change.

Although the regional SaaS market is still dominated by five top vendors

– Salesforce.com, WebEx, RightNow Technologies, Oracle and NetSuite

– several other vendors, especially local players, are beginning to make

their presence felt in the region (Figure 36). As Springboard Research

estimates show, the five major vendors accounted for 45% of the Asia

Pacific market in 2006, 5% less than their share from the previous year.

We believe that the entry of several US vendors and local ISVs in the

market has played a key role in the expansion of the market. Despite

the challenges these ISVs face in reaching their target customers, many

of them have succeeded in attracting a fair amount of customers to

their SaaS offerings. For instance, vendors like Australia-based Saasu

(accounting applications), Aussiepay (payroll application), Singapore-

based JustLogin (collaboration), China-based 800CRM (CRM on-

demand) and India-based Adrenalin eSystems (payroll/employee

management) are gaining popularity in local markets.

Figure 36: Asia Pacific SaaS Revenue Vendor Market Share


We expect the competitive landscape in Asia Pacific to become more

dynamic in the next few years. Growing interest from large on-premise

software vendors like SAP, Microsoft and Symantec will have a

significant impact on the SaaS market. Also, as local ISVs mature with

their offerings and build marketing strength, they will find more market

acceptance. In addition, high-profile business developments such as

the Google-Salesforce alliance and Cisco’s acquisition of WebEx, will

impact the market.

Other, 54%

Salesforce,

23%

Webex,

11%

Oracle, 4%

RightNow,

5%

NetSuite,

3%

45

The large vendors entering the market like Microsoft, SAP, Oracle and

Symantec – who have built their business selling licensed software – are

demonstrating their commitment to the SaaS market with definitive

SaaS strategies. This entry of large vendors is also expected to force

mergers and acquisitions, realignment of players and emergence of

new alliances.

The top SaaS vendors in Asia Pacific are profiled below.

Salesforce.com

Salesforce.com is the number one and also the fastest-growing major

SaaS vendor in the Asia Pacific region. Riding high on the popularity of

its salesforce automation (SFA) application, the vendor registered

around 82% growth in its revenue in Asia Pacific in 2006. The vendor

offers salesforce automation, marketing automation (marketing and

sales application), partner relationship management and analytics

applications. The company’s AppExchange, an online marketplace for

on-demand applications, allows ISVs to distribute and share their

applications with Salesforce.com customers. Not only is Salesforce.com

using AppExchange to grow its customer base by offering existing and

new customers additional functionality and applications, it is also using

AppExchange as a platform for encouraging ISVs to develop new

applications that can be used by Salesforce.com customers. The

vendor is also actively tapping developer resources in Asia Pacific. It

introduced Salesforce Platform Edition, which opens its AppExchange

menu of third-party applications to customers that do not have

Salesforce subscriptions. The platform aims to give developers

incentives to write and host software offered through AppExchange

and to get more business customers to use its current applications.

Springboard Research estimates that the region generated around

US$35 million in revenues for the company in 2006 compared to just

over US$19 million in 2005. While Australia is the top market for the

vendor, business is picking up significantly in India, Singapore, Hong

Kong and South Korea. Among others, China is one of the key market

focus areas of the company. The vendor recently launched Salesforce

China Edition in simplified Chinese. Key verticals that have adopted

Saleforce.com applications in the region include financial services,

high-technology and business services. The vast majority of its customers

have gone for SFA solutions.

WebEx

The web collaboration pioneer, which was recently acquired by Cisco,

is the number two SaaS vendor in Asia Pacific and leads the regional

web conferencing and collaboration tools market. Springboard

Research estimates that the vendor grew by around 89% in Asia Pacific

in 2006 and reached revenue of around US$17 million. The vendor has a

strong presence in Australia, China and India.

The vendor is focusing mainly on integrating its web collaboration

services with other business applications through partnerships with other

on-demand vendors and ISVs. Its WebEx Connect initiative is focused

on creating an ecosystem of ISV partners with the objective of

extending its core web collaboration services to deliver a suite of

46

complementary and collaborative business applications. Launched in

September 2006, it has been positioned as an on online marketplace

that ISVs can use to sell their on-demand applications to WebEx

customers. WebEx Connect also includes a middleware that enables

different on-demand or on-premise applications to inter-operate with

each other.

RightNow Technologies

RightNow Technologies is the second largest on-demand CRM vendor

in Asia Pacific. Even though it is mostly present in Australia and New

Zealand, it also has customers in Singapore, Hong Kong, China and

India. Asia Pacific generated around 7% of its revenue in 2006. Australia

accounts for the largest portion of its revenue from the region. Its

customer base includes companies in high-tech, retail, telecom, higher

education, manufacturing, financial services and the public sector.

RightNow has built its presence in the market on the strengths of a

comprehensive CRM offering. Beside marketing, sales and customer

service capabilities, its solutions feature web, interactive voice, e-mail,

chat, telephone, and proactive outbound e-mail communications. All

this makes RightNow’s solutions one of the most prolific CRM solutions

available in the market. Of late, the vendor has been focusing on

launching vertical-specific solutions. It recently launched RightNow

Telecom, an on-demand CRM solution for telecom service providers

and RightNow Retail for retail companies.

Oracle

The world's largest enterprise applications vendor has been active in

the on-demand space for the past few years. Its on-demand delivery

model is not entirely built around the multi-tenancy model that has

been one of the hallmarks of SaaS delivery from vendors like

Salesforce.com and others. For instance, in its latest Release 14 of the

Siebel CRM on Demand, Oracle offers customers the option of going for

a private, physically separated database vs. a logically separated

database offered by the multi-tenant architecture proponents like

Salesforce.com.

Springboard Research believes that while there is no significant

resistance to multi-tenancy in SMB organizations, this strategy might

help Oracle gain large enterprise customers interested in an SaaS

delivery model but very keen on sharing databases with other

companies due to security or compliance-related concerns.

NetSuite

NetSuite, which entered the Asia Pacific region three years ago, offers

an integrated suite of business applications including CRM, ERP and e-

commerce targeting small and medium-sized businesses. The vendor

considers its strength in on-demand accounting software as its biggest

market differentiator.

Springboard Research estimates that the vendor generated revenue of

around US$ 4million from the region, primarily from Australia where it has

a very strong presence. The vendor has a direct presence in Australia

and Singapore, but is also active in other key markets in the region

47

through channel partners. Expansion of the channel partner base has

been one of the key focus areas of the vendor in the region. Currently,

direct sales account for the majority of its sales in the region. However,

the vendor is expecting more sales through the channel once it

succeeds in building its strong network of sales and solutions partners.

With its SuiteFlex, which can be compared to Salesforce.com’s

AppExchange, NetSuite is trying to extend its reach in the market. ISVs,

solution providers and systems integrators can create, customize,

extend, and integrate new functionality using the SuiteFlex platform

that is built into the NetSuite application.

Citrix Online

Citrix Online offers a range of online collaboration solutions including

one built specifically to facilitate collaboration between technical

support professionals. The package is a remote IT service application –

Go2Assist – that forms the core of its business in Asia Pacific. It is being

used both by businesses (for internal helpdesks) and technical support

service providers / large ISPs (who use it to facilitate external customer

support). System integrators and software companies are also among

the customers of Go2Assist. On the other hand, its remote PC access

tool GotoMyPC is also steadily gaining customers in the region. The

vendor is also witnessing significant uptake of its other on demand tools

– Go2Webinar and Go2Meeting. Citrix’s on demand collaboration tools

are finding acceptance among a broad spectrum of companies in

Australia, India and ASEAN.

Springboard Research believes that the depth and breadth of Citrix

Online’s offerings will help it emerge as one of the key players in the

Asia Pacific SaaS landscape. The vendor’s focus on SMBs in Australia

and ASEAN will be a key factor that will drive its growth in the region.

IBM

IBM currently works with more than 100 application providers who

deliver their solutions in the SaaS model. IBM’s software-as-a-service

showcase aims to provide SaaS application vendors with a global

delivery infrastructure and tools and technology that can help an ISV

transform into a SaaS provider, which the company sees benefiting its

hosting business. The showcase currently has application providers

offering SaaS applications for four vertical industries (healthcare,

insurance, manufacturing and retail) in 13 solution areas including CRM,

messaging, collaboration and web conferencing, product lifecycle

management, ERP and compliance management.

The other aspect of IBM's interest in SaaS is linked to its Lotus

collaboration and conferencing tools. Springboard Research believes

that with collaboration and conferencing emerging as one of the key

elements of the SaaS landscape, IBM will have an increasingly

important roll in this space. The other important aspect of IBM's role in

SaaS is going to be SOA. With businesses increasingly looking at building

dynamic business processes and services, SOA will be critical for them

for deploying software-as-a-service within the organization.

48

Microsoft

After doing it in bits and pieces, the world’s largest software company

finally seems to have acknowledged the relevance of the on demand

model and the vendor now has a clearer SaaS strategy. However, for

Microsoft, SaaS is not software-as-a-service but software + service.

Throughout the beginning of 2007, the Redmond headquartered

company has been promoting the software + service tagline in an

apparent effort to convince customers and competition that on-

premise and on-demand will co-exist, but that the former will remain the

dominant mode of software delivery.

As of now, Microsoft’s play in SaaS is more significant in the

collaboration segment. The vendor offers Live Meeting, a web

conferencing and collaboration application and a significant presence

in the Asia Pacific web conferencing and collaboration market.

Microsoft is planning to launch its Dynamics Live CRM service in the first

half of 2008 with initial focus on sales force automation. Even though no

definite plans for its launch in Asia have been announced, the vendor is

likely to bring it to the region’s customers after it is launched in North

America. In line with its software + services strategy, Live CRM will be

the first Microsoft CRM release based on a multi-tenant architecture,

using a single code base to support three types of usage – Live CRM, an

on-premise version of the CRM application and a partner-hosted

release.

Springboard Research believes that Microsoft will continue to enhance

its portfolio of on demand offerings in line with its software + service line

of thought. Moreover, given Microsoft influence in the ISV community,

the vendor will also have a significant role to play in shaping the SaaS

ecosystem. The vendor already provides technology, best practices

and marketing support to hosting service providers and ISVs looking to

develop and deploy SaaS applications through the Microsoft Solution

for Windows-based Hosting for Applications Version 1.0, and other ISV-

targeted programs.

The vendor has also launched a SaaS Enablement Program developed

for ISVs offering SaaS or planning to do so. The vendor also launched

SaaS Incubation and SaaS on-ramp programs in November 2006, to

attract ISVs to SaaS and help them move from the traditional model of

delivering software to the on-demand model. It has signed a

memorandum of understanding with Suzhou Software Park in China for

a SaaS incubator program that is aimed at encouraging Chinese

software companies to develop SaaS applications.

Microsoft also recently launched the Connected Services Sandbox, a

program designed to bring together ISVs, developers, SIs, network

equipment providers and telecommunications service providers to

develop, test and bring new communications services to market. The

Sandbox is aimed at encouraging the creation of “managed network

mash-ups” in which Web services are combined with traditional

telecommunications offerings, and then offered through the SaaS

model and delivered across any type of network or device.

49

The vendor also recently issued a new architectural guidance for

organizations looking to implement a software-as-a-service system. The

Microsoft sample SaaS application is known as LitwareHR, a fictitious

human resources application providing recruitment management

software delivered as a service.

Progress Software

Progress Software’s SaaS partnership program has resulted in the

development of one of the most successful SaaS ecosystems, attracting

more than 200 ISVs. The vendor provides technology, business planning,

marketing, selling and application transformation support for ISVs

delivering or planning to deliver on-demand applications. In addition,

partners can also access Progress’ best practices framework and

access training and workshops. A key feature of the Progress SaaS

ecosystem is that the vendor does not exercise much control over its

partners – many Progress partners arrange their own hosting and the

vendor does not keep track of users served by its partners.

Progress' SaaS enablement program is aimed at helping ISVs in 3 main

areas: business transformation, go-to-market planning and application

transformation. In Asia Pacific, the vendor has a presence in Australia

and a partner in Singapore. Most of its partners are focused on legal,

healthcare, financial services, and manufacturing verticals and offer

applications like CRM, ERP, human capital management, and

claims/patient management. Just about all of its SaaS providers in Asia

Pacific target the SMB market – except for some of the financial

applications firms who are targeting the larger banks – but within

specialty areas.

SAP

Even though the German software giant SAP has not appeared to be

very focused on SaaS in the past, it is beginning to make significant

moves in the market. Springboard Research believes that SAP’s SaaS

strategy, at this point of time, is more about giving its customers who

might be looking for an on demand option, a choice. However, unlike

SaaS vendors like Salesforce.com and RightNow who are proponents of

the multi-tenancy model, SAP remains focused on what it calls the

isolated-tenancy model as it feels its customers might not be

comfortable sharing data with others because of security and

compliance related concerns.

The vendor launched its subscription-based CRM application in

February 2006. In the beginning, its on-demand CRM offered only sales

and marketing functionality. Later in September 2006, the vendor

added sales automation features for product and quotation

management. During the same time, it announced the launch of

Service on-demand solution, with functionalities like service ticket

management, rule-based escalations and service level monitoring.

However, more significant is SAP’s plan to launch SaaS enabled A1S ERP

by mid 2008 as part of its strategy to offer customers the choice of both

on premise and on demand models. A1S will have the entire stack of

ERP, CRM, SCM, and BI in one suite and made available on the SaaS

model. Springboard Research believes, once in the market, A1S is going

50

to be one of the most comprehensive SaaS application sets in the

market.

Symantec

A recent convert to SaaS, Symantec entered the SaaS market with the

announcement of its on-demand Symantec Protection Network, which

is a SaaS platform, designed to deliver easy-to-use security and

targeted at small and mid-sized businesses at a price they can afford.

The vendor is banking on its ecosystem of channel partners to enable

businesses to work with the partner of their choice and take advantage

of customized service offerings to meet business requirements as they

evolve. Businesses also have the option of subscribing to the service

directly with Symantec through the web and can manage and monitor

their service from any Internet connection.

Springboard Research believes that Symantec is likely to emerge as a

key factor in the on demand landscape given its preeminent position

on the security software and solutions market. As such, the vendor’s

progress with the SaaS model will be instrumental in shaping the

dynamics of the on-demand security software and solutions market.

51

SPRINGBOARD RECOMMENDATIONS

Springboard Research recommends that SaaS vendors looking at

opportunities in the Asia Pacific SaaS market focus on four key areas –

educating the customer, gaining an understanding of the customer’s

business processes, localizing their offerings and building a strong brand.

Provide education and then more education: Despite a significant

increase in the awareness of SaaS, organizations in Asia Pacific still have

an inadequate understanding of the on-demand software delivery

model. This insufficient understanding, in many ways, is the key reason

why many organizations are still not considering SaaS. As such, SaaS

vendors who aggressively focus on providing customer education that

demolishes unfavorable perceptions and emphasizes the benefits of

the SaaS model, will outpace the competition. Although several

vendors already offer customer education, Springboard Research

believes that those efforts would be more effective if they directly

addressed the IT and business challenges faced by customers.

Build an understanding of customers’ business processes: As many of

the potential SaaS adopters in the region are likely to be first-time IT

users, for instance – the SMB companies – they are likely to see

immediate or long-term value in deploying a SaaS application only

when vendors show an understanding of their business processes and

challenges. An understanding of the above can help vendors relate

benefits of their applications to the customers’ business goals more

clearly and directly. This process should also include providing the ROI

that customers can expect with the particular SaaS application that is

deployed.

Get close to customers and add more local flavor: Localizing SaaS

offerings, as Salesforce.com and WebEx did in China by launching

Chinese editions of their applications, can be an effective way to build

a strong market presence. Targeting a SaaS application to the local

market is also accomplished through partnerships with strong local ISVs

and SIs. These partners can also be helpful to gaining insight into the

needs of target customers.

Build A Strong Brand: Springboard Research believes that vendors must

focus on building strong brands with trust, reliability, high performance

and assured ROI as key attributes. This brand development would be

key to overcoming customer perceptions that SaaS applications lack

technological maturity, are less secure and reliable.

52

CONCLUSION

Software-as-a-service (SaaS) will continue to go mainstream in the

coming years and Springboard Research expects more users and

organizations to deploy some form of SaaS application in the near

future. Much of this adoption will be driven by business users; however,

IT departments in large and mid-sized companies will increasingly play

an important role in standardizing SaaS procurement, deployment and

usage.

Another factor driving SaaS market growth is the growing adoption of IT

by the SMB segment. In step with this trend, the early part of 2007 saw a

series of SMB-focused product launches by many IT vendors including

IBM, SAP, Oracle and Microsoft. The proliferation of SaaS ecosystems,

like AppExchange and WebEx Connect, that position their platforms as

ways for local ISVs to access customers will also change the complexion

of the SaaS market.

For SaaS applications and vendors, Springboard Research forecasts

that only the fittest will survive the market churn that is on its way. The

current situation of supply outnumbering demand is likely to continue as

the Internet makes it easier to create new applications. We anticipate

a blossoming of SaaS providers and applications over the next 2 years

to boost adoption, but then a winnowing of the players in the market.

Throughout this process, however, SaaS as a software delivery model

will continue to strengthen and increasingly challenge the traditional

software industry.

53

APPENDIX: LIST OF SAAS APPLICATION PROVIDERS

Vendor Applications Web Address HQ

24SevenOffice

Accounting, collaboration, CRM,

document management, E-

commerce, ERP, messaging,

project management

www.24sevenoffice.com Norway

37signals Project management www.37signals.com US

3i Business Solutions NetSuite applications www.3ibizsolns.com Singapore

800CRM CRM www2.800crm.com China

AC3

Governance, project

management, document

management

www.ac3.com.au Australia

Adaptive Planning Budgeting, planning and analysis

www.adaptiveplanning.com US

Adrenalin eSystems

Human resources, payroll,

employee and manager self

service, employee work process

automation and analytical

reports

www.adrenalinet.com India

Adventnet multiple applications www.adventnet.com India

Agile Software PLM www.agile.com US

AIE Technologies Microsoft office applications www.Software4Rent.Biz Australia

Aldea Infotech BI, ERP, CRM India

appMail Communication and workforce

collaboration www.appmail.com US

Appscale HR management software www.appscale.com/ India

Appscale Technologies HR management application www.appscale.com India

AppStream Software distribution www.AppStream.com US

Apptix E-mail, messaging www.apptix.com US

Arena Solutions PLM www.arenasolutions.com US

Aria Billing & customer management www.ariasystems.com US

Atlantis Computing Storage, collaboration www.atlantiscomputing.com India

Aussiepay Payroll www.aussiepay.com.au Australia

Authentium Security www.authentium.com US

Avalara Accounting www.avalara.com US

Axentis Governance, risk and

compliance www.axentis.com US

BIPT Policy and claims administration

system for property and casualty

insurance industry

www.bipt.com US

BIW Technologies Collaboration www.biwtech.com UK

Blue Tie E-mail, messaging www.bluetie.com US

Bluearc collaboration www.bluearcgroup.com Australia

BlueRoads Corporation Channel management www.blueroads.com US

BMC Software Infrastructure, application and IT

management www.bmc.com US

Bscaler CRM, ERM www.bscaler.com US

Builder Lynx Channel management www.builderlynx.com Canada

Business Objects Business reports www.businessobjects.com US

Campus Management Educational campus

management solutions www.campusmgmt.com US

Captiva Software Information management www.captivasoftware.com US

CaseCentral Litigation lifecycle management www.casecentral.com US

CDC Software HR/Payroll, CRM www.cdccorporation.net China

Cenzic Security www.cenzic.com US

54

Citrix System Collaboration www.citrixonline.com US

Click Commerce SCM www.clickcommerce.com US

CMC Limited System Integrator www.cmcltd.com India

CollabNet Collaboration www.collab.net US

Compulink SaaS enablement www.compulinkgroup.com India

Concur Technologies Expense management www.concur.com US

ConferIndia Conferencing www.conferindia.com India

ConferNet Conferencing www.confernet.co.kr Korea

Coremetrics Web analytics www.coremetrics.com US

CORESense Retail management www.coresense.com US

Cosmoshakthi Software

Solutions ERP, CRM www.ixprt.com India

Critical Path Messaging www.criticalpath.net US

CRM24x& CRM www.crm24x7.com India

crmOrbit CRM www.crmorbit.com India

CrownPeak Content management www.crownpeak.com US

Cube Route Logistics www.cuberoute.com Canada

Cynapse India Collaboration tools http://cyn.in India

DarwinSuzsoft Import/export custom

application www.darwinsuzsoft.com China

D-BAM Automation management across

the marcom supply chain www.d-bam.com US

DealerTrack Retail solutions for automotive

industry www.dealertrack.com US

Demandware E-commerce www.demandware.com US

Direct Insite Invoice, spend management,

business metrics management www.directinsite.com US

E2Open SCM www.e2open.com US

eAccounts Global Accounting www.eaccountsglobal.com New

Zealand

Emantra Application delivery www.emantra.com.au Australia

eMeta Digital content management www.emeta.com US

Employease HR www.employease.com US

Employee Connect Payroll, HR management www.employeeconnect.com Australia

eProject Project management www.eproject.com US

eTrack Data Management

Services Payables management system www.etrack.co.in India

Everest Software CRM, accounting, payroll www.everestsoftwareinc.com US

Evision B2B integration and EAI as an on-

demand Internet service www.evision.com.au Australia

eVision Messaging solutions www.evision.com.au Australia

e-Zest SaaS enablement http://www.e-zest.net India

FluidViews SaaS integration and

enablement www.fluidviews.com

New

Zealand

Functional Software System management www.fs.com.au Australia

Gate13 CRM www.gate13.com.au Australia

Genesys Conferencing Conferencing & collaboration www.genesys.com France

Gen-i Office applications www.gen-i.co.nz New

Zealand

GXS SCM www.gxs.com US

Halogen Software HR www.halogensoftware.com Canada

Hot Banana Software Web content management www.hotbanana.com Canada

HRMantra HR & payroll software www.hrmantra.com/ India

HRMantra software HR and payroll ERP software www.hrmantra.com India

HyperOffice Collaboration, messaging www.hyperoffice.com US

HyperSites Corporation Web development www.hypersites.com US

IBM System integrator, SaaS delivery www.ibm.com US

iKnowWare CRM www.iknowware.com US

Image Fortress Corporation Digital archiving www.imagefortress.com US

55

Indicium Technologies E-business www.indicium.com.sg Singapore

InfoTronics Workforce management www.infotronics.com US

Insightful SugarCRM www.insightful.com.au Australia

Intacct ERP www.intacct.com US

Interwise Web collaboration &

communications www.interwise.com US

Intuit HR - payroll www.intuit.com US

Invoice Insight Telecom expense management www.invoiceinsight.com US

iqDynamics HR, ERP, CRM www.iqdynamics.com Singapore

iWeb Technology Solutions ERP www.iweb.co.in India

Jamcracker SaaS integration and

enablement www.jamcracker.com US

Janeeva Assurance www.janeeva.com US

JustLogin Collaboration www.justlogin.com Singapore

Kana E-mail, messaging www.kana.com US

Kaspersky Lab Security www.kaspersky.com Russia

Kaz Group E-mail, messaging, collaboration www.kaz-group.com Australia

Kinaxis Response management www.kinaxis.com Canada

Kintera CRM, ERM for non-profits www.kinterainc.com US

Kronos HR - payroll www.kronos.com US

Lawson (Intentia) ERP www.lawson.com US

Lean Logistics Logistics www.leanlogistics.com US

MailStreet Messaging and collaboration www.mailstreet.com USA

Majitek Digital rights management www.majitek.com Australia

MCA Solutions SCM/PLM www.mcasolutions.com US

McAfee AntiVirus plus AntiSpyware www.mcAfee.com US

Medtech

Medical appointment scheduling

and electronic patient records,

collaboration

www.medtech.com.ar Argentina

Microsoft Collaboration & communications www.microsoft.com US

MicroWorld Software Services AntiVirus www.msspl.co.in India

Mitrix SCM www.mitrix.com US

Mitrix SCM www.mitrix.com US

MMP Software (India) SaaS enablement www.mmpsd.co.in India

Navisite SaaS integration and

enablement www.navisite.com US

Netapplica Accounting www.netaccounts.com.au Australia

NetReturn NetSuite applications www.netreturn.com.au Australia

NetSuite CRM, ERP, e-commerce www.netsuite.com UK

NewLease Security, collaboration, e-mail www.newlease.com.au Australia

NexGen ITS SaaS enablement http://nexgen.sg Singapore

Nothacker

SaaS business platform,

intellectual property

management, key performance

indicator management (Dashboard), learning

management system

www.nothacker.com Singapore

nSite Channel, quote and proposal

management www.nsite.com US

Octopus e International ERP www.octopuse.com India

Omniture Web analytics www.omniture.com US

OnDemand-Asia NetSuite applications www.ondemand-asia.com Thailand

OpenAir Professional services automation www.openair.com US

OpSource SaaS integration and

enablement www.opsource.net US

Oracle CRM www.oracle.com US

osCommRes E-commerce www.osCommRes.com Australia

PASR Technologies E-mail, messaging www.pasr.com.sg Singapore

Peopleclick HR, workforce management www.peopleclick.com US

56

Platte River Systems Sales information system for

semiconductor companies www.platteriversystems.com US

Practical Business Systems CRM, accounting www.thebooksonline.com Australia

Procur Procurement www.procur.at Austria

Pyxis Systems Derivatives risk management www.pyxis-it.com India

Qualys Vulnerability management www.qualys.com US

Radical Networks VB.net, MSSQL, ASP.net 2.0 www.radical.co.in India

Ramco Systems ERP www.ramco.com India

Rearden Commerce Employee services www.reardencommerce.co

m US

RedTail Solutions SCM www.redtailsolutions.com US

RightNow Technologies CRM www.rightnow.com US

RightServe SaaS enablement www.rightserve.com.au Australia

SaaS Central Online applications market,

payroll, CRM, anti-spam & web

content filtering

www.saascentral.com Australia

Saasu NetAccounts

Invoices, payments, timesheets,

inventory and process payroll

maintenance

www.saasu.com Australia

Saba HR, collaboration &

communication www.saba.com US

Salesboom CRM, ERP www.salesboom.com US

Salesforce.com CRM www.salesforce.com US

Salesnet CRM www.salesnet.com US

SAP CRM www.sap.com Germany

SecureMyCompany Computer management www.securemycompany.co

m US

Sitek CRM www.sitek.com.au Australia

Siti Corporation HR management application www.siti.com India

Smart Online CRM www.smartonline.com US

SmartCompany CRM www.smartcompany.net US

SMBLive Information management,

collaboration www.smblive.com US

Snap Technologies

Web marketing, web productivity

and web content management

solutions

www.snaptech.ca Canada

Sonata Software SaaS enablement www.sonata-software.com India

SOPRANO HR management application www.soprano.com.au Australia

Spendvision Expense management www.spendvision.com New

Zealand

Starway Service HR www.starwayservice.com US

SuccessFactors Performance management www.successfactors.com US

SugarCRM CRM www.sugarcrm.com US

TakeCharge Technologies Spend management www.takechargetech.com US

Taleo Talent management www.taleo.com US

Talisma CRM www.talisma.com India

TeamPoint Systems Collaboration www.teampointsystems.com US

Tradecard Accounting www.tradecard.com US

Two Step Software

Corporate governance and

entity management

www.twostep.com US

Ultimate Software Workforce management www.ultimatesoftware.com

USA.net E-mail, messaging www.usa.net US

Vaakya Technology Technology platform www.vaakya.com India

Vcommerce

Commerce and fulfillment

solutions for retailers and direct-

to-consumer initiatives

www.vcommerce.com US

Venda E-commerce, CRM www.venda.com US

Verticalnet SCM www.verticalnet.com US

57

VIE Pty Multiple applications www.vie.com.au Australia

Villagemall Pty

CRM, order management,

inventory management, accounting

www.villagemall.com.au Australia

Visible Path Relationship management www.visiblepath.com US

Vocus Corporate communications and

public relations www.vocus.com US

vSplash TechWorks Hotel reservation software http://hotels.vsplash.com India

Watchfire Corp Security www.watchfire.com US

Web Economy Technology Content management, ERP www.web-economy.com Singapore

Web Global Net SCM www.printdm.com US

WebCentral E-mail, messaging, collaboration,

accounting, HR, procurement www.webcentral.com.au Australia

WebEx Web conferencing &

collaboration www.webex.com US

WebSideStory Web analytics www.websidestory.com US

West Corporation Conferencing www.west.com US

WestLake Financial Group HR www.westlakefg.com US

Wesupply SCM www.wesupply.com UK

WhiteHat Security Security www.whitehatsec.com US

Working Systems Applications for healthcare

companies www.ws.com.au Australia

Workscape Workforce management, HR

applications www.workscape.com US

Workstream Workforce management www.workstreaminc.com Canada

Woznet CRM www.woznet.com.au Australia

Wrapped Apps Corporation SaaS Delivery www.wrappedapps.com Canada

Xactly Sales compensation

management www.xactlycorp.com US

XChange Network Messaging, collaboration www.xcnetwork.com US

Xinnet.com E-mail www.xinnet.com China

Xtools CRM www.xtools.cn China

ZANTAZ E-mail archiving, storage www.zantaz.com US

Zara Technology

Web mail, document library,

product catalog management,

content management, business

processes and accounting

www.zaratechnology.com Singapore

Zimbra Messaging, collaboration www.zimbra.com US

Zycus Spend Data

Management Spend management www.zycus.com US

58

45 Club Street

Singapore 049561

Tel: (65) 6325-9716

Fax: (65) 6222-5785

5201 Great America Parkway

Suite 320

Santa Clara, CA 95054

U.S.

Tel: (408) 730-2680

Fax: (408) 562-5745

www.springboardresearch.com

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