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SaaS in perspective

This article appears in the issue June 2007, [Vol 16, Issue 6]
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Few trends in the software world are attracting as much attention as "software as a service" (SaaS). In this delivery model, customers typically access software applications over the Internet and pay a subscription fee that depends on the number of users. Similar to the application service provider (ASP) model, the software is hosted externally. However, ASPs generally host software that is bought and licensed by the user. In contrast, providers of SaaS applications are renting, to multiple customers, software that they own and maintain. SaaS is also referred to as "on demand." The vendor provides software upgrades as part of the subscription.

The appeal of SaaS comes from multiple sources. First, organizations are spared the high initial costs of purchasing the software. Small and midsize businesses are, therefore, more able to contemplate using applications for which the buy-in for an enterprise installation would be too expensive. Companies are able to outsource a function that is usually not a core competency, allowing them to focus on their primary mission. And usage can be scaled up easily as new employees are hired, or cut back if the company downsizes. Drawbacks include concerns about data security and about the stability of the provider, as well as the need for reliable access to the Internet.
Expanding market

A growing number of applications in the KM space are available via SaaS, including customer relationship management (CRM), Web content management (WCM) and enterprise content management ECM). has been perhaps the most visible SaaS product and the leader in on-demand CRM.
Most indicators point to a rapidly growing market for SaaS over the next five years, including portions of the SaaS market that relate to KM, such as ECM.

"We expect the SaaS market for ECM to grow 30 percent annually," says Karen Shegda, research director at Gartner, "but this is over a very small base." Only 2 percent to 3 percent of the money spent in the ECM market—or $25 million out of a $1.2 billion market—is spent on hosted solutions, according to Shegda.

In general, surveys indicate that about 30% of companies have one or more SaaS applications deployed, with a larger percentage considering SaaS for the near future. Somewhat surprisingly, interest has come from large firms as well as smaller ones. For example, McKinsey reports that 61% of companies with sales over $1 billion plan to adopt SaaS as their model in 2007.

WCM leads the way

One functional area that has found early acceptance using SaaS is Web content management (WCM). "SaaS offerings tend to use a browser interface, says Rob Rose, VP of marketing at CrownPeak, "which is very compatible with Web content management."

In addition, Rose explains, Web content is typically less sensitive than other enterprise data, so companies have not been as reluctant to have it stored outside the firewall. CrownPeak is a leader in on-demand WCM and was built from the beginning as a SaaS product.

The Hospital Corporation of America (HCA) uses CrownPeak CMS to publish documents over an extranet, which covers remote sites for hundreds of hospitals. "Users get notification when new guidelines come out," says Rose. "They can then retrieve the information from the extranet repository." The repository contains static content such as finalized documents; it is not used for moving a document through workflow and approval.

CrownPeak can host the Web site as well as the content management repository, but gives its customers the option to take on that task or to outsource it to a third party. Customers can also maintain unstructured content such as PDF or MS Word documents in-house and just let the CrownPeak software handle the links to the content.

"That way, a company just has one version of a document, such as a price list," says Rose, "and it will be the same on its intranet as it is on its Web site."

RM for compliance

AXS-One, which offers an archiving and electronic records management (RM) software platform, just announced a SaaS product for large enterprises. The company had been providing a hosted solution for small and medium-sized enterprises (SME) and dealer-brokers through partners, but now sees a strong demand from large businesses.

"A major factor is the amount of data that these companies have to deal with," says Marie-Charlotte Patterson, VP of market strategy. "According to some reports, the amount doubles every 10 months." The new service will provide AXS-One’s current e-mail and electronic records archiving and management through hosting services provided by EDS, a global technology services company.

Compliance considerations

Aside from the burden of managing burgeoning data stores, organizations also have increasing concerns about compliance and legal discovery. "The complexity of regulations about what needs to be retained and the implications of litigation readiness have caused a lot of worry," says Patterson. "IT personnel who were managing messaging environments now have to become experts in archiving, records management and legal discovery." Adding to the concern are the implicationsof the changes to the Federal Rules of Civil Procedure (FRCP) passed in December 2006, which affect the requirements for preservation and accessibility of all electronically stored information.

The AXS-One service is priced according to the number of users. It is available both directly from AXS-One and through strategic partners.

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