Report Outlines SMB SaaS Strategies for Vendors

Software as a service (SaaS) for the small to medium-size business (SMB) market has opened potential opportunities for vendors, and a report released last week by Forrester Research offers some advice for gaining entry.

The report, "Forrester's SaaS Maturity Model," describes a six-step approach to help service providers and independent software vendors (ISVs) assess their SaaS business goals and technical means of achieving a successful SaaS business.

SaaS is going global. Forrester says that North America has the highest adoption rates, the Pacific Rim has the most pilot projects and the European business community has shown significant interest in SaaS. The most notable success for SaaS has been in providing customer relationship management apps to SMBs, such as those provided by Salesforce.com. However, other hosted apps may gain momentum.


Forrester's SaaS Maturity Model describes levels of sophistication of hosted services. It provides tips for making business and technical assessments, with basic questions such as "Who does what for whom?" and "What is the approach for customizing processes, data and user interfaces?"

The maturation range of the Forrester model is from 0 to 5, with 0 being a simple outsourcing of an application by a single enterprise customer. A level 0 operation is not considered to be a true SaaS implementation, according to Forrester's definition. Level 5, at the top, relates to dynamic service applications with a "build for change" approach to application development. By contrast, Forrester puts Salesforce.com's initial CRM operation at level 3.

The SaaS Maturity Model aims to match the technical foundations of the service provider or ISV with its business goals. The report warns that "targeting the highest maturity level is not necessarily the best fit for every vendor."

The Forrester SaaS Maturity Model can be accessed here .

About the Author

Herb Torrens is an award-winning freelance writer based in Southern California. He managed the MCSP program for a leading computer telephony integrator for more than five years and has worked with numerous solution providers including HP/Compaq, Nortel, and Microsoft in all forms of media. You can contact Herb at htorrens@verizon.net.

Reader Comments:

Fri, Aug 22, 2008

Herb,

The maturity model is definitely very valuable.

A great article by Brian Zanghi of Pragmatech at sandhill.com lays down some guidelines to help ISVs considering adopting the SaaS model. Brian says that the transformation called for drastic changes and took three years.

Change is always a difficult proposition. Some schools of thought even claim that traditional ISVs can never transform to the SaaS model. One look at SAP's transition attempt and one can surmise that this is no easy task. So lets look at why this is the case:

a) Changing from a perpetual license model to a recurring revenue model is not a natural transition. A SaaS offering can cannibalize premise software revenues.

b) ISVs must change development methodologies and adapt to an iterative mode of development. They need to be very conscious of ease of use and ease of integration.

c) ISVs must also build their expertise in operations such as ensuring high availability and meeting other service level agreements. If they choose to outsource web operations, then they need to choose a good managed service provider (MSP).

d) The customer service departments of transitioning ISVs must assume new responsibilities of being the subscription renewal agents.

All in all these are big changes, and the fact is that the transformation to the SaaS model must be executed very carefully.

- Ranjit Nayak ( eVapt Inc.)

- Ranjit Nayak

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