Microsoft moves boost local SaaS opportunities

What Microsoft calls 'Software plus Services' could open up new markets for local developers

Recent moves by Microsoft to support Software as a Service (SaaS) will boost the new software distribution model, particularly with enterprise users, say SaaS vendor representatives and hosting companies who met Microsoft’s visiting director of architecture strategy, Gianpaolo Carraro, in December.

Microsoft’s support will help attract the attention of enterprise customers, says Rod Drury, CEO of Xero, the NZX-listed online accounting software provider.

The early appeal of SaaS was confined to small- to medium-sized businesses, says Drury. “But we’re now getting the attention of the enterprise market.” This is good news for New Zealand software developers, “because we’re good at writing enterprise systems”, he says.

New Zealanders have grown used to having to cater for a variety of both user platforms and needs in order gain a chunk of this small market, says Chris Auld of Intergen. And such range is characteristic of the SaaS market internationally.

That flexibility, Drury says, equips New Zealand well to sell its services to the world in competition with outsourcers from countries such as India.

Microsoft sees itself making an important contribution to the many layers of the complex SaaS stack, says Carraro. It is heavily involved in British Telecom’s BT Applications Marketplace and with BT Tradespace SaaS offerings, and Office Live also integrates well with SaaS applications.

“Office Live will drive market to us,” says Drury. And companies like Xero will also get valuable help with marketing strategy.

“We’re seeing Microsoft listening more than they used to,” says Ed Robinson, chief of SaaS collaboration-tool provider ActionThis.

Hosting companies such as Intergen are a crucial layer of the SaaS structure. They can provide integrated services for a number of SaaS application providers simultaneously, the vendors say. This means real economies of scale, as well as what Intergen’s Auld calls “quality of scale”: as more applications can be provided through one SaaS platform, the quality of the offering is boosted.

“What we’re building is a platform for the future,” he says. “We provide a core set of platform technologies and manage the people [who keep it running].” There are multiple levels of provider and “everyone clips the ticket along the value-chain”.

Microsoft has described the next phase of the SaaS evolution as “Software plus Services” (S+S). Local SaaS providers clearly believe this has great potential. S+S involves a combination of SaaS and processing on the desktop, along with supporting services, including forums and blogs.

Robinson says this represents another iteration of the back-and-forth movement between centralisation and distribution that has been ICT’s history for the past few decades. But with every cycle, the fit to the customer’s needs becomes closer, he says.

Vendors acknowledge this can result in problems, with slow or failed services. These can involve prolonged drop-outs or micro-outages of a fraction of a second — which can cripple partially completed transactions — but reliability is increasing, vendors claim.

Intergen says it has patents pending on a technique for addressing the problem by reducing the time a given amount of data takes to traverse a link. Neither Auld nor Intergen’s managing director, Tony Stewart, would go into further detail, however.

The dividing lines between application provider, platform vendor and hoster can be drawn at various points, to maximise both the effectiveness and the efficiency of the service to the customer, says Carraro. This must be the ultimate touchstone, he says.

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