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SaaS Progress in Asia

Chris Perrine

May 30, 2006

Our new study of the Asian SaaS market revealed a particularly dynamic, promising and exciting corner of the IT market. Many segments of the market are doubling in size every year, and the pace of strategic experimentation is astounding. Most vendors are approaching the market in a different way, viewing it through a lens that can help them benefit from this new market dynamic to the largest extent possible. Young SaaS-founded companies are moving at a fast and furious pace to stake their claim, as traditional IT firms delve into the SaaS landscape more cautiously. Regardless of the approach, all vendors we encountered have a healthy dose of respect for the power and force of the SaaS dynamic, and its ability to reshape their fortunes in the long term. Our five key findings from this research study are provided below:
  • The SaaS Market is Here to Stay: Unlike many hot IT industry buzzwords that come and go, all evidence we gathered points to the long term staying power of the SaaS model. Early adopters report significant savings and high satisfaction, vendors are investing heavily, and ecosystems to support SaaS growth are taking shape quickly. We do not believe SaaS will replace the traditional software license model any time soon and we envision an environment where both models coexist; however, SaaS will eat into the share of the traditional model and the traditional software license approach will need to adapt.
  • SaaS is not Just for Asia's Small and Medium-sized Businesses: Although adoption levels for SaaS will be greater in the SMB market sector, vendors indicated there is activity in the large enterprise sector as well, and that upper mid-market and large businesses represent some of their largest and most important clients. Large enterprises are far less likely to leverage the SaaS model for core applications such as ERP, but for applications deemed less mission-critical and those on the edge of their infrastructures, SaaS is receiving considerable interest.
  • Competitive Frameworks in the Enterprise Application Industry will be Reshaped by SaaS: Traditional enterprise application vendors are already adjusting their offerings to address the SaaS dynamic, and new formidable competitors are emerging at a rapid pace. In many ways, SaaS - enabled by its ease of implementation, maintenance and support - levels the playing field and allows vendors to compete more effectively across borders based on the merit and ease of use of their applications.
  • SaaS is in the Process of Branching out of the Core CRM Segment to other Application Markets: CRM has been the pioneer and largest segment of the SaaS market, but a myriad of other markets are now gearing up for a SaaS push. Two segments in particular that we believe are on the threshold of strong SaaS advances over the next several years are Security and Collaboration; however, the spread of the SaaS dynamic can be expected far and wide in the years to come.
  • A SaaS Channel and Ecosystem is Emerging in Asia Rapidly, but it is Marked by Experimentation and Fear: The race is on as traditional software firms and SaaS vendors are working hard to develop extended regional networks of resellers, system integrators (SIs) and developers. Experimentation has been common with several tie-ups between software vendors and telecommunication firms and the rollout of innovative referral models. However, traditional SIs are weary of embracing the models too firmly out of fear that it could cannibalize their existing sources of profit.


In addition to these key findings, other prominent study results are outlined below:
  • The Asia Pacific SaaS enterprise applications market amounted to US$80 million in 2005, and generated 82% revenue growth over the previous year. The market is projected to grow at a CAGR of 84% from 2005 to 2008.
  • CRM is the largest SaaS application segment in the region, representing 50% of total SaaS revenue in 2005. CRM is trailed by Web Conferencing and Collaboration (30%) and back-office applications such as ERP (9%)
  • The primary factor driving SMEs to adopt SaaS applications is cost benefit (33%), followed by ease of use and business benefits.
  • Of the surveyed SMEs that had adopted SaaS, they reported savings ranging from 5-55% compared to the traditional licensed model, with the majority (58%) reporting estimated savings of between 20-30%.
  • The primary factor preventing SMEs from adopting SaaS is the perception that it is more expensive than licensed software. The next most important inhibitors are a lack of SaaS understanding and security concerns.
  • Among SMEs that had not adopted SaaS, 25% indicated plans to do so within the next 12 months. The primary application being planned is CRM, followed by web collaboration, security and HR applications.



Chris Perrine is vice president of business development at Springboard Research.



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