On-premise to SaaS
By shupadhy on Jun 18, 2008
For On-premise software vendors looking to offer an On Demand solution, what should be the thought process? Like any other business, you should start with defining your business model. What is the value proposition of your On Demand offering, what is your target customer segment and how will you make money.
It might be the case that your On Demand software targets the same market segment as the On-premise software and you want to add On Demand as an additional delivery channel due to customer demand. In this case you can work with a hosting service provider like Oracle On Demand to host your On-premise software without much technical change. Due to the commoditization of hardware and emergence of virtualization technologies, the cost of operating your On Premise software in a On Demand environment for multiple customers is not as high as you think. However, you will have to deliver on key functional advantages of SaaS. Customers should be able to try out your software online before buying it, they should be able to pay on a subscription basis and have a faster implementation cycle. You will have to build these capabilities on top of your existing software. You can keep the subscription model simple, for e.g. by number of customer users per month etc. Using the hosting provider services, you can slowly add additional capabilities like pre-built integrations with other SaaS and On Premise applications as a differentiating factor. It is essential that you invest in the right hosting provider.
On the other hand, if you are targeting the long tail market, then you might have to operate at a much lower cost and find additional ways of making money. This requires re-architecting components of your existing software using platforms like Oracle SaaS Platform. You might need to think multi tenancy to share infrastructure components at different layers of your software. You might have to add metering capabilities for making money through different avenues e.g. space used, features used etc. Further, you will have to continue investing in your SaaS offering to keep these customers happy. The switching cost is low for these customers. Today it is Web 2.0, tomorrow it might be something else. It is essential that you invest in the right platform, which allows you to continue delivering innovation.
Like most business problems, there is no right or wrong way of moving to On Demand. However, due to the subscription nature of the business, it is essential to move fast to capture initial customers. Once you have the customers, do everything to keep them happy.