Is Software As A Service THe Right Model in Malaysia?

18 March, 2005

Kuala Lumpur, March 18, 2005 – Today most enterprise software is installed and managed at the customer's site, rather than delivered as a hosted, managed service. In addition, customers purchase most software licenses in the traditional manner, with an initial financial outlay followed by a yearly maintenance fee, as opposed to subscription or usage payment models. However, disruptive forces are threatening the status quo in the software industry. The results of IDC's Malaysia IT Market Monitor survey indicated that 36.4% of the respondents have adopted some forms of Software as a Service (SaaS) in their organizations. The adoption of SaaS is particularly higher in certain verticals such as manufacturing and resources, healthcare and education, and distribution and services.

SaaS refers to the ongoing support of applications. The core value of these services is also maintenance and daily operation of business and consumer applications. The following are core-defining characteristics of SaaS:

• The main value of SaaS is the provisioning of network-based access to and management of a commercially available (e.g., not custom) application.
• SaaS activities are managed from central locations, rather than at each customer's site. Customers access applications remotely.
• SaaS activities are characteristically closer to one-to-many services than one-to-one services. These include architecture, pricing, partnering, and management characteristics.

There are three main components of SaaS: application service provisioning (ASP), Web-native applications, and hosted Web services applications

Source: IDC 2004

The end user result indicated that the trigger events that drive users to adopt SaaS in the Malaysia market was cost factor. More than half of the 150 respondents that we interviewed adopted SaaS to reduce IT cost, particularly on the owning the software licenses and the ongoing maintenance cost. In addition, most medium-sized and large companies in Malaysia actually have a large IT team to support or develop in-house applications rather than external parties. Thus, the trigger events that prompted and may prompt them to use SaaS naturally are a failed in-house implementation and the need for major software upgrade.

In the survey, we have also asked respondents what are the enhanced services that they are willing to pay extra 10% premium and who are the providers that are willing to work with. In the local market, we found that most respondents will pay additional 10% for enhanced disaster recovery (back online in two hours rather than a baseline of one day), as ensuring that the respondents' businesses run smoothly once they outsource to third parties is crucial. When we ask the respondents whom they are willing to work with, we believes that understanding who companies trust the most to provide SaaS can help service providers make decisions on the types of companies they should be going to market with. In the Malaysia market, the top 3 SaaS providers that a customer trust the most to provide SaaS are service companies like IBM, EDS, and HP; traditional software companies that offer the applications; and surprisingly, telecommunications companies like Telekom Malaysia and Maxis. Service companies have established stronger service standards and have long term working relationships with most of the medium-sized and large companies.

For more information about purchasing this research, please contact Hazmi Yusof at +603-2169-7526 or hyusof@idc.com. For press enquiries, please contact Stephen Chong at +603-2169-7521 or ckchong@idc.com.

Contact

Chee-Kian Chong
Events & Marketing Executive
Tel: +603-2169-7521
Fax: +603-2163-5098
Email:ckchong@idc.com