Tuesday, February 8, 2011

SaaS - An Opportunity or A Threat to Indian IT/ITES Industry

The most quickly adopted cloud-computing model is SaaS (Software as a Service) due to the relative ease with which it can be implemented for key yet mundane IT enabled tasks in an organization. This straight away leads to a debate whether SaaS is an opportunity or a threat to the IT/ITES outsourcing industry in India.

To come to a logical conclusion it is important to understand what SaaS is. SaaS, put simply, is software provided as a service over the internet, either on a subscription basis or pay-per-use basis. It certainly is a revolutionary concept as it presents low-cost upfront investments to maintain and upgrade software applications.

For many verticals like Manufacturing, Human Resource Management, Education and Retail it makes strategically viable to move to the SaaS cloud and offload some overheads of IT. SaaS becomes another way of presenting outsourcing method to these verticals. Some of the operations such as payroll management, sales lead generation and sales tracking can follow standardised protocols and hence go the SaaS-way, only this time much cheaper.

Specifically some of the tasks handled by ITES-BPO industry such as data entry, data conversion, accounting, back office operations etc. can well be moved to the cloud of SaaS. With high attrition rate in Indian BPO industry and increasing cost of maintaining employee benefits and employee satisfaction, SaaS model can surely pose a threat to ITES-BPO industry of India. An industry which is works on ever squeezing margins this could be a matter of concern.

On the same lines it may pose a threat to the India IT outsourcing industry to some extent. Whereas this may seem gloomy, but the bright side is that Indian IT/ITES industry has come of age and has a long standing reputation of being the best in terms of outsourcing services provided. With a long track record of about 25 years, our key players of this industry can include SaaS as a model to provide some outsourcing services. Their outsourcing experience should enable them to standardize key elements of processes of such functions which are usually outsourced. They should be able to move up the value chain faster and include SaaS in their service offerings. Moreover, moving to SaaS would help them scale faster and reduce redundancy within their organizations too.

In a nutshell, how I see this is – a threat which is posing a bigger opportunity.

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