Alternative software players are pushing businesses towards the notion of renting software rather than buying it. But are Irish firms convinced?
Having made the switch from running a business largely on spreadsheets to using on-demand software delivered over the internet, James Burke wouldn’t go back.
“It’s running the business – we couldn’t do without it,” he says.
Burke is general manager with Larionovo, an overseas property investment company.
As interest among Irish clients in buying property abroad has grown, the company found its old customer relationship management (CRM) package had reached the end of its useful life late last year.
It needed a tool that could get around the tricky logistical challenge of multiple locations. Larionovo’s headquarters is in Ennis but its main sales branch is in Dublin, with satellite offices in the UK, Dubai and Spain.
“Previously, we would make a sale in one office and the other wouldn’t know about it as they weren’t connected to the same system,” Burke relates.
“We were running multiple databases and that actually led to conflicts and multiple bookings.”
Since November last, Larionovo has used Property CRM, a tool developed by the Irish software consultancy Saaspoint and based on the Salesforce.com CRM system.
Unlike traditional software that is installed on a server, usually at the company’s offices, Salesforce.com is accessible through a web browser from any location.
Larionovo pays a set monthly fee – effectively a rental charge for the software – based on the number of Property CRM users. As the company has grown, it simply adds more employees to the system.
“We wouldn’t have been able to cope with the expansion and different projects without it,” says Burke.
“We can conclude a sale quicker and more accurately and get information on to the system in the process. We’ve completely got rid of spreadsheets and nothing gets done manually.”
Larionovo is one of a growing number of companies using software as a service (SaaS), or on-demand computing, as an alternative to buying and using licensed software the traditional way.
A study from Aberdeen Group last year found that companies of all sizes have begun adopting it, citing advantages such as fast return on investment and lower IT costs.
According to the firm’s research, 74pc of companies said they implemented a SaaS CRM system in under two months. The same companies also reported that the software had paid for itself in six months or less.
Acceptance in Ireland has been slower to date and is just beginning to take off, according to Colm Mulcahy, CEO of Saaspoint, which is the largest implementation partner for Salesforce.com in Europe.
Part of the reason for this slow adoption rate is cultural, he suggests.
“In Ireland we’re still educating people. They can have a lot of problems with security and the question of where their data is; as a result, the sales cycle is very extended.”
It takes a leap in thinking to change from having vital business information physically stored on a computer in the building to having it hosted off-site and delivered over the internet.
There are several benefits to the latter option. By being delivered as a service, the software has a predictable price that the business customer can factor into its ongoing expenses.
SaaS differs from the traditional software model where set-up can require a lot of upfront capital investment.
According to Mulcahy, it’s “a fraction” of the cost of licensed software.
Moreover, if the manufacturer adds new features to an SaaS application, they are instantly available to every user because the changes are made centrally, where the software is hosted.
That way, the company using the program doesn’t have to send a technician around to every desk to check if it is up to date, or wait for the new version of the software to be released by the developer.
An ecosystem is starting to build up around Salesforce.com, which is one of the leading lights in promoting SaaS. Its AppExchange is a kind of directory where companies can search for software that fits their business need.
“You’re not constrained to CRM. You can do literally anything with this platform,” says Mulcahy. It has built applications in several areas, such as billing, human resources and ordering.
The concept is not new. The building of large data centres in the late Nineties was intended in part to host software remotely for customers.
The dotcom crash caused plenty of collateral damage, including a setback to the establishment of SaaS in the software sector.
But the idea is back and has gained traction, helped among other things by better availability of broadband. Now, companies have a better guarantee that their software will be accessible from any location.
The SaaS approach isn’t just for users of software – it has serious implications for those who sell it, too.
It’s a disruptive business model. According to an estimate from the industry watcher Gartner, 25pc of new business software will be delivered this way within five years.
Whether that forecast proves true or not, it has already stirred up much debate in the industry.
As the SaaS concept becomes more established, we can expect some new and some familiar names to appear. As an example of the former, last week Wax Digital set up an Irish sales office.
It is growing its business by 50pc year on year and provides its purchasing and spend management software purely on an on-demand basis.
Microsoft, the biggest of them all, obviously has a significant interest in the current software model but it’s paying close attention to developments in the on-demand space.
The indigenous software sector is also sitting up and taking notice. SaaS was the phrase on everyone’s lips at last year’s Irish Software Association conference.
Enterprise Ireland is also looking at the area closely and is planning a seminar on the subject – its second within a year – for next month, to explain the concept to client companies.
The message is, if export-focused Irish software companies are to be competitive, then SaaS has to be part of the strategy.
“Just because you’re an SME doesn’t mean you can’t be a global player,” Mulcahy agrees. “The opportunities are there for smaller companies to get involved.”
Illustrating this, more than 80pc of Saaspoint’s business comes from outside Ireland.
The AppExchange platform is an ideal stage, he suggests. “There are more than 500 applications on AppExchange. Some have been developed by large companies and some by one-man companies,” he points out.
Case study: Zero to hero
“We began in September 2004 with three staff and zero customers,” recalls Donal Hanrahan, sales and marketing director with Magnet Business.
To keep track of growth, the company needed a customer relationship management (CRM) system that could grow as the company and its client base did.
Now it has 120 staff and more than 10,000 customers.
The division chose CRM from Salesforce.com from day one. “There was no point in us starting with one system and then having to change it months later,” says Hanrahan.
As a young company, Magnet needed a flexible software system to adapt as it grew. “In growing the business, we keep changing as the market changes and Salesforce.com isn’t stuck in one area,” he adds.
Hanrahan acknowledges that, by selling broadband connectivity and internet services, the prospect of using software on demand holds no fear for Magnet.
In fact he sees it as an advantage. As the tool is accessible through a web browser, new employees are quickly up and running on the system.
“If we have field sales staff in Galway, Limerick or Cork, we have no issues with setting them up. You give them a laptop and they’re off, they’re connected,” he explains.
Even if they’re on the customer’s site, sales staff can use a PC there to access the CRM application. “That kind of productivity is very powerful,” says Hanrahan.
Magnet also uses a project management tool called Project-on-Demand from Salesforce.com’s AppExchange.
Magnet employees can use it to manage a major project for a corporate customer without leaving the Salesforce CRM system, saving time and money.
By Gordon Smith
Pictured – Donal Hanrahan, sales and marketing director, Magnet Business