On Demand Blogging by Stephen Pech

I have recently read an article by Saugatuck, On the Road in Europe: SaaS Demand Grows both extremely exciting news for the industry world-wide, and a great point of comparison for The Asia Pacific region.  Just what is happening in Asia Pacific SaaS?  Is it following the growth pattern of Europe and the US?  What are the differences in the market?  What movements should ISV’s make and when?

Statistics

First let’s look at the statistics.  These are from 2H 2007 and I believe highlight the enormous APac SaaS opportunity as compared to Europe and the America’s

* Have a look at the great flash animation on the NexGen homepage for a great interactive demonstration of this

The statistics say it all.  The Asian market will grow at a faster CAGR, using faster Internet growth supply a faster growing economy, of more people and soon to be bigger economy than both the US and the EU.

One thing we do share with our European cousins is our interest in using WiMAX broadband to reach the Asian growing SaaS user base.  According to Paul Budde Communications based on Point Topic data “WiMAX will make up 60% of the wireless broadband market by 2008…. With Asia and Central and Eastern Europe the two hottest markets”, however the Asian region will lead even Europe.  In-Stat forecast that the Asia-Pacific market will account for “45% of the world’s total WiMAX user base by 2009, reaching 3.8 million.”

Key differences between markets

1. SaaS penetration in Asia is currently 18-24 months behind North America, and approximately 6-12 months behind EMEA.
2. Less sunk cost in legacy business systems means quicker penetration gains than both EMEA and North America (but similar to Eastern Europe).
3. Less sunk cost in legacy infrastructure is means quicker penetration gains than both EMEA and North America, (but similar to Eastern Europe)
4. Accounting practices in regards to depreciation of intangible assets can make SaaS more  attractive in some countries.

Customer Segments

Is there a difference between specific market segment’s?  Large companies are taking on SaaS in much the same way as their European and US counterparts, albeit slightly behind time-wise.  Asia is special however, in that it’s small businesses are the drivers of it’s new booming economy, entrepreneurialism is ‘built-in’ to many cultures here, and all of these SME’s need will need to take the next step in processes soon.  Government organisations know this too and some, like the Singaporean Government, are actively looking towards SaaS as a smart next step for their countries SME’s.  The industry is better set to take advantage of this process investment than in any other market.

Geos & Applications

CRM & Web conferencing were approx. 80% of Asia Pacific SaaS revenues in 2005, and were still probably 60% in 2007.  In 2005 over 1/3 of this was derived from the Australian market were less than 1% of people in the region live.  China, Korea, India and Singapore are the other leading markets in the region, however I believe that Thailand, Vietnam, Malaysia & Indonesia will outstrip growth in these regions in the next couple of years.

The Alibaba group , and their SaaS line Alisoft are a great example of China’s own direction (Alibaba run Yahoo’s presence in China) and representative of other parts of Asia like India. Indo China is caught in the middle of these and US/European services whilst Australia does now, and will continue to lean as normal towards US and European offerings, at least initially.

The Ecosystem

A SaaS ecosystem is definitely developing in the region, but it is still fledgling and not yet understood or accepted either by customers or the IT industry.  Those that can last out the winter could have a great summer.  Perception and mainstream acceptance are still the biggest retarder to the uptake.

Asia Pacific has already bred it’s own SaaS platforms (Morph ), Business Exchanges (Alibaba ),  Channels (NewLease and BlueArc ) and of course start-up ISV’s, (thinkfree which has strong Korean roots, AliSoft in China, Just login & Cynapse in SE Asia, and Enovation,   SaaSu and Xero in Australasia)

Much of the SaaS revenue in the Region is being derived from North American based ISV’s but the market is still only at early stages of maturity, is diversity, and has unique requirements such that local and international firm who position themselves and adjust to the market still have a good chance of being amongst the big winners.  Like for Europe, language is a barrier to expansion of Asian ISV’s. 

Crossing the Chasm

Software as a Service in Asia will outstrip even the US and Europe for growth, and potentially eventually as a market.  All of the feedback I get puts SaaS as a ‘when’ not an ‘if’, however perception and mainstream acceptance are still the biggest retarder to the uptake.

How I gather this information

I read and contribute to the SaaS-AsiaPacific.com website which is a commity for the SaaS industry, users and commentators in the Asia PAcific Region.  As a director at NexGen, an Asia Pacific SaaS enabler and ‘hub’, I travel to many Asian and world-wide conferences and speak to many enterprise interested in working in thismarket.  I suggest Springboard research an excellent source of APac SaaS Information. 

* I also post versions of relevant AsiaPacific articles from this this blog on the SaaS Asia Pacific Community site.

Yesterday Salesforce.com’s SaaS platform play, Force.com, announced it was going to support applications made with Adobe’s FLEX and AIR technologies on their platform.

This is a very good move by Salesforce.  It means they are allowing AIR/FLEX to be the presentation layer and also taking advantage of the offline functionality that AIR/FLEX will bring.  It means that they are leveraging the impact and drive that Adobe has brought to the web already with flash, shockwave et al., along with the extra it will be bringing to the web application space with AIR and FLEX.  It also means that strategically they are really opening themselves up to other technologies other than their own processes and user interface components which, although useful were never going to be able to keep up with the pace of change in the wider SaaS / web application community.This hook-up also means that the offline functionality that AIR and FLEX are developing immediately steps salesforce.com into the forefront of the drive to take SaaS apps offline.  The ability for applications to work effectively in both a connected and an unconnected mode is essential to effectively supporting business processes and our increasingly mobile work habits.

It will also allow the applications developed to be listed on their AppExchange, which on top of the technology based criteria for choosing the force.com platform, also provides a marketing and sales incentive by providing a built in route to the customer and marketing avenue. 

Force.com’s saleforce.com based customer interface layer was always going to be the Achilles heel of their platform.  It works well for sales management and database driven applications but not well enough for the wider array of web applications.  Adding AIR and FLEX is like selling a car with the option to snap the body off of the chassis and exchange it for one with a different look, feel and interior.

This really gives Force.com the opportunity to become the defacto standard web platform that Salesforce.com wants it to be.

Interestingly today also brought a big AIR/FLEX update in my neck of the woods, the Asia Pacific.  Australia’s biggest bank, the CBA, has chosen AIR/FLEX for the customer facing component of it’s home loans (Mortgage) processing system.  This will mean that the same user interface is available when offline or online and that mortgage data captured offline will be synchronised when the computer is next online.  A great example of what this technology can be used for.