Commentary - There’s no doubt that Software-as-a-Service (SaaS) or on-demand software has become a driving force within the software industry. Over the past few years, there has been a surge of interest and investment in SaaS solutions from retailers and their trading partners looking to optimize their supply chains. Multi-tenant SaaS has become a robust contender for slices of the IT budget, and on-demand solutions are now available across a wide range of supply chain functions in North America, such as sourcing, procurement, CRM, manufacturing, warehousing, logistics, forecasting and planning. Where does the Asia Pacific region fit into the SaaS picture?
The appeal of SaaS is growing rapidly in Asia Pacific, due to a host of factors – primarily a significantly increased awareness of the SaaS concept and a proliferation of new SaaS applications. In fact, Springboard Research predicts that the SaaS market in Asia Pacific will grow to $2.25 billion by 2012. Many organizations are deploying SaaS to meet their key IT needs and overcome challenges posed by the rising cost of deploying and managing traditional software systems. In addition, SaaS is creating a new breed of first-time software users, mostly among small and medium enterprises. However, research also shows that Asia as a whole is still tracking behind North America in terms of SaaS adoption.
There are several reasons for this. Many of the traditional software providers such as large ERP vendors have failed to promote their supply chain solutions to enterprises in the region. This has created a gap in the market, and many best-of-breed vendors have taken advantage of this by selling an array of supply chain solutions. While many Asian companies are tempted by SaaS and have options to choose from, they’re still concerned about the maturity of these solutions, losing control of their data and applications, the financial stability of the vendors providing them and an uncertainty as to how to integrate SaaS into their legacy systems.
The market for B2B EDI solutions is particularly confusing. Countries such as Australia are underserved by providers, where a key few own the majority market share. Other countries, such as Japan, have technical and relationship hurdles that slow EDI adoption. And still others, like China, are served by every vendor you can think of, while still lacking a dominant player. Retailer advice and systems are useful, but a third party solution would be more effective long term. Many small, agile vendors provide high quality solutions, but users worry that they won’t be able to grow with their business and be with them long term.
The biggest hindrance to SaaS supply chain adoption in Asia, in my opinion, is the unnecessary complexity that is embedded in educating the market. Talk to any software provider and you will hear the following verbiage: VAN, fees, annual contracts, maintenance renewal, software updates, map maintenance, resends, transmission monitoring, kilo-character charges, etc. You don’t know what a kilo-character is? Join the group. This is like asking your mother how large her email file is, or if she knows the location of the EML file on Yahoo’s servers. The problem is that factories popping up every day in Asia do not drive their business this way or speak like this. They simply want to receive a purchase order and send an invoice – the less software, install time and setup the better. When they are ready to purchase a solution and explore the market, they are unnecessarily inundated with this “education” into the vernacular of EDI. Why do you have to be an EDI expert to use EDI to automate your supply chain?
There is a better way. The SaaS delivery model, in which applications are delivered to users by a browser and software that doesn’t reside on-premise, is ideally suited to emerging markets such as those that characterize the Asia-Pacific region. Primarily, this is because the SaaS model appeals to a segment of user organizations that has previously been under-catered by software providers. The SaaS provider is responsible for hosting, deploying, customizing, configuring and delivering the software. Many of the Asia-Pacific countries have a huge base of small and medium sized enterprises (SMEs), and traditional enterprise applications have been way out of their reach. Those companies are mostly using point solutions at the moment. They would like to use advanced software, but they don’t want – or aren’t able to – invest money upfront to buy it. So the subscription model that is inherent in SaaS is ideal for them.
SaaS takes the setup and maintenance away from the customer by putting it online. The trading partner can then focus on receiving and processing orders, not running the IT of EDI. But it doesn’t stop there. There are still maps that must be created, document flow that needs monitoring and alerting – all of which should be happening behind the scenes. When there’s an issue, rather than get a confusing email telling you to click on the third tab and fifth link down to see an indecipherable error message, you should receive a phone call from an individual at your SaaS provider – a real human being who takes ownership of your account and speaks to you in your language, in your terms, about your business. In addition, these same individuals are there to manage any disputes that may occur in regards to EDI communications with your trading partners. When an issue arises, the SaaS provider contacts your trading partner on your behalf to resolve the situation. You avoid the traditional finger-pointing with your trading partner’s EDI staff and can focus on your business. While Asia remains a complex and challenging marketplace, SaaS providers will continue to stream in, refine and localize their business models.
Jim Frome is executive vice president & chief strategy officer at SPS Commerce.