Small firms to benefit from new business model

MANILA, Philippines - Small and medium-scale companies are expected to benefit from the “Software as a Service (SaaS)" business model since it costs less and is run by a service provider. Already considered as a success in the United States, the business model is also expected to reap similar results among small and medium business in the Philippines, Silicon Valley-based venture capitalists (VCs) said. But the Philippines has yet to bring this business model to users, including companies. Atty. Denny Roja, managing partner and general counsel of Acuity Ventures, a Palo Alto, California-based VC, told young participants in a conference on Tuesday that VCs everywhere are putting more money in SaaS because of the business model’s cost benefit. Roja quoted an industry forecast saying that 95 percent of companies will use SaaS by 2011. “Software-as-a-Service is being driven by small and medium companies," Roja told participants of the 6^th Philippine Youth Congress in Information Technology in the University of the Philippines Diliman, Quezon City campus on Tuesday. He added that small and medium business segment is a fertile market for SaaS with a high adoption rate. In the SaaS business model, the software is developed, managed remotely by a service provider. The service is delivered through the internet. This means less upfront cost for companies because the software is developed for many instead of just one company. The cost of maintaining the software will also go down with the SaaS model. This model departs from the traditional model of selling software which is sold per license. The SaaS model is said to be more successful for companies using company-wide applications or what is called in the industry as enterprise applications. Among the popular SaaS applications are for human resource management, procurement and customer relationship management (CRM). In the same conference, Winston Damarillo, another VC with experience in Silicon Valley, said SaaS is still new in the Philippines as there are still no big companies offering SaaS. In the US, the more successful SaaS provider is Salesforce.com which saw its net income last fiscal quarter ending July 31 doubling to $10 million from $3.74 million in the same quarter last year. Damarillo said SaaS is going to be a hit with small businesses because they do not have the time to learn, install and manage the software. “Because of this, SaaS will be successful," he said. Another success factor is the “sachet mentality" among Asians, said Damarillo, whose company based in Cebu, Morph Labs, Inc., is offering SaaS. Damarillo said this retail mentality is similar to paying only for what you need today. For SaaS to be successful, Damarillo said connectivity is important but he expressed confidence that the local telecommunications companies are already addressing this. Morph Labs, which is planning to hold an initial public offering, also has operations in Manila and the US. - GMANews.TV