The travel industry is just one of dozens of sectors which have seen what many say is a major shift from off-the-shelf, version-based technology to Software-as-a-Service (SaaS).
A string of travel technology providers have adopted the model amid incessant chatter in the wider tech community as to the benefits of the having a SaaS programme to run critical systems such as reservations, booking, CRM, email and accounts.
But as the following clip from ZDNet explains, SaaS still accounts for just 4% of the overall global software marketplace and is only expected to double in size over the next three years.
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The issue for the travel sector was brought into sharp focus just days ago when Air New Zealand found itself on the wrong end of a power outage from its technology provider IBM.
But the question remains: will the travel sector move toward a SaaS-based platform to run its systems, or will larger projects remain the preserve of traditional software?
[Disclosure: Tnooz nodes Alex Bainbridge and Stephen Joyce run SaaS-inspired technology companies]
Kev:
A good VC buddy who has backed both successful old-economy enterprise software companies and new-economy open-source software ventures once told me: “The CTO’s job is to say yes to new things; the CIO’s job is to say no to everything!”
Many core functions will soon turn toward SaaS and cloud-based hosting across many industries. And who’s to say now (as in the viedo) that email and CRM are not “core” to every business?
Is SaaS-for-core-ops-and-apps around the corner for GDS’s, rez systems and other big-iron travel software? That’s a good question.
Cheers,
Gene
Sure it will, but not for everything, and it also depends on which sectors of the travel industry are referring to.
Like with all businesses, the adoption of SaaS by travel businesses will depend upon the benefits and risks, and this will depend upon what aspect of the business the SaaS solution caters to. I think the video covered the concerns nicely.
One thing is for certain though, the benefits will need to be clear and will need to outweigh the negatives by a multiple if travel businesses are going to replace core systems with SaaS solutions.
When it comes to services like email, the downside of using a SaaS solution is minimal, as it is more likely that the office PC/server will experience problems or lose connectivity to the outside world than the cloud based solution.
For booking systems however, it depends on where the business fits in the distribution chain and how bookings are made. If bookings are online or multiple offices require access to the inventory then a SaaS solution provides clear benefits. If most bookings are made over the phone however, then it is important for the business to have the availability and pricing data stored locally and accessible even if they are disconnected from the internet.
One could argue that OTAs provide SaaS, with providers splitting their inventory and allocating some to these solutions and paying a fee (commission) on bookings. If so, then the SaaS market is undoubtedly larger than $4billion.
Won’t it be great when providers do not have to split their inventory, and could use a single SaaS solution which they can access even when they become disconnected etc (e.g. using google gears or adobe air or another syncing technology), with safeguards being put in place to ensure that inventory is not double booked (e.g. uses SMS to check availability and alter the available inventory when the net goes down).
8% of software revenue, which should reach about $400B by 2012 (following DataMonitor figures), would be about $32B. That’s not too shabby. I’m not sure how much headroom for penetration there will be – because a lot of those dollars are tied up in huge, propietary software/hardware platforms where SaaS will never penetrate, such as stock exchanges, larger banks and financial houses, major telecoms, and larger airlines (Are you sure ANZ is an example of SaaS? Isn’t that just a hosted mainframe enterprise application?).
What would be more telling is to look at SaaS penetration not just by revenue but by users, market segments like company size (SMEs), industries, etc… that would give a richer picture of SaaS potential.
Having worked on both traditional and SaaS systems, my experience has been that large enterprises are less likely to adopt SaaS then smaller organizations. The reason is primarily because of the perceived lack of control and ownership of the technology. Corporate IT departments are very complex organizational structures sometimes filled with “strong” personalities who are generally resistant to change or solutions that are outside their area of expertise (or comfort). Until a new set of technologists, who are comfortable with SaaS, start to fill these IT departments, I think the resistance to hosted solutions will continue to be strong.
I agree with Stephen in regards to larger organizations are less likely to adopt SaaS for their core systems – though they may end up utilizing the cloud computing server technology for cost savings. SaaS in the travel industry is much needed for the Small and Mid-size sector since they are the folks who are in the midst of having to compete with everybody. The need for utilizing complex and enterprise software at reasonable costs can easily be achieved thru a SaaS model where they do not have to invest in huge IT staff nor infrastructure. I think the need will clearly outlive the fear of change and adoption rates would go higher.