Everyone knows that buying and updating software can be a huge business expense. However, software delivered ‘on demand’ over the web is often proving more cost-effective and is providing users with more control over their IT. David Bicknell finds out more
Avis Budget Group, Expedia Corporate Travel, Millennium and Copthorne Hotels, and Carlson are just four of the 38,100 customers of Salesforce.com.
If you’re not familiar with Salesforce.com, it is the pioneer for the ‘on demand’ delivery of software applications via the Internet, which is transforming the way companies will utilise software in the future.
The fact that those four Salesforce.com users are in the travel sector offers an indication that the sector has already embraced the concept of Software as a Service (SaaS), as it has become known.
With SaaS, no software is installed on the premises of the purchaser. Access to applications is provided on demand over the Internet and it is the supplier that manages the whole thing in a secure central location.
SaaS has become one of the fastest- growing segments of the information technology industry because it provides a more cost-effective alternative for enterprises to achieve their business objectives than traditional packaged applications.
Most of Salesforce.com’s own customers use it for customer relationship management applications, and it is a reasonable claim that the company’s portfolio of SaaS applications has revolutionised the way its customers manage and share business information over the Internet.
But Carlson and Expedia Corporate are global enterprises. Does the SaaS model extend to small to medium-sized organisations that make up a large part of the travel marketplace? According to the Forrester Research Group, although SaaS is still in its infancy, an expansion of the model appears inevitable.
In a recent research report, it suggested that the SaaS business model is “…both Web 2.0 and business technology and reflects the wishes of business users to have more control over their IT.
The success of new SaaS providers such as Salesforce.com is seriously disrupting the business applications software market, and even SAP is now providing such a solution for its customers. Several SaaS start-ups are already in this market, and the solutions they offer are compelling to both enterprises and small and medium-size businesses.”
Three UK companies who have already adopted the SaaS model and are delivering it to tour operators and travel agents are Comtec, TourCMS and Traveltek.
Humphrey Sheil, chief technology officer at travel technology specialist Comtec, says the SaaS model fits well into his company’s product portfolio.
He says: “Comtec is today using SaaS to deliver products such as our travel agent selling platform, TravelConnect, and our tour operating system, Travelink.
“SaaS is a great way for us to release products into the leisure travel marketplace more rapidly than before, enabling new features in TravelConnect once they have been developed and pass Quality Assurance in our staging area. When they log in to production, our travel agent users simply see a new enabled tab that says, ‘search, cost and book cruise’ functionality, where before there was a greyed-out tab. This low cost of deployment is a great win for us,” he adds.
“Keeping applications browser-based minimises the support we need to provide compared with fully-fledged application installs. We are also looking at the next-generation of browser plug-ins from Microsoft (Silverlight), Sun (JavaFX) and Adobe (AIR). We can see that they are less painful to install and administer than before and can be used to deliver a compelling end-user experience that includes seamless integration of video and audio, and collaboration, including social networking and instant messaging integration.
“One key thing is that more and more browser-based apps can execute some functionality even when disconnected and then upload the changes to the server when re-connected, making SaaS software users even more productive.”
Alex Bainbridge, founder and CEO of Travel UCD, the company behind TourCMS, says SaaS is taking off, because it is much easier for smaller organisations to pay a monthly subscription of £50 than worry about capital outlay.
“We offer TourCMS as a complete website and reservation management system for small and medium-sized tour operators and travel agents who cannot afford the typical capital outlay for the hardware and software involved in buying a system of £10,000-£15,000. Instead, using SaaS enables them to get to a price point they can afford. They don’t need to have an IT member of staff either, and an average small tour operator will only pay £50 for upto five Tour CMS staff users.
“By adopting this ‘cloud computing’ model, you don’t need to worry about worrying whether your IT kit can scale to meet your peaks. For example, if your peak period is January, February, and March, your really expensive servers will be under-utilised for nine months of the year. However, although people are taking SaaS to be the next big thing, it’s not necessarily a massive leap. It’s simply evolution, rather than
Kenny Picken, managing director of SaaS provider Traveltek, says the cost of adopting a SaaS-driven back-end solution clearly outweighs the cost of adopting your own solution.
“Every Traveltek product is web-based. There is no installed software at all, and all of our clients’ information is stored on the Internet. An agency could spend £27,500 on software licences, set-up and
server, plus £250 a month for Virtual Private Network access. So that’s more than £30,000, plus a further 10% of that on annual maintenance.
“Then if they are taking bookings from the web, data will have to be put into the back-end system, so there’s the additional cost of those data entry staff. So, if you pay £15,000 for those staff costs, you’re looking at £45,000 for a standard back-end system. Or you could use our SaaS-based iBOS system for £10,000-£14,000.”
Kevin Duckworth, managing director of Preston Travel Group Holdings says outsourcing all or part of your IT requirements can bring huge initial benefits.
“You may not need to worry about hardware (servers etc) and employing IT people, or making significant investment in software development. However, you do need to choose your outsourced IT partner very carefully.
“Outsourcing may solve some immediate issues. However, remember that technology is constantly changing and you need to ensure you have a strong relationship with your partner that satisfies both your short term and long-term strategic IT objectives. Buying off-the-shelf solutions may also restrict bespoke developments. Like a marriage, everybody enters the relationship full of optimism, but exiting can be costly and painful.”
Chris Nourse, general manager of Multicom, whose offerings include the FindandBook travel booking engine, says one of the key benefits of the SaaS model is its greater flexibility for travel organisations.
“The industry is now a very complex picture, with the rise of low-cost airlines, bed banks and dynamic packaging. Customer service has to be of good quality, and that means having a flexible system that can easily be adapted to environmental factors.
“If the economy struggles, people’s travel habits may change, and they’ll go for three or four long weekends to European destinations rather than two weeks on a beach. Or maybe the Government will introduce new fuel taxes that affect prices. Our customers have to be able to adapt and service those demands quickly.”
What is Software as a Service?
The key characteristics of Software as a Service (SaaS), according to the research group IDC, include:
- Network-based access to, and management of, commercially available (not customised) software
- Activities that are managed from central locations rather than at each customer’s site, enabling customers to access applications remotely via the web
- Application delivery that typically is closer to a one-to-many model (single instance, multi-tenant architecture) than to a one-to-one model, including architecture, pricing, partnering, and management characteristics
- Centralised feature updating, which eliminates the need for downloadable patches and upgrades
- SaaS applications are generally priced on a per-user basis, sometimes with a relatively small minimum number of users, and often with additional fees for extra bandwidth and storage. SaaS revenue streams to the vendor are therefore lower initially than traditional software licence fees, but are also recurring, and therefore viewed as more predictable, and much like maintenance fees for licensed software.
Who’s who in travel SaaS?
A web-based selling system that provides a merged search across multiple product types, whether agents are selling traditional package holidays, creating a tailor-made journey, selling their “own inventory” or building a dynamic package sourced from an extensive range of suppliers in real time. Comtec has 600 agent and tour operator customers supported on TravelConnect. www.comtec-europe.co.uk
TourCMS is a web-based reservation system designed to be affordable for small and medium-sized operators, featuring integrated customer CRM, website CMS, online booking engines, PPC marketing tracking, supplier and agent management, plus enquiry workflow, multi-currency margin analysis and multi-centre bookings. Aimed at event ticketing companies, agents, villa and cottage rental companies and operators, including Angling Direct Holidays, Expat Explore, and Uncover the World. www.tourcms.com
Traveltek is a specialist in Internet travel technology, providing online solutions for large and small customers with expertise in web design, XML interfaces, dynamic packaging, data manipulation and CRM systems. Products include Travelshop in a Box, a complete website package for agents; a dynamic packaging option, HolidayMaker; and recently, a web-based back-office system for agents, iBos, which will offer an all-in-one integrated system with full back-office functionality, whether the client is a travel agent or a tour operator. Clients include Preston Holidays, Kwik Travel, and Holidays You Like. www.traveltek.com
Drivers for SaaS adoption
Comtec’s Humphrey Sheil believes SaaS is the logical successor to the old ‘application service provider’ model of the late 1990s with the main differences being that:
- Today’s networks are cheaper, faster and more resilient, making browser-based software genuinely usable
- Virtualisation in the data centre layered over multi-core CPUs running inside multi-CPU servers has allowed companies such as Comtec to amortise the cost of deploying a leading data centre configuration across multiple customers, enabling it to host products such as Travelink and TravelConnect more cost effectively than the customer can themselves
- There is an acceptance industry-wide that the SaaS model is mature, both commercially and technically. It is critical to have both aspects. While application service provider was a cool idea, SaaS is a good idea.