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  SaaS in China: An Ecosystem In Flux
July 16, 2008

Software as a service (SaaS) is transforming the way software value is realized. Vendors are able to benefit from an ongoing revenue stream through periodic service charges, while customers can reduce up front license fees and hardware costs.

In 2008, SaaS has had further development in China, as many vendors have embraced the model, realizing revenues and profit. Chinese users have strengthened their understanding of SaaS through vendor marketing and the media.

The SaaS ecosystem is still in flux.

In China, the SaaS ecosystem includes SaaS application service providers, software vendors, hardware vendors, system integrators, Internet operators, telecom operators, IT channels, and users. This ecosystem is still in its embryonic stage, as players are still defining their roles and own SaaS models within the ecosystem.

For example, many players are pursuing their own SaaS initiatives. Trading website Alibaba offers SaaS applications targeted towards SMEs. Digital China has launched an SaaS platform. China Telecom has launched its BizNavigator website. Governmental entities also have their own SaaS application, such as the Ministry of Commerceís International Trade and Economic Affairs.

Software vendors also have their own vision of SaaS, including those from eAbax, Kingdee, Microsoft, Oracle, and UFIDA to name a few.

Vendors form varying degrees of partnerships to facilitate or support the SaaS model. IBM and Lehman Brothers have stakes in Kingdee; IBM also partners with MainOne. Softbank BB and Digital China have a joint venture to launch their SaaS platform. Alisoft actively seeks partnerships with multinational software vendors to deliver SaaS.

User concerns.

Chinaís small and medium enterprises are the primary targets for SaaS, given low upfront costs and pay-as-you go model of SaaS. Resource-rich large enterprises are typically not the target for SaaS in China.

However, users are concerned with vendors, or the ecosystemís, ability to deliver services on a continual and stable basis. Data security and storage by various vendors is also concern, given a lack of standards or practices.

For more information

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