Defining Software As Service
Software as a service is abbreviated of SaaS which stands for a distribution model that helps in providing applications to customers through a network (Mowery, 1996). In this service, applications are hosted by vendors who are also regarded as service providers who then make the softwares available to the customers at a particular fee (Knecht, Leszinski & Weber, 1993). The SaaS model has become one of the biggest successful delivery service models in the recent past. The growth of this new model can be attributed to some of its benefits which include easier administration, automatic updates, compatibility, global accessibility as well as easy collaboration (Hempell, 2006). This has rapidly surpassed the traditional model of distributing software through purchasing and installing it on personal computers (Knecht, Leszinski & Weber, 1993). The difference between the two of them is that, on the one hand, one can purchase the software as a product while, on the other hand, it can be purchased as a service which is typically sold with all the rights to use it (Hoch, 2000).
How software as a service alters the competitive environment for software vendors and buyers
In the past, consumers had to purchase the software and incur all the attached maintenance costs (Knecht, Leszinski & Weber, 1993). This cost included applying security and upgrading the software to make it function, which was not a guarantee though as there were a number of cases of botched upgrades and hardware failure (Huang &Denne, 2003). Other costs incurred included cost emanating from the designing and maintaining security systems to avoid a leak to one’s competitors (Clair, 2005). Nonetheless, software as a service approach has solved all these issues by providing the consumers with an option to simply pay for services and an IT firm to take care of all the other costs and software infrastructure (Mowery, 1996). All that is left for the consumer to do is to simply use the software.
SaaS affects a number of the software market categories but not all of them. With its growing popularity, SaaS will definitely disrupt the current software market significantly, and the effect of its entry into the industry is gradually being felt already in some aspects (Knecht, Leszinski & Weber, 1993). The SaaS technology has impacted a number of software oriented businesses although some have not fully accepted or confined to the new model. The areas where SaaS has an influence or has failed to impact business include business intelligence, HR software, platform and middleware solutions, IT management applications, CRM software and productivity applications, ERP and supply chain software (Galin, 2004).
In IT management, for instance, the cloud solutions have a potential to save companies a great amount of money and also create an environment where workers can work in full productivity by focusing on their line of expertise (Oliviera, 2012). Users who engage the SaaS technology benefit greatly from the rapid updates of the softwares (Knecht, Leszinski & Weber, 1993). Collaboration applications have a gigantic user base among their employees, customers, and other business partners (Huang &Denne, 2003).
A software can either be binary coded or source code (Knecht, Leszinski & Weber, 1993). The binary coded instructions are machine instructions that the processor can understand, while source coded instructions are more understable to human beings (Knecht, Leszinski & Weber, 1993). Softwares are grouped into the two main categories which are system software and application software. System softwares are those softwares that are required for a computer; they include, for instance, the operating system which the computer cannot run without. Application softwares, on the other hand, must use the computer system to function. They are in most cases programs that are designed to help the computer perform different functions which are beyond its normal computer functions (Knecht, Leszinski & Weber, 1993).
In a more comprehensive definition, software or computer programs are data stored in a computer to help with operating the data processing system (Knecht, Leszinski & Weber, 1993). It could be a set of programs, procedures, algorithms as well as documents (Platt, 2007). The term was introduced to distinguish the softwares from the hardwares which were already known and used in computers. So in Layman’s distinction, one can say that softwares are the internal and intangible components of the computer while the external and physical components are called the softwares (Martin, 2003). A system software helps the computer to perform certain computing functions.
Software services include aptitude that a software gives to a computer enabling it to execute diverse purposes (Mowery, 1996). Service in computing is defined as the method that gives a computer the capability to access diverse purposes (Cusumano & Selby, 1995). The right of entry to these utilities is facilitated by precise crossing points as presented by the creator (DeMarco, 1995). Software services depend on some definite rules that an end user needs. For example, every computer must have an operating system in order to perform its functions effectively. Such programs are made by software engineers for commercial ends (Fowler & Beck, 2001).
An anti virus, for instance, being one of the greatest software programs has been dominating the market. This fact is influenced by the function the software plays in the computer systems. Technology has helped improve the functionality of computers but it has also given room for malpractices (Fowler & Beck, 2001). This is the advantage that malicious programmers take to create harmful softwares meant to destroy or ignore the computer system (Weinberg, 1994). The antivirus software counters this function and protects the computer from the harmful impacts of the malicious programs also known as viruses (McConnell, 2004). The software industry has gradually transferred into a commercially viable entity over years due to the inventions and innovation of new applications that have good features improving user interface (McBreen, 2002).
Defining software markets
The software market entails different functions such as development, maintenance, and publication of softwares as well as using business models (Utterback, 1994). In the software industry, there are a number of business entries that include infrastructure softwares, enterprise softwares, security softwares among others. The infrusctructural models include the operating systems, middleware and database programs that shape the functions of a computer (Kan, 2003). Enterprise softwares are those programs that support automated business processes, such as those in accounting , logistics, marketing, sales, and production among other functions (Cusumano, 2007).
Competition within the Software Industry
To successfully decide on the competitiveness of an invention, it is necessary to assess the cost of its fabrication (Martin, 2011). Construction of software is comparatively straightforward, weighed against other computer applications in particular the Hardware. The supreme cost incurred in creating a software can be described as the efforts made in innovating the design. This consequently means that when softwares are produced, the copy cost is virtually zero (Cohn, 2004). Competition in the industry is based on how innovative a software is and the technology used to create it. The market has become very competitive due to great innovations realized in the 21st century. On a daily basis a number of new creations and innovations are being made hence creating a stiff competitive environment in the industry.
Changes in the Software Industry
The number of free softwares flooded in the market and on the internet overshadows the sum of marketable softwares (Sommerville, 2007). This has harmfully exaggerated the viability environment of vendors because their sales are dropping although the demand is greatly increasing (Weinberg, 1998). The creation of free and easily downloadable softwares affects the market and, consequently, software vendors are feeling the ultimate impacts of these entries (Ramesh & Desikan, 2006).
Factors influencing rising in demand of softwares
Software engineering has been on the spot for the last two decades as one of the most upcoming and economically viable profession. The demand for software engineers is increasing every day and the production of software is on the rise currently as well. Softwares as mentioned earlier come with different functions and capabilities (Kahn, 2003). When creating or innovating a software, the engineers pay much attention to the needs of the consumer and capitalize on that, hence meeting the consumers’ needs. Every business is about satisfying the needs of the consumers; with the growing technological generation, computing has become part and parcel of our every day lives (McConnell, 2004). Factors influencing the rise in demand of software products include insecutrity, itneranational trade and globalization, social interaction, communication, education among other basic fundamentals of our livelihood.
Porter 5 forces
With the increase in computer literacy, many industries are embracing the use of ICT in their day to day functions, which has necessitated the increased knowledge of computers and their programs (DeMarco, 1995). This has further created the need for computer applications which have consequently enhanced the demand for softwares thus improving supplier’s bargaining power (Clair, 2005). In the market there is plenty of software applications that have been influenced by innovative creations of the same. This has further increased the competitiveness in the industry; due to the innovation of new products, the demand is still rising up (Thayer, 1997). Other factors such as competition among electronic manufacturers, have also contributed to the increasing demands for software (Christensen, 1997).
With security softwares, the rising and looming criminal activities have led to the increasing demand for such software. This has consequently reduced the consumer’s bargaining power by increasing dependency on the supplies. The law of demand and supply therefore deprives the consumers the power to bargain due to the rise in demand.The government and other business organizations have been forced to use surveillance cameras to secure their premises which calls for computer softwares (Tockey, 2005). This has further influenced competition and rivalry as software companies compete for the limited opportunities offered in this niche.There are softwares that have been designed to perform such functions and they have been in very high demand (Knecht, Leszinski & Weber, 1993). The innovative nature of this industry has brought into the a challenge due to the threat posed by substitutes. There are so many companies producing the same products hence creating a the occurance of substitutes hence the prices go down. The banking industry as well has created a demand for financial and other business utility softwares (Hooch, 2000). The use of ICT in banking has created a rising demand for anti-fraud software in the sphere of the online money transfers as well as for online banking (McBreen, 2002). Marketing has as well influenced the demand for business softwares in a very significant way. Advertising has been increased by the use of IT hence giving further rise for the need of the software (Humphrey, 1995). This broad markets are slowing giving rise to new palyers or competitors who are entering the market with new and better products hence threatening the existing outdated tecknologies.
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