software as a service (SaaS) is now mainstream.
Research from International Data Corp predicts annual cloud computing subscriptions in South Africa will grow 29% annually, from $370 million in 2018 to $1.7 billion in 2024.
The study shows that cloud computing is growing exponentially in South Africa, creating value for businesses by enabling lower investments in IT maintenance and upgrades, which account for 70% of IT spend.
“SaaS and cloud applications have grown at an almost unimaginable pace over the past decade, and it’s no longer about the technology, it’s about the entrepreneurial mindset.” – Kerryn Lee, Head of Financial Operations at Tarsus On Demand, a four-time consecutive winner of Microsoft’s Cloud Solution Provider (CSP) of the Year.
Why SaaS is becoming the dominant IT trend
The transition from in-house software to the SaaS model was accelerated rapidly by the outbreak of the pandemic.
The financial benefits of SaaS for SMBs include:
- No capital expenditure: With on-premises IT solutions, data, applications and software are run entirely on expensive internal servers that require a significant capital outlay. With SaaS there is no hardware to buy, install and maintain. The need for a physical installation of vital security software is also eliminated as it is now offered virtually. SaaS is billed as a recurring monthly expense, a steady and predictable cost with no large upfront payments and no need for sudden unexpected expenses when it’s time to upgrade or something goes down. It’s a mindset shift from Capex to Opex.
- Data centers are expensive to set up and operate: The monthly subscription fee for SaaS offerings is based on consumption, so businesses pay for what they use. From a budgeting perspective, this is an advantage because the company can include these costs in its budget as recurring monthly expenses. Because there are no sunk costs with SaaS, there is no need to waste IT resources and hold on to legacy technology that could limit a company’s ability to innovate. In addition, with SaaS there are no personnel costs for IT support, since no IT infrastructure has to be rented and managed. It’s a mindset of your own to hire.
- Plannable turnover for providers and partners: SaaS is an attractive business model due to the predictability and flexibility of the recurring revenue stream. The SaaS model enables a hybrid billing model that allows for a combination of subscription-based and consumption-based payments. This pre-payment (subscription) and post-payment (consumption model) model can be adapted to the ever-changing needs of the customer. For example, a customer pays a set monthly subscription fee for a particular offering, with additional usage billed as consumed. This predictable recurring revenue, combined with flexibility in managing consumption, allows Tarsus On Demand partners to efficiently control input costs and allow flexibility in consumption costs. The mindset is shifting to the hybrid – a word that makes many accountants uneasy.
New ways of company valuation
If you are looking for an investor or plan to exit your company in the not too distant future, a revenue-based SaaS business model makes you attractive to a potential investor. In their view, the predictable revenue stream based on subscriptions makes the business attractive and allows for an above average valuation.
SaaS contributes to valuation numbers because an investor can calculate a customer’s lifetime value, resulting in better predictability of future value. The recurring revenue model also makes it easier to forecast cash flow and generate sustainable profit margins for the business. Which investor would not like this picture?
“Through our SaaS-first offerings, Tarus On Demand not only enables digital transformation for SMBs, but we also offer the best technology, regardless of brand, to solve the ever-changing, real-world business challenges in the most efficient way. It’s about building relationships with SMEs that transform technology access into new competitive advantages,” says Lee.
For these reasons, the “as-a-service” market is becoming both a mindset and a business strategy, Lee concludes.
About Tarsus On Demand
Tarsus On Demand, a division of Tarsus Technology Group, enables managed service providers, independent software vendors and technology resellers to seamlessly transition their businesses to the cloud and software as a service. The dynamic team works closely with channel partners to help their customers design and deliver cloud solutions that support growth, efficiency, agility and innovation.
Tarsus On Demand gives channel partners access to aggregated offerings from leading cloud service providers, as well as tools that enable them to offer customers seamless access to cloud products and services. Partners can accelerate their move to the cloud by leveraging the company’s established competency base and direct supplier relationships.
Tarsus On Demand has been named Microsoft Cloud Solution Provider (CSP) of the Year for four consecutive years (2018, 2019, 2020, and 2021) and has also won multiple industry awards, including 2021 Microsoft Partner of the Year, Acronis Cyberfit Distributor of the Year 2021, Mimecast Technical Excellence Partner of the Year 2022 and Mimecast Managed Services Partner of the Year 2021. This has enabled Tarsus On Demand to establish itself as the leading cloud enablement partner for resellers looking to offer cloud solutions to customers.
For more information about Tarsus On Demand, visit www.tarsusondemand.co.za or visit YouTube, LinkedIn and Twitter.
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