To many, the concept of Software as a Service (SaaS), Platform as a Service (PaaS), and what-have-you as a Service (XaaS) is well understood. The emergence of strong cloud based services facilitates a true paradigm shift in modern computing. I’ve found though, that there remains a misunderstanding in some circles about exactly what this new option really is.¬† For simplicity and brevity, I’d like to take a moment here to explain this concept using SaaS as an example.¬† I’ll also offer a few suggestions about how to add SaaS to the enterprise services portfolio, and offer some commentary for providers that hope to move applications from a product-centric to a service-centric delivery model.
In its simplest form, SaaS is the concept of using a software application that executes external to one’s own enterprise.¬† That is to say, the application doesn’t live in the enterprise data center, the enterprise is not paying (directly) for infrastructure to run the application, and the enterprise operation staff is not responsible (directly) for its uptime.¬† Instead of buying the license, the servers, implementation, and ongoing operations to have access to an application, with SaaS the application is purchased as a service from a third party provider.¬† The theory is that SaaS is a lower cost way for business to enjoy the same benefits of commercially licensed, internally operated applications.
SaaS is not outsourcing of a business service (as interestingly, I’ve encountered many people who have that impression). Consumer-oriented, web-native applications that are normally spoken about in the context of Web 2.0 are not SaaS.¬†¬† SaaS solutions are not client/server applications.¬†¬† SaaS solutions are developed specifically to leverage web technologies (such as the browser).¬† The data architecture of SaaS applications are designed as a “multi-tenant” backend to allow multiple simultaneous users to access a shared data model.¬† One pays for SaaS services through a pay-for-use model or by subscription based on relevant usage metrics.
There are many services available through this model.¬† Customer Relationship Management (CRM) services enjoy a large share of the SaaS market, as do content management, communications and collaboration, office productivity, and ERP are but a few.¬† According to recent Gartner research, SaaS growth is projected to be 22% through 2011, which is twice that projected for enterprise software.
For the Enterprise:
For the enterprise, SaaS offers distinct advantages in the overall portfolio of services delivered to the business.¬† The attraction of SaaS tends to be low deployment costs, low upfront capital investment, and little demand on back-end systems operations and support.¬† The cost of development, procurement and operations of data processing platforms, and expensive licenses may be avoided, and the time to deploy a service may be shortened.¬† We say, “may” because as is always the case, the devil is in the details.¬† One should evaluate how the procurement of SaaS services fits within the overall sourcing strategy, and then select candidate partners who can deliver the needed services.¬† It’s important to thoroughly vet the cost components of the provider’s service to properly understand the ROI and long term TCO involved.¬† There will likely be a combination of monthly subscription fees, usage fees, integration, training, and storage fee components.¬† Get clarity on all the costs from the candidate vendors to make the best selection for the firm.
When building a candidate list of SaaS providers, it may be interesting to include providers who are not traditional enterprise software companies.¬† Companies that offer process outsourcing may also prove to be attractive SaaS providers in some cases.
Another point that’s critical to mention is to vet the service, the provider, and the delivery systems against the corporate security policy.¬† The method of access control, storing of data on shared infrastructure, encryption methods, and so on must be evaluated against the enterprise IS Security guidelines¬† Having one’s data “in the cloud” can also create exposure to contemporary compliance issues, especially when users and data may be located across political borders.
For the Provider:
For a provider moving a product to a services-based offering, the first hurdle is the roadmap to convert from a product-centric model to a service-centric model.¬† This is clearly not a trivial task, and may well involve creation of core capabilities that do not exist in a product-centric-only model (e.g., high availability data center facilities and technical operations framework to guarantee service levels).¬† There is also of course the development of a revenue framework that makes sense to the firm as well as to the market.¬† Because of the change of delivery model, it may be advantageous to select those applications that are simpler and easy to use.
The availability of professional services is a component that many providers have considered.¬† Professional services can be focused on having the customer online and productive very quickly or can be focused on applying industry best practices in the use of the service as a way of maturing the processes used by the Customer themselves.
Selling through partners is a natural channel for software vendors and the same applies for SaaS delivery of those products.¬† The benefits of using good channel partners can be leveraged for SaaS as well as conventional delivery models.
The SaaS market is expanding at a healthy pace, and is enabled by the proliferation of cloud computing and the boom in large scale data center construction.¬† There is a lot of investment behind this movement, and represents a computing trend that is changing the landscape of the enterprise services portfolio and software vendors alike.