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SaaS Forecast for 2010

Posted by terrosatechnologies on December 28, 2009

This Thinking about SaaS provides an actionable watch list of insights on what CIOs and other C-Level executives can expect from Cloud Computing in 2010.

First let’s say goodbye to 2009…2009 was a year of emergence of a mainstream focus on Cloud Computing and Software as a Service.  For the first year, we saw SaaS move into serious consideration by mid-size and large organizations alike; in part because end users have been implementing SaaS applications independently of any corporate-wide initiative. This is changing. Far fewer discussions of the subject refer to SaaS and Cloud Computing as ‘the latest fad’. We now know that these technologies are a fundamental shift in how application software will be delivered going forward. The numerous business benefits of Cloud Computing are becoming firmly established.

So here is Terrosa Technologies’ 2010 watch list:

  • A tipping point will be reached whereby IT leaders favor SaaS solutions and only choose site installed solutions if no suitable SaaS version is found.

 

  • The silos of independent application acquisitions by end user departments will be integrated into larger corporate-wide SaaS and Cloud initiatives. IT departments will attempt to build cohesive IT environments that include SaaS applications.

 

  • Watch Microsoft’s Azure development platform as it could push Platform as a Service (PaaS) into mainstream acceptance of Cloud Computing for internally built applications.

 

  • The battle of Cloud hosting giants (such as MS, IBM, HP, Oracle, RackSpace, OpSource) ramps up quickly, keeping costs low and rapidly expanding more specific use offerings.

 

  • Expect SaaS and Cloud computing roll outs to accelerate significantly in 2010. Organizations who delayed scheduled hardware renewal purchases in 2009 and those coming due in 2010 see the Cloud as the new way. Watch for legacy applications’ maintenance budgets to carry much of the transition costs for SaaS applications.

 

  • Computing becomes all about ‘anywhere availability’ and high quality browser based software. Look for new places to intersect with customers and suppliers, but don’t necessarily think traditional personal computers. Spend more time on new uses than re-platforming unchanged legacy applications.

 

  • Thinking GEO green; SaaS becomes the obvious eco-friendly way to run business.

 

  • Facing the inevitable, software publishers will give up remaining resistance to Cloud Computing. But they may still struggle to learn how to make money with SaaS.

 

  • Integrators and consultants will need to identify other opportunities to provide value, while organizations can factor these reduced costs into their project budgets in 2010.

 

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This “Thinking About SaaS” article is one in a series produced by Terrosa Technologies’ President, Kim A. Terry. Each article address a different knowledge area of applications delivered via the SaaS subscription model.

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About Terrosa:

Terrosa Technologies provides a portfolio of SaaS delivered applications, as well as implementation expertise, integration services and C-Level management consulting.

Terrosa Technologies was born out of the recognition that software provided as a service produces greater efficiency, value and benefits over traditional site installed solutions. Enabled by a fast reliable Internet and the ever increasing sophistication of Saas offerings, many companies will be able to reduce their cost of operations and afford to do more with less. In uncertain and financially challenging times, it is more important than ever that Terrosa is helping our customers deliver products and services more efficiently and with less risk.

We welcome inquiries and offer initial phone consultations at no cost. Call us today at (805) 413-4600.

Posted in Uncategorized | 2 Comments »

More SaaS please, but easy on the clouds

Posted by terrosatechnologies on August 14, 2009

This Thinking about SaaS came out of a discussion I had recently with a colleague. He asked me the simple question, “Can an application really be SaaS without using a cloud based infrastructure such as Amazon?”.  While this question is straightforward enough, I realized how much generic cloud infrastructures drives the thought process around security, performance, reliability and other perceptions about SaaS. And yet more often than not they are unrelated. Most SaaS applications need not have any interdependency with cloud based platforms whatsoever.

SaaS is about the operational benefits of sharing a provider built application across many customers on a common platform via the Internet. Sharing infrastructure with other unrelated applications, as is done with Cloud Computing, is a separate issue. There are many benefits to Cloud Computing when talking about company specific applications but mixing the two discussions can really muddy the waters.

This article is in the context of a typical SaaS provider today, which provides a single application in their particular area of expertise. These folks are experts at building and running their application. They are highly reliant on their application working extremely well, with lots of features and functions, and a high degree of security. Otherwise they will not be successful as a company. They typically want the same degree of control over their application as would a company running such an application internally.

If you are a CIO, IT Director or business user evaluating software as a service for your organization, here are a few helpful guidelines:

#1: Using a generic cloud platform implies much about the overall service levels and security of the SaaS application itself.

Barring any major bugs or security flaws in the application itself, performance, reliability, and security are generally infrastructure issues. How a database is administered, how operating systems are hardened, how the network is secured, how disk storage is managed, how CPU power is allocated all hugely impact the uptime and security of one’s application. So while running on a generic cloud is not necessarily a bad thing, it just means that the SaaS application cannot have service levels higher than the underlying generic platform.

#2: There is no such thing as a general analysis of SaaS security, reliability or performance since most vendors do not run on generic cloud platforms.

Most SaaS vendors have created their own technology infrastructure inside a data center. Or they have contracted with an infrastructure provider to build a separate infrastructure only to be used for their specific application. If done well, this type of SaaS vendor should have a highly secure and highly reliable infrastructure. Possibly much better than most companies could provide for themselves. Of course they are dependent on the quality of the data center itself for power and cooling, but their application infrastructure is of their own design and managed to their specifications.

#3: As a prospective customer, each SaaS application you consider requires it own due diligence.

SaaS itself is just an acronym and does not imply anything in particular about the platforms the application is running on. Each application considered should have its own examination of the platform choices, operational procedures and security employed by the vendor. Understanding how the major generic cloud platform companies operate may give you little understanding of how most SaaS application providers run.

The good news in all of this is that by utilizing multiple SaaS applications, a company can have its software operations risk highly geographically diversified data centers, running on multi-million dollar platforms far beyond what they could afford to do internally.

Getting there means choosing the right SaaS providers. And choosing the right provider is all about extending the due diligence process beyond software features and functions to include vendor operations and abilities to deliver consistent and reliable services. Then once the vendor is found, including the right terms in your contracts.

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This “Thinking about SaaS” article is one in a series produced by Terrosa Technologies’ President, Kim A. Terry. Each article addresses a different knowledge area of applications delivered via the SaaS subscription model.

______________________________________________________________________

About Terrosa:

Terrosa Technologies was born out of the recognition that software provided as a service produces greater efficiency, value and benefits over traditional site installed solutions. Enabled by a fast reliable Internet and the ever increasing sophistication of Saas offerings, many companies will be able to reduce their cost of operations and afford to do more with less. In uncertain and financially challenging times, it is more important than ever that Terrosa is helping our customers build, choose or deliver SaaS based products and services more efficiently and with less risk.

Posted in Cloud Computing, SaaS, Software as a Service, Uncategorized | Tagged: , , | 1 Comment »

Thinking about SaaS: Frontline report from SaaScon 2009

Posted by terrosatechnologies on April 6, 2009

This Thinking about SaaS summarizes our findings from the recent SaaScon 2009 Conference held by Computerworld in Santa Clara.

 .

After speaking with many of the attendees and listening to several of the key speakers, the direction of subscription based software is getting stronger and approaching mainstream status.

 

Nine out of ten companies plan to grow their use of “Software as a Service” in 2009 according to the Gartner Group. The conference speakers pointed out many examples and industry reports that SaaS is achieving maturity and now being deployed at an increasing pace in companies of all sizes and in most all industries. 

 

What is not so clear however is the continuing confusion and misinterpretation of terms like SaaS, PaaS, IaaS and Cloud Computing. But nevertheless, end users and the difficult economy are driving strong SaaS sales in 2009.

 

 

What we heard:

 

“SaaS adoption has moved past the ‘tipping point’”

 

“A new ecosystem is forming around Cloud computing that will transform the IT sector.”

 

“SaaS is not an optional disruptive technology.”

 

“Cloud, SaaS and Mobility are helping to make the “boundary-free enterprise”

 

 

Reading between the lines:  Business drivers are winning

 

Companies are moving to SaaS because of lower upfront costs, shorter implementation times, less implementation risk, reduced need for scarce in-house administration resources and more flexibility to right size systems (up or down).

 

SaaS in some cases reduces the cost of ongoing IT/MIS operations but its biggest gain for these groups is that they can now focus on providing new processes that give their organizations added competitive advantages over ‘on-premise’ only type operations.

 

So the old is new again; Return on Investment, Total Cost of Ownership, Risk Mitigation and business focus are still on top when it comes to investing in these types of systems.  SaaS is apparently proving its worth using these traditional measures, especially to  CFOs.

  

 

The job ahead for IT pros:

 

Recent surveys by Saugatuck and other analyst firms show that CIOs and other IT folks need more education and understanding of this software delivery method in order to feel comfortable moving forward with SaaS.

 

Total costs over time, security, availability of specific applications, integration issues, lack of customization capabilities and application speed over the Internet are the major concerns companies have with SaaS solutions according to a recent Forrester survey.

 

So despite the fact that SaaS is a form of outsourcing, there is a lot of work for CIOs and other IT staff to insure a professional level of systems delivery for their organization.

 

IT Leaders presenting at the conference recommended that CIOs develop a formal SaaS strategy, and incorporate SaaS into their existing governance model. SaaS software evaluation criteria, contract guidelines, Service Level Agreements, a SaaS integration strategy and a business process management design will be put into place by forward thinking CIOs. This guidance reinforces IT’s changing role in the organization as a business process leader, with less focus on infrastructure technology.

 

As the hype and idealized assumptions surrounding Cloud Computing are giving way to real world experiences, it is best to proceed with outside guidance and knowledge while the industry is still in this maturing process.

 

 

Where is the fit?

 

According to a recent Saugatuck survey, collaboration products of all sorts are the top application area for SaaS based solutions, with Human Resources and Customer Service next on the list. Finance and Accounting moved up from 10th place last year to 5th place this year – one factor that indicates SaaS is on the move from the periphery to the core of IT applications as the technology matures.

 

Between 2009 and 2012 at least 40 percent of upper mid- to large enterprises will seriously evaluate SaaS-based “core” financial solutions, as well as broader operational systems.  While early adoption has been focused on the small and medium size business market, SaaS is clearly moving on big company radar where appropriate.

  

For mid-sized companies, a mix of in-house and SaaS based solutions was demonstrated by John Dohm, the CIO for True Religion jeans. He found that vendor diligence and the ability to “try before you buy” testing of potential SaaS solutions helped his company improve operations, while avoiding adoption mistakes.  He also emphasized the benefit of being able to spend more time focusing the business needs instead of technology.

 

For small companies under 100 million dollars, it is reasonable today to build and execute a strategy to replace all or most in-house systems as evidenced by a sharp presentation by Tom Kelly CFO/CIO at Kardia Systems. In a former position at 2nd Wind, an exercise equipment company, he was able to replace virtually all the in-house systems with SaaS solutions and reduce costs by 61%.

 

 

The bottom line:

 

This is the time for many companies and in particular for IT Leadership to understand and begin to take advantage of Software as a Service to benefit their companies. SaaS is not simply a plug and play in most organizations. But instead requires all the consideration and diligence required in the selection of traditional in-house applications.

 

As early adopters give way to mainstream implementations, SaaS vendors need to raise the bar in the level of services they provide, while IT needs to step into a leadership role with regard to SaaS to improve business processes and insure strong vendor management.

  

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This “Thinking About SaaS” article is one in a series produced by Terrosa Technologies’ President, Kim A. Terry. Each article address a different knowledge area of applications delivered via the SaaS subscription model.

______________________________________________________________________

About Terrosa:

Terrosa Technologies was born out of the recognition that software provided as a service produces greater efficiency, value and benefits over traditional site installed solutions. Enabled by a fast reliable Internet and the ever increasing sophistication of Saas offerings, many companies will be able to reduce their cost of operations and afford to do more with less. In uncertain and financially challenging times, it is more important than ever that Terrosa is helping our customers deliver products and services more efficiently and with less risk.

 

Posted in SaaS, Software as a Service, Uncategorized | Leave a Comment »

Cooking with SaaS: More calories for your software dollar

Posted by terrosatechnologies on January 5, 2009

In prior Thinking about SaaS articles, I have described the software and hardware efficiencies that are inherent in the SaaS software delivery model. In this article I will discuss why there is something even better driving up the software value to the end customer – market competition. Better yet, the competitive model of SaaS has already been proven in the restaurant business. Welcome to “Cooking with SaaS”.

 

I grew up in the days when most meals were cooked at home. My mother chose foods that she thought would not only be healthy for the family, but fit within our budget. No fancy foods, and with the exception of Thanksgiving, no extravagant portions were prepared. My mother was the gatekeeper to control excess consumption, thus managing our family budget – and our calorie intake. After all, calories were a direct function of how much money she spent at the grocery store. She was a generalist, good at cooking all types of day to day meals at a reasonable price. This is analogous to today’s premise based application systems, where we purchase the various ingredients that make up a system: Servers, operating systems, network gear, databases, and licensed application software. Then generalists serve up whatever applications are needed. Also, most IT staffs are very careful not to over spend on equipment, software licenses, and other components so sometimes end users go a bit hungry.

 

As I entered my twenties, more and more families were eating out on a regular basis. Restaurant food became cost effective enough to be justified based on the added convenience, enjoyment of dining out or time savings. Given that few families could afford a full time maid or a chef to do the cooking, using an “external provider” restaurant became a way to deliver more creative, complex, elegant or faster food. From my conversations with a number of companies who have outsourced their systems, the question of cost savings can be debated. But at least someone else has to do the cooking and wash the dishes. Even if outsourcing is a breakeven financially, it moves the IT headaches to someone else. Many times however, eating out at a full service restaurant every day can put a dent in one’s budget. So whether outsourcing dinner or systems, the focus moves from managing the costs of individual ingredients, to managing the final bill. We controlled this by how many times we ate out and the types of restaurants we visited. We could only afford so much outsourcing.

 

Over time, enough restaurants sprang up and significant competition between them started to benefit consumers. Many low cost providers entered the food outsourcing business, mostly with hamburgers and fries. But many other types of outsourcers created effective restaurant chains with systematized menus in the mid-market as well. These large restaurant chains had much more control over the supply costs than my mother ever did. They worked directly with the potato growers, the meat producers, and other providers. They negotiated down the price of every ingredient, every cup and every napkin. They now owned or influenced a lot more of the overall food delivery process for their specific menu. Additionally, since restaurants focused exclusively on their own menu day in and day out, they became process experts at delivering their meals in the most efficient way possible.  Virtually every element of their operation became managed and refined.

  

A SaaS provider that manages both the software creation, as well as the software delivery of their application has a very similar advantage. They become experts on their own application, far beyond what any single premise based customer could experience. Since a SaaS provider has a specific area of focus and is entrusted with their entire customer base on the shared system, they can develop operational, performance and security features beyond the capabilities on any one customer. When evaluating SaaS vendors, it is critical to perform a vetting process that identifies the vendors who understand this and have taken steps to develop superior processes.

 

Taking this restaurant analogy one step further, can shows us the future of SaaS as well.

 

As the food outsourcing business became more competitive, my mother’s paradigm of calorie control as a function of grocery costs was turned on its head. Now restaurants are in the business of providing as many calories as possible in order to beat the competition. Free refills, giant size portions, discount coupons, etc. Not just at fast food joints, but at very nice mid-range restaurants too. Menus focus on good taste and lots of it. The grocery bill is something that they negotiate with the suppliers, not with the customers. The customer pricing is based on the competition. And the customer switching cost is low. If one restaurant is no longer competitive for some reason, it is relatively easy to switch to another.

 

As the SaaS market develops and customers have the choice of many excellent providers with competitive products, the SaaS providers will negotiate down costs with their suppliers, make their processes as efficient as possible, and raise the quality bar in order to remain competitive. Since the end customer has not purchased the product, installed equipment or hired staff to run it, every contract renewal becomes a Friday night choice of restaurants. We will indeed have more software calories for our dollar, without having to wash the dishes.

 

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This “Thinking About SaaS” article is one in a series produced by Terrosa Technologies’ President, Kim A. Terry. Each article addresses a different knowledge area of applications delivered via the SaaS subscription model.

______________________________________________________________________

About Terrosa:

Terrosa Technologies was born out of the recognition that software provided as a service produces greater efficiency, value and benefits over traditional site installed solutions. Enabled by a fast reliable Internet and the ever increasing sophistication of Saas offerings, many companies will be able to reduce their cost of operations and afford to do more with less. In uncertain and financially challenging times, it is more important than ever that Terrosa is helping our customers deliver products and services more efficiently and with less risk.

Posted in SaaS, Software as a Service | Tagged: , | 1 Comment »

Thinking about SaaS: The goal of more efficient software

Posted by terrosatechnologies on December 6, 2008

This Thinking about SaaS focuses on why SaaS is truly a better answer for delivery of software. We are not just talking browser based applications, but why properly architected SaaS software applications have a true efficiency advantage over locally installed systems. For you, the software user or the software provider, understanding these architectural differences will at some point benefit your bottom line.

 

To understand the subject of software efficiency, consider how we arrived at this point. I will use financial accounting as an example. Many years ago, all software was built in-house. There were no packaged financial applications. Big companies, using big systems, each built their own accounting systems. Over and over and over this process was repeated, with the help of programmers from IBM and others. Each end user company duplicated efforts, with an attempt to make the process more efficient through better coding practices.

 

Then financials in the form of a set of pre-written base code arrived from the vendors. This code base was a starting point from which each company customized and re-worked to meet their specific needs. Companies could start with this generic set of code, rather than starting from scratch.

 

Further attempts to make application development more efficient all stemmed around reducing the amount of coding needed to produce an application. Re-usable code, object oriented programming, high level application development tools, etc.

 

What eventually won out were packaged financial applications. Generic software packages became so full featured, with so many options, that most companies no longer needed to write their own financial software.

 

What is still very inefficient about this approach is on the operational side i.e. the repetitive nature of each customer installing, upgrading, fixing, patching, and maintaining these applications. Also, each individual customer is free to choose different hardware, operating systems, databases and upgrade schedules. This forces software vendors to support multiple releases, multiple versions of their product, and deal with all sort of issues because of these platform inconsistencies.

 

Outsourcing companies known as Application Service Providers, attempted to improve these software affecting platform inefficiencies by offering services to run applications for companies offsite. Citing operating efficiencies, hardware standardization, consolidation of support personnel and other reasons; companies such as IBM, EDS, HP expected to run applications for less money than companies could run them internally. The fundamental problem with this approach is that the ASPs, were still supporting software that was designed to be used by only one company. So while in a centralized location, ASPs were still installing, upgrading, fixing, patching and maintaining many copies of the application and customers were still dictating upgrade schedules and customized features.

 

 In a true SaaS environment, the software provider chooses to run their application on a consistent set of equipment with one operating system, one database, supporting one current release. The entire customer base is running in this consistent environment. Support is unnecessary for back releases, various types of databases, multiple operating systems and different hardware brands. This scenario is only made possible by a multi-tenant software architecture.

 

So what this history lesson clarifies for us now, is the fundamental driver behind SaaS efficiency – a ground up multi-tenant design that allows application sharing across many organizations.

 

Be aware that terminology in the SaaS world is ‘clouded’ by vendors whose marketing department may be a few years ahead of their software teams, calling their products SaaS when they don’t have this multi-tenant design. Vendors in this situation may still have the inefficiencies of the ASPs behind the scenes while calling themselves SaaS vendors in their written materials.   

 

As true multi-tenant SaaS software matures, with the ability to support more and more complex business needs, with all the operating benefits of multi-tenant operations, it is clear that SaaS is truly a fundamental shift in how software is used.

 

  

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This “Thinking About SaaS” article is one in a series produced by Terrosa Technologies’ President, Kim A. Terry. Each article addresses a different knowledge area of applications delivered via the SaaS subscription model.

______________________________________________________________________

 

 

About Terrosa:

Terrosa Technologies was born out of the recognition that software provided as a service produces greater efficiency, value and benefits over traditional site installed solutions. Enabled by a fast reliable Internet and the ever increasing sophistication of Saas offerings, many companies will be able to reduce their cost of operations and afford to do more with less. In uncertain and financially challenging times, it is more important than ever that Terrosa is helping our customers deliver products and services more efficiently and with less risk.

Posted in SaaS, Software as a Service, Uncategorized | Tagged: , | Leave a Comment »

SaaS – Infrastructure Efficiencies

Posted by terrosatechnologies on December 5, 2008

This Thinking about SaaS focuses on how infrastructure savings are derived from the efficiencies gained through the SaaS delivery model, which in turn drive down the total cost of using software.

 

It is clear that Software as a Service is a “Disruptive Technology”, shifting infrastructure and its operation from end user companies to centralized datacenters run by platform providers.

 

Substituting an individual company’s internal infrastructure with a SaaS based solution should be easy to quantify. Calculating internal amortized hardware/software acquisition costs + operating costs vs. Saas subscription fees gives an organization a clear picture on the financial justification.

 

But there is a broader argument that SaaS delivered solutions have such an efficiency advantage when compared to onsite solutions, consuming software any other way cannot be justified on cost alone. As SaaS becomes a larger percentage of the software market, the financial advantages become even more pronounced.

 

Take a traditional site installed application that has a web interface and a database. This application requires a minimum of 3 servers to run – 1 database server, 1 application server and 1 web server. This scenario has no clustering of servers for redundancy, offsite disaster recovery or other reliability measures, but is simply the minimum configuration.

 

Over time, the software provider sells their software package through traditional channels to 800 customers. Each of these customers purchase, install and maintain 3 servers for a total of 2400 servers across the entire customer base.

 

Each customer also consumes about ¼ of a person a year to maintain the environment, apply patches, and to install new releases of the application every 6 months. This totals 200 FTE resources employed to support the software package across the entire customer base of the software provider.

 

Now take the same software package, but the software provider sells their product as a service to the same based of 800 companies. They build two highly redundant, high capacity installations, in high security data centers, in two different states. This takes approximately 50 servers per location, storage area networks, data replication tools, etc.

 

They also need highly qualified operations personnel to run 24/7. 1 Director, 3 Managers (1 each shift), 5 DBAs, 2 network engineers, 3 server engineers, and 6 first line help desk people. This totals 20 people to operate the system.

  

So let’s recap:

 

2400 servers for site installed, 100 servers needed for the SaaS scenario

200 people needed for site installed, 20 people needed for the SaaS scenario

 

Also, note that the SaaS scenario has full redundancy both within a site and across sites in two different states, with live staff 24/7.

 

Similar figures apply to power, air, floor space and other datacenter requirements.

So, the case for SaaS is obvious from a ‘Green’ perspective, as well.

 

This big picture view clearly shows how the efficiencies of SaaS application delivery will drive down the cost of IT infrastructure for everyone as more adoption occurs and technology costs are spread across multiple organizations.

  

______________________________________________________________________

 

This “Thinking About SaaS” article is one in a series produced by Terrosa Technologies’ President, Kim A. Terry. Each article addresses a different knowledge area of applications delivered via the SaaS subscription model.

______________________________________________________________________

 

 About Terrosa:

Terrosa Technologies was born out of the recognition that software provided as a service produces greater efficiency, value and benefits over traditional site installed solutions. Enabled by a fast reliable Internet and the ever increasing sophistication of Saas offerings, many companies will be able to reduce their cost of operations and afford to do more with less. In uncertain and financially challenging times, it is more important than ever that Terrosa is helping our customers deliver products and services more efficiently and with less risk.

Posted in SaaS, Software as a Service | Tagged: , | Leave a Comment »

Thinking about SaaS

Posted by terrosatechnologies on December 5, 2008

Thinking about SaaS is a blog about various SaaS related topics important to organizations and software providers looking to make the move to utilize Software as a Service.

Posted in SaaS, Software as a Service, Uncategorized | Tagged: , | Leave a Comment »

 
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