SaaS Blogs

One question that has popped up in some blog posts recently is whether the notion of “private cloud” is a misnomer or if it conceptually even makes sense. Some of the conversation started when Andrew Conry-Murray posted that the term “private cloud” is bunk and no such thing exists. I have to completely disagree with Conry-Murray. His dismissal of “private cloud” comes from using too narrow of a scope and too restrictive of an understanding of a “cloud’s” applicability, intent, and history.

It’s important to first understand where the term “cloud” originated, as it should really be used in a constructive approach to arriving at the definition of “private cloud” and the determination of how accurate of a term it really is. The term “cloud” originates from a scary place: network diagrams. Have you ever used Visio or a similar tool for modeling diagrams? If so, and if you’ve ever created diagrams that required some sort abstract network, you’ve undoubtedly used the “cloud icon” (which looks kind of like the dust-balls that the Road Runner would leave behind when being chased by Wiley Coyote). This icon was used to denote an abstract network at some responsibility boundary.

Ok, so the history of the term cloud is somewhat rooted in telephony, but we definitely adopted the icon for broader use in general network diagrams. Point being, the origins of the term “cloud”" had nothing to do with the public Internet, and I’d argue it still doesn’t. A cloud is simply an abstraction of network and resource responsibilities that one can leverage in support of some other functional tier or silo. The network diagrams that we’ve all created never restricted the use of the icon to the Internet, but rather remained open to use in any situation where you had to clump non-specific, potentially unidentifiable (but conceptually understood) resources into a dependency.

Given the history of the term and its typical usage, what makes the term “private cloud” so broken? Nothing. An enterprise can use Internet architectures to create internal, “private” resource abstractions. These are private clouds that can be used in a variety of capacities. Granted, larger enterprises are better positioned to leverage private clouds, but that doesn’t mean smaller enterprises won’t build them as well.

All this said, I do distinguish the Cloud, as a proper noun, from a general cloud. The proper noun Cloud should be used to identify the public internet.

How do you feel about the term private cloud? Does history not matter when it comes to best understanding the term? Let me know!

This is a very good podcast of Phil Wainewright from The Connected Web interviewing Rick Nucci, CTO of SaaS integration vendor Boomi on the impact of multi-tenant architecture on the operational cost of delivering software in a SaaS fashion.

Two choice excerpts:

“SuccessFactors recently gave a speech, [by CEO] Lars [Dalgaard], talking about their architecture and their approach. They have something like over a thousand customers per physical server when you net it all out and aggregate it. Andthat’s the marginal utility, that’s the scale that you need to get to — because you need that op-ex in your business as a SaaS ISV to be in the five percent type of range. And it’s not going to happen if you’re doing a per-customer expenditure.”

“And that’s the marginal utility, that’s the scale that you need to get to — because you need that op-ex in your business as a SaaS ISV to be in the five percent type of range. And it’s not going to happen if you’re doing a per-customer expenditure.”

Continue reading the transcript or listen to the podcast here.

Building a SaaS Business in 2010 - An Inside Look at the Business Model and Operations.

On Tuesday, February 2nd the authors of this blog and some of our business partners will be hosting a webinar to illuminate some of the key considerations and challenges ISV’s face when looking to bring a SaaS offering to market in 2010.  This session will include a deep dive into the SaaS business model as well as the operational side of the equation and feature key insights and lessons learned from the frontlines of managing SaaS businesses.

Although the content of the webinar is less technical than our typical fare here at SaaSBlogs, we think many of our readers will find it to be interesting and valuable material.

Additional information and registration: https://www2.gotomeeting.com/register/197663259

This is my first blog post for SaaSBlogs.  My name is Devon Watson and I am the Director of Business Development here at Apprenda.  I have worked with SaaS since 2002 when I founded one of the first companies to attempt to deliver Business Intelligence software in an on-demand fashion.  Being a bit ahead of the curve I found that the company struggled to reconcile our SaaS business model with the realities and limitations of the technology platforms available at the time.  After a good run and achieving paying beta customers we eventually had to close up shop as the dot-com hangover sent funding sources running for the hills.

After that I spent 5 years as a Venture Capitalist where I worked with many companies founded on SaaS business models, but with really what amounts to a glorified ASP (application service provider) infrastructure left over from 6-8 years ago.  I have come to view this non-alignment of business model, infrastructure and operating cost as a fairly standard refrain across the software industry.

Last night I gave a talk on SaaS to about 100 members of the  NY Entrepreneurs Business Network and the NY BizSpark Meetup group at Microsoft’s office in New York (thanks to NYEBN and MSFT ISV Evangelist Gunther Lenz for inviting me).  We had a very good discussion around the progression of the software industry from Client-Server to Web Applications and the ASP’s of the late 90’s on to the current SaaS paradigm.  The changes to the leaderboard of the software industry at each step in the evolution were obvious to the crowd – Mapics?  Gone when 3 tier web apps came out.  Siebel?  Eclipsed by SalesForce.com.

 
People quickly understood how SaaS finally realizes the economies of scale and consolidated operations needed to make on-demand delivery feasible form the ISV.  However, many of the budding software entrepreneurs in the room were surprised to learn that getting a SaaS company off the ground is actually more expensive than in yester years, despite the more desirable end-state.  Of the handful of SaaS companies to have gone public the average cost of capital to reach that state was $76M….$76M!  This is due to two factors – the delay in revenue recognition inherent to the SaaS business model and the longer (and more expensive) path to market due to the complex underpinnings of a good SaaS delivery foundation.

Luckily, you no longer have to reinvent the wheel the way my first startup did 8 years ago.