Get Ready for SaaS, says Gartner


Via Business Two Zero, here is a press release recently issued by Gartner titled Gartner Says Service Providers Must Prepare Now for the Software as a Service Wave. The release opens with numbers: The worldwide SaaS market reached $6.3 billion in 2006, with a forecast of growth to $19.3 billion by year-end 2011.

I want to focus on a portion of the release that stuck out most to me. As I spend my days working at a company that aims to be the driver for ISVs’ SaaS strategies, my mind is trained to pick up on the subtle urgency behind this statement:

“Although the SaaS market is still relatively small, service providers need to make important strategic decisions now.”

Ok, maybe it’s not so subtle. Either way, here’s Gartner’s preliminary list of things that SaaS vendors should do to stay ahead of the SaaS ‘wave’ (by the way, ‘wave’ is their wording. I don’t like labeling SaaS a ‘wave’ – it’s just too fundamental and far-reaching of a shift.) Nevertheless, from Gartner:

“Use solutions built on next-generation Web services, SOAs and highly automated server farms to produce multitenant, mass-customizable solutions that facilitate agility while sustaining uniqueness at a reduced cost”.

“Make strategic decisions around whether to offer SaaS as simply one element of a broader portfolio or to fully evolve toward a SaaS-based delivery model”.

“Act now because of the scale of change required to successfully exploit SaaS opportunities”.

“Conduct thorough due diligence to be well-placed to take advantage of opportunities and manage risk as the market evolves toward SaaS”.

Egads! Not that it’s a surprise around here, but this further illustrates that the shift from software vendor to service provider will require herculean efforts on the part of SaaS providers – startups and existing vendors alike. It will be very interesting to see how this all shakes out; and from our perspective at Apprenda, how SaaS platforms will be perceived and utilized to address these 4 vendor pain points and beyond. The gateway for SaaS platforms to enter the market is, of course, first through the perception that the notion of the platform does indeed satisfy, ease, or otherwise unburden as many of these hurdles and new responsibilities as possible.

Given that, if history is any indicator Gartner’s list of things that SaaS vendors should do to prepare for SaaS will evolve quickly into a veritable checklist of things that SaaS vendors will look to outsource to a SaaS platform.

Are you currently developing a SaaS app? Are you using enablement technologies (such as platforms or libraries)? What are the pain points that you think should be addressed and which ones where the ones you had the most trouble with? We would love to know your thoughts and experiences!

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March 14th, 2007
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Comment Number:
1
Written by:
Anshu Sharma
Posted on:
March 14, 2007 at 2:24 pm

I couldn’t agree with you more that ISVs need start thinking about SaaS even if they are married to the on-premise model for now, or plan to offer SaaS many years from now. SaaS applications require a different architecture (e.g., more SOA), different business mindset, and operational skills that take a long time to acquire/build.

Comment Number:
2
Written by:
Paul
Posted on:
March 14, 2007 at 3:54 pm

Comming at it from a slightly different point of view in that we are looking to build a delivery platform for SaaS.
I think that SaaS is reaching an inflection point and will grow, market trust is still critical
I think the major challenges aren’t technical, i think (certainly for encumbents) one the major challenge is managing the sales channel, and being told to grow in a maner that won’t too agressively canabalise existing revenues.
The other is getting the support organisation away from customers and onto systems…sounds anethema but i know but its essential

Comment Number:
3
Written by:
Matt Ammerman
Posted on:
March 15, 2007 at 4:44 am

Thanks for the comments.

@Paul: Agreed. The requirements listed above are merely a sampling of the myriad technological, business & revenue, corporate culture, support, and sales impact that SaaS has on the way software business is conducted. Some argue that it’s a good time to be a startup because the larger exising players (encumbents) are just going to have too difficult a time making the transition to SaaS. It just has too big of an effect across almost every aspect of the organization -technology being just a drop in the bucket.

Is SaaS leveling the playing field - putting the spotlight on technogical differentiation vs. organization size and existing influence? What do you think?

Comment Number:
4
Written by:
Paul
Posted on:
March 18, 2007 at 4:03 pm

Hi Matt,
Is SaaS leveling the playing field? I think in some instances the new entrents have a significant advantage. They are nimble, they know what they are (by that i mean i currently work for a company with over 50 000 products, SF.com is a crm company… you get the idea). They also don’t have the problems with existing billing and operations platforms.
Service providers have to radically upskill their sales channels etc etc
The ONLY benefit i can see that encumbents have is an existing customer base. If SaaS providers can make the cost of transition small, i think encumbents are in for a world of hurt.
Encumbents are just moving too slowly IMHO.

Paul

Comment Number:
5
Written by:
Ultan O Brien
Posted on:
March 21, 2007 at 7:58 am

I agree completely.
The key drivers of this are
1) the Consumer web platforms like google, yahoo, itunes, ebay and amazon who have been delivering their “software as a service” for some time now,
2) The emerging SaaS orientated technologies such as Web 2.0, Blogs, Web Services API’s, Mash-ups, Ajax, Folksonomy, and even Open source which ask the question - why can’t business applications be as easy to use as Consumer Web apps and
3) the emergence of defining standards for applications within the Business Web - Where ISV’s create once using SOA standards, run securely and scaleable, and integrate easily with other web services applications, and are delivery everywhere, so have a global appeal.

We have created a suite of applications on http://www.panthius.com over the past 3 years and the key tenants that we started with or have developed over time were:
Multi-tenancy
Secure delivery
High available network and hardware architecture
Scaleable performance
Scaleable functionality
Web Services Integration
Replicated development Environment
and more recently we are focusing on application exchange.

Our biggest commercial learning has been that SaaS delivered applications are not sold in the traditional manner, and that the sales organisation has to view the customer from a life-time rather than a transactional perpspective. Older dogs and their respective channel partners will (and are currently) struggle the most to learn these new tricks.

Comment Number:
6
Written by:
Abraham Sultan
Posted on:
March 21, 2007 at 11:35 am

Ultan,

You are very certain on what you are saying. That is why SaaS is considered such a disruptive concept. Not only will existing companies cannibalize their existing offerings by trying to move to SaaS but their entire sales, business model and company culture has to change.

In the next few years we will see new companies enter the market and dominate an industry that has long been dominated by older players because the odds are that they won’t be able to change in time.

Comment Number:
7
Written by:
Matt Ammerman
Posted on:
March 22, 2007 at 9:03 pm

@Paul - I agree with you wholeheartedly on this. The industry’s giants are moving too slowly with SaaS adoption. But when you think about it, they HAVE to take it slow - it’s quite important that their SaaS strategies are very close to ‘right’ from the get go, because of fundamental shifts like changes to sales channels (as Ultan highlights), and so on. As disruptive as business model and ancillary culture changes can be for them now, imagine the destructive power of getting it wrong - these companies don’t just turn on a dime.

It would seem that startups have the inherent agility to adjust with the unfolding demands of the SaaS model, giving them a strategic advantage that might just count for more than an established customer base.

Thanks for the insight.

Regards,
Matt

Comment Number:
8
Written by:
Sushant Madhab
Posted on:
April 9, 2007 at 6:43 am

I liked the comments from Paul and Matt. Since, we have recently created/developed our own SaaS delivery platform for our innovative eFacility; what we know by now is that, technically there are a few challenges no doubt about it, BUT, it mainly lies in the vision, business & revenues, sales & marketing, pre-sales and after sales support.
BUT, yes, with SaaS and Web2.0 together, “users” are in a much more comfort level than using traditional industrial software/traditional delivery systems.
Because, no one likes months to six months of implementations any more.

Rgds,
Sushant Madhab
http://www.workace.com

Comment Number:
9
Written by:
C R M I T - Solution On Demand
Posted on:
February 4, 2008 at 9:41 am

[…] Adoption of the model has been growing at well over 20% year over year, Nick Carr says (paraphrased) that SaaS adoption is set to explode and reports that McKinsey & Co. will release a survey showing that 61 percent of CIOs at North American companies with sales over $1 billion are already planning to adopt one or more SaaS application.  Additionally he says that Deutsche Bank projected that the SaaS market will account for half of the application software spend by 2013, Gartner predicts that SaaS will triple in size by 2011 from 2006, Jeff Kaplan thinks SaaS adoption is underrated and the success of companies like SalesForce.com should be enough to convince even the most skeptical, but if all of this is still not enough and you are having trouble convincing your customers, your boss or yourself into adopting SaaS, here is a list of benefits to consider. […]