Not All Clouds Are Created Equal…

Jun 11, 2009 by Abe Sultan

Just a quick note: I just published an article in Datamation titled “How to Be a Cloud Computing Vendor”. The article focuses on clarifying the jargon that exists on using Cloud Computing Providers as substitutes to SaaS Platforms. 

Check it out and let me know what you think!

Cheers
Abe

PS: If you’d like to mingle with others in the SaaS space, the SaaSBlogs group on LinkedIn now has 2130+ members and is growing every day; make sure you’ re not missing out and join today!

read more

Join the SaaSBlogs LinkedIn Group!

Mar 28, 2008 by Abe Sultan

 

   

Dear Readers,

We’ve established a LinkedIn group called SaaSBlogs. LinkedIn is a networking site for professionals and the purpose of this group is to extend the SaaSBlogs community and provide a place for further discussion and knowledge sharing amongst SaaS entusiasts.  We welcome you to join by following this link, and based on the comments seen here on SaaSBlogs, we’re sure we’ve got a lot of great conversation to look forward to.

 Thanks.

 

read more

Happy Holidays to all SaaSBlogs readers

Dec 25, 2007 by Abe Sultan

 

As the year winds up it’s always good to analyze how things turned out; we normally look into the past, compare the present and prepare for the future. It’s never good to wonder without ever checking if you are in the right path and thanks to the feedback from many of you, things are turning out great for us at Apprenda and we are really looking forward to 2008.

SaaS has reached mainstream and it is here to stay. Every day we are working with more and more companies that are porting their existing applications or analyzing the best way for them to tackle their SaaS initiatives because they are receiving increasing demand from their customers.

We hope that you’ve found our community and our thoughts useful and as a little token of appreciation, we rounded up the top 10 most popular articles of 2007.

1. Can the Fortune 500 Achieve Efficiency through Intra-enterprise SaaS?
2. Can Open Source & SaaS Get Along?
3. SaaS 101: The Benefits
4. SaaS 101: The Drawbacks
5. Will ‘Beta’ Fly in B2B SaaS?
6. Is SaaS About Maximum Profit for the Provider?
7. Enterprise SaaS != Web 2.0: A Quick Hosting Perspective
8. Reaching the SMB – Can Telcos Lead the Charge?
9. Is there room for a SaaS hardware play?
10. How Can a SaaS ISV Drive Down Marketing & Sales Costs?
11. (BONUS): The Right Tools for the Job

As a final thought, we will give out a small gift to the first 10 people who figure out what the image above says and posts it as a comment ;-). Only your first comment will count.

Happy Holidays and a very happy new year to all!

 

read more

SaaS 101: The Drawbacks

Oct 16, 2007 by Abe Sultan

A while back I wrote an article called “SaaS 101: The Benefits” in which I discussed some of the benefits of the SaaS model for end users and software vendors alike. Of course, where there’s a yin there’s a yang, and so this article (a long time coming, we know) will explore the other side of the coin.

For the Customer & End User:

• No direct control of the data – One of the biggest hurdles to get over is the control of the data. Specifically, what happens when things go wrong? I’m sure every company trying to sell you a product will tell you that things can’t go wrong and that they will be there to support you for years to come. It is important that you ask the difficult questions: How safe is my data? Will I be able to download it? Will it be disposed of properly and safely? Can it be sold? Can anyone else host the application and my data? Will the application source be opened so that hosting can happen in house or by another provider? Stories of companies going belly up are not uncommon, and not only for SaaS companies but for traditional software companies as well. The only difference is that when a traditional software company goes under, the most you might lose is the years of support you were expecting from the vendor. When your SaaS provider goes under, deeper implications surrounding your vital business data have to be considered. 
• Internet connection required - I don’t know of many businesses that run without an internet connection these days. Nonetheless, it could affect your operations if you need to access an application and the internet connection is down.  A good set of companies are trying to solve this problem by allowing their applications to continue to work in a disconnected fashion for a period of time but at some point you will need to sync back up to the server. If this is a big concern for you make sure that your provider can address this need.
• Dependence on an outsider to run your business – In a big way, you are trusting an outsider to help you run your business, and if they are not keeping their end of the bargain it can really affect you. To keep it in perspective, these people are out there to stay in business and they do this for a living so arguably 95 out of 100 times they can do it a lot better than you could in house. This does not mean that you shouldn’t be aware of the implications so make sure you ask the tough questions.
• Security awareness – Another big hurdle is security. This concern is the umbrella that is home to the concerns above, as the common thread among them all is that they make you consider how “secure” you feel with SaaS. You are trusting your really valuable data to someone else. This can be a painful reality to accept but most security breaches occur because of disgruntled internal employees that end up selling or releasing the data when they are fired or when they quit, having your data managed and stored by an expert of the application is not a bad idea as long as they take it as seriously as you would. Again, it is in their best interest to do so but make sure you trust your provider the same way or more than you would trust your internal IT department and again, don’t forget to ask the tough questions!

For the Provider:

• Focus on customer satisfaction - This is one of those bad things that it’s good to have and makes great companies but we have to mention it anyways. SaaS providers need to focus on customer satisfaction month in and month out or they will lose their customers. They need to earn their customer’s business every month or they can simply leave. Contrary to on-premise deployments which are very costly and time consuming, if your customer is unhappy with the service he can up and leave at any time with very minimal cost. Some might argue that you can negotiate longer term contracts, make it hard to take their data and all other kind of shenanigans but if you ask me, it is bad practice and if you are not the best, then you better have one damn good reason why they should stick with you other than a binding contract.
• Harder development process – There are many different approaches to writing SaaS applications and they are outside the scope of this article but the bottom line is that there is a whole new set of things that you need to worry about when writing a SaaS application that you otherwise wouldn’t need if it were a traditional on-premise deployment. Things like tenant isolation, provisioning and scalability to mention a few could be a hard thing to tackle where you wouldn’t even have to think about if you were writing an on-premise application. Nowadays there are several companies working on “SaaS Platforms” including mine that make this a lot easier but none the less it’s something that you didn’t have to deal with before. For a great article on how to transition your company into SaaS read Sinclair’s article where he outlines a couple different strategies. Another thing that makes the development process harder is finding the right talent as the skill sets required are more advanced than for its on-premise counterpart but hey, who doesn’t enjoy a good challenge!?
• Compensation issues – One of the early problems for SaaS providers is how to maintain operations when there is only very little money coming in. Unlike traditional on-premise deployments where one deal could bring you $60,000 upfront and carry you for a couple of months while you close more deals, SaaS deals are MUCH smaller so initially it will be a lot harder to maintain operations unless you are properly funded so you can survive until enough money is coming in . Additionally the question of how you compensate your sales team can be a tough one to answer and can vary greatly depending on your offering. It might require you to offer higher base salaries and get creative with your commissions but without a doubt it can be one of the tougher operational questions you will encounter.  As an example let’s look at this scenario: Provider A sales an on-premise application for $2,500 a license. On a decent 20 seat deal they would bring $50,000 ($2,500 x 20) plus an additional $10,000 for support (usually 20%). Out of the $60,000 they would normally give anywhere between 1% to 4% commission to the sales rep leaving the company roughly $58,500 to run operations. In a comparable scenario where Provider B sales the same type of application as Provider A but as a SaaS application it will probably cost around $75 per seat so on the same 20 seat deal they would bring $1,500 a month taking over 3 years to reach the same $60,000 that the on-premise company received. You will need to come up with a good strategy on how to compensate your sales guys but at the same time have enough money to run the company.
• Success can be a problem – You’ve heard many times that being too successful is a great problem to have but in the case of SaaS it can literally bring you to your knees if you are not prepared. This goes back to my second point of SaaS being harder to develop. Things can grow out of control if the application is not architected properly and addresses scalability issues and your service can become unusable over time if it does not scale properly with the addition of new tenants. Make sure you don’t leave the hard decisions for later because you will run into a wall down the road.

After reading this article some of you are probably thinking “Damn, Why would anyone even think of getting into SaaS?!” But for the ones that are still not convinced check the benefits before making any decision. As with anything else you should always make a decision after you have considered all things good and bad.

What do you think? Does it make sense to jump into SaaS from end user and provider perspectives? Do the benefits outweigh the drawbacks? Or is it the other way around?

[poll=7]

We’d love to hear your opinions, so leave your comments!

 

read more

SaaS 101: The Benefits

May 2, 2007 by Abe Sultan

In Matt’s previous post, he made mention that the true sign of SaaS’s arrival is that it has garnered the sincere interest, and better yet dollars, of the investment community.  More people in a greater array of business roles are giving SaaS the ol’ thumbs up.

We’ve established that the pursuit of SaaS is on the minds of *almost* everyone, but what is it about SaaS that gives us all the warm and fuzzies?  For the most part, SaaS is still a nascent industry.  It wasn’t long ago the purveyors of SaaS applications or enablement technologies were referred to as the tech industry’s “lunatic fringe”.  Strangely, the benefits of SaaS have emerged and shown a bright light on the future of all those involved in delivering software functionality to businesses.  So, what are these benefits? This may read like a SaaS 101 laundry list… but to see where SaaS is going, it might be best to take another look at the fundamentals.

For the Consumer:

• No client/server software installation or maintenance – that’s right, no more 800-page planning and implementation guides.
• Shorter deployment time – potentially minutes as opposed to a phased implementation that could take months (see item #1)
• Global availability – sure the technology exists to make on-premise software available outside of the premises, but we’re talking about functionality that is available from anywhere on the internet natively.
• Service Level Agreement (SLA) adherence – reported bugs can be fixed minus any rollout overhead.  Sure the provider actually has to fix the issue, but assuming they’ve deployed a moderately efficient SaaS application the rollout of a patch or fix should happen in the blink of an eye.
• Constant, Smaller, Upgrades – when you use a SaaS application, it is in the best interest of the provider to keep you happy and they can do so by constantly improving the application experience.  With SaaS this can come in the form of consistent miniscule changes that add up over time instead of monster patch and upgrades that cost you time and money to implement.
• Ease Your Internal IT Pains - This is a big one. Most of the last several points here highlight that SaaS offloads a great deal of IT pains incurred by software consumers in the traditional client/server model.  This leaves IT personnel to focus on improving the day-to-day technical operations of your company instead of being called upon to troubleshoot 3rd party software or maintain aging infrastructure.  Which leads to…
• Redistribute IT Budget – by outsourcing software functionality to a provider, the enterprise realizes a cost savings in infrastructure requirements and IT personnel knowledge requirements.  This allows the enterprise to focus on core competencies.  It also means that the cost savings from using SaaS applications can be flat out saved, or reallocated to boost productivity through other services.

For the Provider:

• Aggregate operating environment - as a provider, you own your domain.  No longer are you sending technicians to fix or customize your software because it doesn’t fit into a customer’s highly-specialized (or horribly outdated) infrastructure.  You have complete control to optimize an infrastructure to your SaaS application’s specific requirements.  This is synergy at its best, and leads to financial savings as well as less headaches.
• Predictable Revenue Stream - the subscription model associated with SaaS means that your customers will pay you on a recurring schedule.  If you make this cycle flexible enough, you can get a real handle on forecasting revenues.  The payment may be tied to your product (think cell phone plans) where everybody pays according to the same term, or tied to your individual subscribers where some may pay monthly, some yearly, and some quarterly.  In my opinion, the more flexible you are with this piece of the offering the better.  Either way, because of the scheduled nature of cash inflow, revenue modeling becomes more reliable.
• Predictable Growth - Same as above, but here we’re talking about sheer volume of subscribership.  The fact that users hit your site to access the application means that with the right tools you can monitor their usage pretty closely – something that’s not so easy with all your customers running the application on premise.
• Focus On Smaller Upgrades Instead of Monster Patch Rollouts – and while you’re at it, don’t worry about rollout logistics across all of your customer sites either.  Your development teams can focus on fixing core application functionality, tackling bugs and enhancing features in smaller incremental rollouts because it’s just easier to do so.
• Sales Becomes Customer Relationship Management – When you are selling a subscribable service, the game of gaining subscribership becomes one of balancing user retention vs. attrition more than a game of landing the ‘big deals’.  Sure, it’s important to have a team out there pounding the pavement to sell your application – i.e. getting subscribers in the door - but the real thrust of the new sales and marketing in SaaS is customer relationship management.  The equation becomes quite simple – keep retention rates higher than attrition rates and focus on bringing in new customers.

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.

What do you think? Have you experienced other benefits already? On the contrary, have you experienced major drawbacks? We would love to know what’s holding you back or what has pushed you forward!

read more