Apr 3, 2009 by Sinclair Schuller
If you’re an ISV considering SaaS as a delivery model (whether it’s for a new product or migrating an existing one), you’re going to inevitably bump into SaaS platforms as a potential means of building your service. Once you do, you’re presented with two options: (1) build a fully integrated SaaS offering yourself which includes your actual offering (say, an HR solution) and the underlying SaaS mechanics (relevant SaaS delivery components like multi-tenancy, onboarding and provisioning, high availability architecture, web services API, etc.) or (2) build your actual offering (the same HR solution) atop a purpose built platform as a service (PaaS) offering that does the SaaS heavy lifting in your architecture. When faced with these two options, the astute decision maker will inevitably ask:
“Well, a PaaS seems to save us a ton of upfront effort and cost. In fact, it might cut our costs down from $600,000 and 14 months to $200,000 and 4 months. However, if we go with a PaaS, we’ll have an ever present operational expense that never goes away. If we go with option 1 and just bite the bullet, sure we’ll spend the money and time upfront, but that’s just a one-time investment. Won’t we experience ROI on that 10 months and $400,000 rather quickly?”
My answer is an emphatic no! Now, don’t take the platform guy’s (me) word for it: let me put some substance behind my claim. To understand why I say no, let’s really understand the question. Starting from the top and irrespective of the aforementioned question, an ISV is deciding to deliver software functionality to the web. That functionality is valuable to their customer base. The better the ISV is at their core competency of capturing value for their customer, the better off the customer is and the more likely the business is to succeed. If you’re building an HR app, every minute and dime your company invests in HR functionality could yield added value for your customer and higher revenue for you. At no point does this suggest that somehow the delivery model is the core value offering to your customer, or that your competency is in constructing a delivery model. In fact, it’s a distraction to the primary goal. Now, going with option 1 with a notion that we have to “Build it here because it’s a one-time investment and we’ll make a return” assumes that it is in fact, a one-time investment. This couldn’t be farther from the truth. Realistically, you’ve in fact decided to take on the burden of whole product line and its lifespan. I’ve constructed a conceptual diagram to capture the rough notion of relative cost between your actual offering (an HR app), the “home built” SaaS delivery model stack, and opportunity cost (all of which I’ll discuss)
At the start of your SaaS journey, option 1 means that a huge chunk of your development time and money (40% – 70%) will be focused on solving SaaS delivery model problems and not on the value proposition you plan on delivering to customers. This is what accounts for the added 10 months and $400,000 in our initial scenario. Now, if the buck stopped there, our decision maker might be right: ROI is right around the corner. Realistically, you’ve made a first attempt at building a SaaS delivery model and have rolled out a very immature SaaS support stack. Once you launch your product, you’ll start your first maintenance and “new feature” phase of your offering. During this period, you’ll find that the most bugs and changes are coming from deep SaaS architecture problems and change requests. Your time will most likely be diverted away from product change requests (read: innovation) by SaaS stack repair. If you’re successful, you hit some “scale event” and feel a massive “cost pinch” and risk point. The scale problems in this case are most likely a result of poor assumptions in the SaaS stack, or the coupling of your actual application to the underlying delivery model machine. This cycle of maintenance effort and scale events will likely happen a couple of more times, and a couple of years down the road, with thousands of man hours and lots of money spent on the SaaS stack, you’ll reach a point where the stack effort starts to decrease, giving you some breathing room. At that point, you’re done battling fires with the fits and starts of big problems and maintenance phases, but opportunity cost ambiguity kicks in; are you going to exert effort on your core product or boost value in the delivery stack? Odds are you’ll forgo improving the stack (despite the massive value it can inject in your business) in favor of responding to customer demand on domain functionality need in your nifty HR app (since you’ve been distracted by the SaaS stack for so long). Those opportunity costs mount, and potential added revenue or savings opportunities disappear. Think of simple examples like giving your customers the ability to download data backups: is that an application specific problem or a “horizontal” problem for which a stack should be responsible? Do you want to waste effort on this or would it have been wiser to build on a PaaS that either has this functionality or that would introduce it faster than you would? I guess it wasn’t a one-time investment after all! In fact, it seems to be a massive ongoing investment with little predictability or bounds. This discussion hasn’t even touched on the maturity concept (for example, a “home built” SaaS stack will bump into security problems, bugs, etc. that get resolved in PaaS offerings much quicker because of the speed at which they scale due to aggregation, and the fact that PaaS providers focus solely on solving these problems).
When looking at a PaaS offering like SaaSGrid, you need to understand that paying a utility fee gives you a fully maintained delivery model without the ongoing headaches; one that will evolve much faster than you can imagine, constantly adding value to the guest applications that depend on it. If this isn’t enough, history has shown us great analogies. For example, why don’t people write application servers each and every time they write an on-premises web app? Because it doesn’t make fiscal or logical sense! You just download JBoss or buy WebSphere and go about your business! It’s very difficult to argue that a “home built” stack would be more powerful, less costly, and more able to keep up with market change.
What’s your opinion on PaaS vs. building it all yourself? Does the application server analogy resonate well with you? I’m interested in your feedback!
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