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!

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SaaSCon Recap

Apr 23, 2007 by Matt Ammerman

Last week was SaaSCon 2007, the definitive conference for B2B Software as a Service (not to be confused with Web 2.0, or Enterprise 2.0, or Office 2.0).  The conference was at the Santa Clara Convention Center Tuesday and Wednesday.  For those that attended, the conference offered a wide spectrum of keynotes and workshops revolving around all aspects of SaaS – from SaaS revenue modeling to application architecture.  Sinclair has already mentioned an interesting analogy conjured up by Treb Ryan from OpSource.  Gianpaolo Carraro and Eugenio Pace from Microsoft’s SaaS team gave a detailed architecture overview of their Litware HR sample SaaS application.  Also of note, Apprenda unveiled details about its forthcoming SaaS platform, SaaSGrid.  Because we were busy at the Apprenda booth meeting hundreds of SaaSCon attendees, we had trouble finding the wherewithall to blog during the event in any consistent fashion.  Therefore, for those of you that were not in attendance, I’d like to offer an aggregation of others’ blog content about SaaSCon 2007:

Adventurista – SaaSCon recap

Marty’s Blog – Death By A Thousand Duck Bites

Dave Terrar (Business Two Zero)

(Note that in Dave’s post, he expresses a disappointment with the lack of blogging coming from the actualy event.  Dave, I agree.  And I’m sorry.)

Jeff Kaplan gives probably the most thorough roundup of SaaSCon on his blog.

Lee Thé from Application Development Trends provides a great analysis of some of the core offerings that were on display at SaaSCon, including Apprenda’s SaaSGrid platform.

These are a few of the interesting recaps from SaaSCon 2007.  There sure was a lot of information packed into a two day conference.  Perhaps too much (SaaSCon organizers – 3 days next time maybe?).  If you were there, and have written about the event please feel free to post links in the comments.  Do the same if you’ve found more blogging out of SaaSCon that I haven’t linked to here.  Thanks!

 *UPDATE* – Eric from Marty’s Blog wrote a great article yesterday that is born out of some of the concerns that smaller ISVs may have when exploring the larger enablement platform technologies.  These concerns – such as platform companies that introduce functionality that threatens their own ecosystem players – came up at SaaSCon frequently.

 

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Vendor Perception of the SaaS Platform Landscape

Mar 28, 2007 by Matt Ammerman

We’ve written quite a bit here about Salesforce’s Apex… and, admittedly, we’ve taken a somewhat critical stance on it.  Questions of identity crisis and ambiguity have boiled down to “Is it a SaaS platform, or a CRM platform? Is there a difference, and does it really matter what they call it as long as it is what I need?”  Frankly, I don’t think Salesforce has done a clear enough job defining what it is, and what it isn’t.  If I simply relied on their homepage description of Apex:  “A ground-breaking platform for customizing and integrating CRM, as well as developing and deploying brand-new applications, ” I might chalk this up to semantics – but understanding how the Apex technology stack works, one gets a better understanding of how closely tied it is to the Salesforce.com application codebase.  This satisfies part one of their description – but the growth of Apex as a SaaS platform vs. CRM platform will rely heavily on how far it can deviate from the Salesforce.com application.  This, of course, remains to be seen.

As SaaSBlogs and pretty much the rest of the SaaS blogging community (SaaSWeek, Phil Wainewright, Jeff Kaplan, among many others) took note of last week, Opsource announced the Optimal OnDemand 2.0 SaaS Platform.  Opsource really caught our attention with this one because of the way Optimal OnDemand 2.0 seems to quell some of our contentions with Salesforce’s Apex platform concept and other ‘niche’ platform concepts to date.  Opsource’s core competencies have been in the hosting infrastructure and provisioning realm, but with OOD2.0 they are introducing value adds further up the stack that fulfill SaaS hosting requirements (read: vendor pain points).  It’s a tremendous boon to the notion that to build robust SaaS applications, vendors will rely on platforms that provide general purpose technological and business value rather than platforms with a bent towards a particular vertical market or spawned from an application codebase. 

The introduction of OOD2.0 is big not only because of its impact, or dent, in relative size to the landscape of SaaS platform offerings, but because of how much it contributes to the growth of the landscape in terms of overall value.  Given that the landscape is, at least for now, shaped by a veritable combination of niche platforms and newer large scope general purpose platforms such as Opsource’s OOD2.0 and Apprenda’s platform offering - which type of platform has more perceived value to the ISV?  For instance, if I aim to build a project management application, should I utilize a proprietary hosting platform that offers a toolset strategically designed for project management applications (perhaps even built from one) but is limiting in terms of scope?  Or do I want to host my application on a general purpose platform that provides multiple tenets of SaaS as a base but does not intend to provide toolsets for strategy-related aspects of the application?

A better question at this stage is whether not this type of question is perceived as one of semantics or of real technical merit.  If you’re currently building a SaaS application, or simply doing research for a future project, I’m interested in learning where your search has taken you across the unfolding landscape, and where you’ve seen the most value in terms of SaaS platform offerings.

 

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