SaaS & Learning from Malcolm McLean

Mar 17, 2008 by Sinclair Schuller

For those who don’t know who Malcolm McLean is, I’ll give a brief introduction. Malcolm McLean invented the modern shipping container: you know, the ones that come in on cargo ships, are craned onto trucks and trains, and that provide a standard for transporting goods worldwide. So why are his ideas important and what does it have to do with SaaS? I think we should all pay attention to the shipping industry and how he revolutionized it. SaaS and service oriented architectures have the potential to cause a change as profound as the one experienced by the transportation world in the 1950s.

Traditionally, software is notorious for capturing functionality and locking it away in an unsharable fashion. Any other piece of software interested in tapping into some other software’s functionality generally needed access to the source code or some non-standard programmer interface. This isn’t necessarily the fault of any one piece of software, but rather a problem of lack of basic agreement. Software lacked (and still somewhat lacks) protocols, well-defined modular architectures, and an economic model allowing for subscribed functionality that can compensate producers in a producer/consumer model.

In the shipping industry, McLean recognized some significant parallels: across transport mechanisms (trucks, trains, and ships) there was no efficient protocol (everything was break bulk) and economic models in transportation reflected a heavy penalty because of lack of disintermediation (someone had to interfere at each drop point to break down shipments). By introducing shipping containers and associated support infrastructure (crane structures, roll-offs) etc., we saw those issues alleviated. McLean broke the mold by recognizing that lack of standard produced inefficiency and not competitive advantage.  This is why these days you’ll see the same shipping container on the deck of a cargo ship, on the bed of a freight train, or on the back of a trailer heading down the interstate.

In the software space, we’re starting to recognize that lack of protocol, economic models, and isolated functionality are in fact hurting us. Service oriented architectures have shown that cross-technology communication and access to non-commodity functionality is possible from a technical standpoint, that applications can in fact be very modular (just look at the mashup craze), and that software as a service has introduced an early framework for monetizing this functionality between parties. Looking back at McLean and what the shipping industry is today, we should recognize that his work and ideas led to the ability to transport goods across the globe as efficiently as possible and that we have a similar duty in the software space.

Over time, do you expect that software space to become more protocol driven and more flexible in terms of functional composition, or have we reached our peak with respect to “functionality on tap”?

 

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SaaS Adoption’s Secret Weapon: Hosting Providers

Feb 4, 2008 by Sinclair Schuller

It’s common place to discuss SaaS adoption as being driven by either an ISVs need to remain competitive or tackle new markets, or by customer demand to move responsibility away from internal IT to an outsourced provider. I support this as being very true, and we can thank these two constituents as being the driving force behind recent adoption. But is that all of the muscle that the SaaS movement has? Absolutely not.

Two constituents that care the most, and bring a lot of strength to the table, are enablement companies like Apprenda (our company), and application hosters (not really a ‘word’ but we’ll make it part of the post’s vernacular). Hosting companies/managed application providers are often overlooked or underplayed when discussing SaaS. Generally, the world of hosting has become a collection of relatively bland offerings with focus on “old style” services (although there are atypical cases). Most hosters are looking for a new value proposition that can move them out of a low margin commodity and back into the lime light. Building a business around SaaS alleviates the “low margin” problem and if hosters spend more time and money taking SaaS more seriously, they may become SaaS’ next champion. The more ISVs and customers they can attract, the more they can extract from this high value market.

I don’t believe SaaS adoption is set to halt by any means. In reality, I think there is still plenty of room for adoption via a collective championing of the delivery model by hosters who are looking to leverage their multi-million dollar infrastructure investments and pump up that good ‘ole revenue dollars/deployed infrastructure ratio!

Do you think that hosters can play a larger role in driving adoption? Do you see the next stage of SaaS innovation coming from hosters?

 

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Enterprise SaaS != Web 2.0: A Quick Hosting Perspective

Sep 10, 2007 by Matt Ammerman

I like a good mystery just as much as the next guy, and this story’s got it all.  If you haven’t got the time or interest to read the whole forum thread, here’s the synopsis:  Jatol.com (no hyperlink provided because of said mystery), a notable web hosting company seemingly popular with development crowds has simply vanished.  Literally.  Websites down. Domain missing. Phones disconnected. Believe it or not, even the owner is missing! 

At this point, there’s not even a support number to call and Jatol.com users aren’t even able to retrieve their stored data or web site files. As I read further down the discussion chain, I started thinking about how awful it would be if I were running a web-based business in a situation like this – the mere thought of surmounting catastrophic shutdown such as this is mind boggling.

While it may seem obvious to some, this story specifically highlights a very important part of what enterprise SaaS ISVs should look for in managed services: providers that can assert serious service level agreements and back them with real ramifications.  For instance: transparent multi-tiered redundancy, consistent and thorough backups and archives, potentially even software and hardware escrow services (see ‘catastrophic shutdown’ above). The bottom line is that hobbyist devs hosting websites or even working applications with reliable hosting companies count downtime in minutes, while enterprise count downtime in thousands of dollars.

The tricky thing about SaaS is that it fundamentally requires the ISV to at least purport to be the ‘provider’ of software.  While hosting may be outsourced and ISVs become at least the ‘P’ in ‘MSP’, it is vitally important that the backing ‘MS’ be up to par.  If you’ve dealt with an MSP (without naming names) and had service level ‘experiences’, what are your thoughts on MSP preparedness for SaaS?  Are MSPs ready to host enterprise SaaS applications that generate the aggregate load of potentially millions of ISVs’ users?

[poll=6]

 

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Google Buys Postini Solutions

Jul 10, 2007 by Matt Ammerman

The SaaS world is abuzz around Google yet again with yesterday’s news that Google will acquire on-demand communications security firm Postini Solutions for $625 million.  The acquisition is aimed at bolstering enterprise security and management confidence in the Google Apps online suite, and seems to be a direct mirror of Microsoft’s Exchange Hosted Services strategy which was born from their own 2005 acquisition of Frontbridge Technologies. 

With advanced security, archiving, and message filtering in place, Google’s hopes are that this move will shine a new light on the Google Apps suite as a viable hosted business suite to enterprise users who often must conform to compliancy requirements in security and data archiving.  It’s a good move, and one that Google pretty much had to make in some form or another.  They’ve established over 100,000 Google Apps users who will speak for the suite’s usability and aid in productivity.  Now they’ve set their sights on converting the hordes of users who haven’t been convinced that usability benefits and frills outweigh security and compliancy concerns.

As always, Phil has an interesting piece that takes the news and goes another step… “What next for MessageLabs?”

 

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Smoke & Mirrors Alert: What is Salesforce Trying to Say?

May 21, 2007 by Sinclair Schuller

Although most people don’t realize it, plenty of advertising and announcement techniques use “sleight of hand” style approaches to exploit your first glance and focus your attention on the content of the ad and an intended message rather than seeing the truth. This technique is common among propagandists and corporations alike. Let’s look at some examples:

• Undoubtedly, you have seen the phrase “Made with All Natural Ingredients” on food packaging. Many consumers see that and think – Wow, it’s an all natural product! Well, no. The phrase is simply stating that at least one ingredient in the food product is natural – all the rest can be artificial, and the label would not be telling a lie. This statement creates a large gap between understanding and meaning, giving the advertiser plenty of “wiggle room.”
  
• “No soap cleans better” or “No detergent kills more bacteria than X” is another one of my favorites. To a casual reader, this is generally understood as a claim that a specific cleaning product is better than the rest – it defines a less than clause. The true meaning, however, allows for the case that all other detergents clean equally as well as the subject product, meaning that it in fact cleans no better. This creates a situation where “No detergent kills more bacteria than X” and “All detergents kill the same amount of bacteria”
  can in fact be synonymous.
  

Generally, using these tactics help out a ton when trying to position a product or service. So what does this have to do with Salesforce.com? Well, they’ve become quite keen on using this approach (aka smoke & mirrors). A couple of weeks ago, Phil Wainewright asked the question “How is AppExchange really doing?” where he highlights that they’ve played “fast-and-loose” (what a great phrase!) with their numbers in touting the “popularity” of Apex & the AppExchange. Salesforce.com has conveniently made sure that all of its CRM customers are considered Apex customers. According to this page, Apex as a platform is used by 32,300 customers. That makes it seem like the Apex platform has been privy to massive adoption. Just like all natural ingredients or killer soap, however, their assertions lack the necessary clarification. Salesforce.com, the CRM product, is counted in those figures. So as Mr. Wainewright asked, how well is AppExchange really doing? In October of last year, Josh Greenbaum called analyzing AppExchange a “guessing game” and I wrote an article on some of the applications found in the AppExchange.

Well, looks like Salesforce.com is at it again.

A press release issued today announced the AppExchange Venture Network and states that “More than $225 million has been invested in two dozen companies on the AppExchange.” At first glance, you think – Wow, venture money is really flowing to software companies building apps on the AppExchange. What did we learn about first glances? You guessed it – this has some artificial ingredients! The statement is intended to give off the message that money is pouring into the AppExchange. This is nothing but marketing at its best. $225 million most likely has been invested – but it went to building the companies and their primary SaaS offerings, and not their Salesforce.com integration do-hickeys. Salesforce.com is using the companies and their funding as a proxy marketing message, almost like mathematical syllogism: since A>B>C then A>C. Better yet, let’s look at the possible roots of the message: Since $225 million has been invested in two dozen companies, and those companies each built integrations between Salesforce.com and their application and published it on AppExchange, then “…$225 million has been invested in two dozen companies on the AppExchange.”! I can see how building these messages can be addicting! Now, spin that into the general purpose platform message of Apex, and you have a platform with hundreds of ‘applications’ – right.

What do you think? Do you see these marketing tactics used frequently? Have any good examples that you’d care to share?

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