SaaS is going Mainstream

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The headline depicts my impression from a Research Note written by Burton Group's analyst, Craig Roth. The Research Note describes and analyzes the results of a new SaaS survey conducted by Burton Group and Ziff Davis Enterprise.

It is not just a survey. Some of the participants were asked to explain their answers. The explanations provide another layer of understanding: Why (explanations) in addition to What (the answers).

Some of the findings are in accord with my expectations (I assume that my expectations are not very different from expectations of other people who read articles on SaaS), but there were also findings I would not expect to find.

It should be noted that all the 318 participants reside in USA and Canada, therefore extrapolating the conclusions to other parts of the globe could be misleading.

Reasons for implementing SaaS

The obvious reason is cost reduction, but a lower cost was not the most frequent reason for interest in SaaS applications. The most related reason was "No in-house Maintenance", which could be positively correlated with lowering costs.

Surprisingly, the second, third and forth frequent answers are more related to Agility than to lowering costs (Shorter roll out time, Usable anywhere via internet, Faster improvement cycles).

Reasons for avoiding of SaaS implementations

As expected the leading reason for not implementing SaaS was Security risks. However, those who implemented SaaS experienced rarely Security breaches occurrences.

The second frequent reason was Unavailability in case of inability to connect by the internet.

and the third frequent reason (less customizable) also fit to my expectation.

The surprising findings are the low frequency of citing "Less functionality". I would also expect to find integration between SaaS and Data Center applications to be cited frequently. However, that was not what Burton Group and Zif Davis Enterprise found.

Applications

The most popular SaaS applications are Web Conferencing and CRM. CRM is expected to be used frequently due to SalesForce.com effect. As expected, applications used for SaaS are applications which are standalone (e.g. HR, Surveys, e-mail) and are less used as connected systems.

Least cited applications were ERP applications.

Charging Model

I expected that the preferred charging model would be related to usage and or capacity, but actually most of the participants preferred Flat Fee Enterprise Model.

Probably, this model would be more expensive than charging by Usage and/or Capacity models.

My Take In my opinion the bottom line of the survey done by Burton Group together with Ziff Davis Enterprise is very clear: SaaS is going Mainstream.

The following bullets include my view of the surrey's results:

• Agility is a leading reason for selecting SaaS applications. This finding illustrates the similarity between SaaS and SOA, which is driven by the quest for Agility.

• The old Service Bureau charging models of the 60s are still valid. Service Bureau Customers preferred a simple and stable charging model over a more accurate and complex charging model. I do think that more flexible models are better fit for Cloud Computing. It looks as if SaaS consumers are not yet able to adapt Out of the Box thinking and therefore stick to the Data Center Enterprise License model.

• The issue of integration between local and SaaS applications was lacking from the list of reasons to avoid SaaS usage. This issue matters more to large Enterprises and especially for Business Intelligence purposes.

Why is this reason lacking from the list?

Is it because SaaS implementations are not yet mature?

Is this reason (Integration), which was not cited, at list a partial explanation of more benefits realization

by SMBs than by Large Enterprises?

• Types of applications implemented by SaaS model is a key issue. Core Systems implementations is an indicator of SaaS Maturity. Burton Group's analyst thinks it is not yet matured. The low rate of ERP usage sustains his view. NetSuite was the first company to offer SaaS based ERP. Other companies will probably follow NetSuite.

• Even though, SaaS is not matured it is going Mainstream. The majority of enterprises deploy SaaS applications. Mainstream technologies should not be confused with Mature technologies. Mature technologies could become non Mainstream e.g. pre-relational databases like IMS or Adabas. A very good example of Immature Mainstream technology is Enterprise Client/Server Integrated Development Environments (IDEs) in the middle of the nineties.

• Burton Group's analyst Craig Roth concludes that SaaS is immature. The immaturity is manifested in the type of applications used frequently in SaaS model. Maturity will be manifested by more frequent use of SaaS model for Core Applications such as ERP.

Cloud Computing Challenges and Risks

This post complements the post Cloud Computing: Hype, Vision or Reality?

The previous post describes the presentation by Pini Cohen STKI Vice President in a in the 23^rd meeting of the SOA Forum of the Israeli Association of Information Processing.

This post describes the interesting discussion during the meeting, which was focused on Cloud Computing challenges and risks.

Security

Often cites as the major risk of Cloud Computing and verified as the leading cause for avoiding Cloud Computing in surveys. One of the participants (a Security expert) argued that Security is partially real issue and partially psychological issue. The image of less controlled environment (Cloud is less controlled by a customer) is an image of less secured environment; therefore we should expect resistance to Cloud Computing.

My take

The issue is not only Security. It could be also an issue of Privacy.

For example, usage of Infrastructure as a Service (IaaS) for backups by a home consumer may expose his personal data.

Availability

Planned Cloud unavailability schedule is not controlled by customers. It could be in a customer peak hours due to the global distribution of the Cloud customers.

My take

• I do not think that planned unavailability is a real issue. Clouds Providers will minimize planned unavailability time and restrict it to parts of the cloud, similarly to the high availability of current Data Centers.

• The realistic concern is unplanned service outage. Most, if not all Cloud Computing providers experienced unplanned outages. For example Saleroce.com outage on January 6^th 2009.

• Another problem is a difficulty to diagnose the problem's root due to multitude of technological components and layers (including communication via the Web and Virtualization). The cited above SaleForce.com unavailability incidence reason was not identified during service outage time.

Tasks for Clouds and tasks for Internal Clouds

Services types suitable for inclusion in web based Clouds:

• Autonomous (independent on other Services) e.g. employee evaluation

• less critical services

• Development and testing with scrambled test data.

• Training

Internal Clouds would probably execute production workloads e.g. Legacy applications (including Business differentiating functionality).

SaaS Adequacy: CRM & ERP only?

The issue is Cloud adequacy for hosting Legacy and proprietary applications. These applications maintenance is a lot more difficult than maintenance of pre-built applications such as CRM and ERP.

My take

• Currently even customization of pre-built applications is an issue. CRM is the most prevailing SaaS implementation. Is this the reason why even ERP solutions are relatively new in the Cloud?

• It is part of a broader concern: building a Virtual Enterprise composed of a Data Center and multiple clouds. Functional Integration, Business Intelligence and EII are other issues in the virtual enterprise context.

• As far as SOA is concerned, location of Services or parts of Services is more significant than within an enterprise.

Infrastructure vendors: Is Cloud Computing a threat or an opportunity?

Infrastructure vendors' revenues could decrease significantly in Cloud Computing model Due to the efficiency of that model (efficiency is less servers,  less licenses and less licenses fees).

Vendors like IBM, HP and SUN have to resolve a conflict between adopting the Cloud model as Cloud suppliers and cannibalize their revenues or maximize revenues of current Data Centers based sales revenues.

As a compromise between these approaches they offer to large customers Internal Clouds model. Some of the participants argued that internal Clouds as Utility Computing and not Cloud Computing.

They could also innovate offering new Cloud Based services and products.

My take:

• Internal Clouds models could lower costs significantly. They address fears and doubts and resistance to the new Cloud Computing model. They are not adequate to SMBs which will adopt Cloud Computing earlier than large enterprises.

• Large enterprises will have to follow consumers (already adopted the Cloud model by using services like gmail) and SMBs. Therefore for the Long Term Infrastructure vendors should support the Cloud Computing model.

• The Internal Cloud Model will coexist with Web based clouds.

• Licenses revenues will decrease not only because of efficiency. The other reason is size. Cloud Computing suppliers size will drive price pair unit (hardware & software) down. The lower hardware and software licenses price to Outsourcing giants is an indicator of future prices trends of sales to Cloud Computing giants.

• Reduction of prices will not be limited to Infrastructure products. It is also applicable to applications (ERP, CRM, SCM etc.).

Which vendors will dominant Cloud Computing for the Long Term?

Current Infrastructure vendors (IBM, HP, SUN, Microsoft etc.) will probably dominate this market but expect innovative niche solutions by new market players, for example in Integration between Clouds and Data Centers.

My take:

• Web 2.0 vendors like Amazon and Google will be also dominant players. Consumers will probably prefer these current Cloud Computing leaders over the traditional infrastructure software and hardware vendors. Probably they will compete with infrastructure vendors in the SMB and Enterprise markets.

• Cloud Computing is a major paradigm shift. Traditional infrastructure vendors should adapt their Business and Organizational models to the new IT world, similarly to the change from Hardware centric model to Software centric model more than 10 years ago. My prediction is that not all the infrastructure vendors will succeed (like DEC which failed the transition from Hardware centric model to Software centric model.

Hints about my predictions which vendors succeed are available in my vendors-survival posts on: SUN, HP, Microsoft .

Cloud Computing: Hype, Vision or Reality?

The question in the title above was the key question raised by Pini Cohen STKI Vice President in a presentation in the 23^th meeting of the SOA Forum of the Israeli Association of Information Processing. The meeting took place on December 30^th in Afeka College Tel-Aviv.

The following sections summarize Pini's view on Cloud Computing:

Cloud Computing Basics

Cloud Computing delivers Data Center services via Internet on demand. The user is paying for the resources he is consuming and for the period of time he is using them.

The slide in the left side describes the four cloud service types layers.

Infrastructure as a Service provides resources such as storage for backups

Platform as a Service provides a platform and development environment for developing applications or SOA Services.

Software as a Service provides Applications or applicative Services.

Desktop as a Service provides Desktop Operating System of choice view based on Virtualized User Interface Services located in the Cloud Data Centers.

Service invocation is based on Web Services client in the Cloud user location and a Web Service provider in the Cloud.

Cloud Computing is based upon Grid, SOA and other technologies.

The implementation could be Multi-Tenants i.e. customers share a single machine instance or Single-Tenant i.e. a dedicated Virtual Machine for a customer.

Salesforce.Com Cloud provides Multi-Tenants implementation, while Serena software provides Single-Tenant services.

The second illustration classifies Cloud Computing vendors based on approach and user types. Traditional Infrastructure vendors' approach is more conservative than Web 2.0 vendors' approach.

Cloud Computing and IT

• Cloud Computing and SOA represent a Business model change from Products to Services.
• Currently it is immature therefore STKI analysts are not able to analyze it
• It looks like a revolution which will change the way organizations and people use IT.
• Technological Revolutions cycle time is 40 to 60 years. The cycle includes a crisis due to difficulties to adapt to the new technology. Right after the crisis a mass adoption of the revolutionary technologies and concepts is taking place
• Cloud Computing emerging concurrently with the economical crisis. Probably it will dominate IT after the crisis.
• Cloud Computing promises significant costs reduction. Infrastructure Costs could be 10% of current costs in traditional Data Centers.
• Usage of Cloud Computing services is not risk free. The following list includes some of the significant challenges facing Cloud Computing users:

Security, Availability, Architecture and Integration.

Pini's presentation is accessible in SlideShare