Evolution to Viability, The SaaS Story

What is Software as a Service, and should I look at it for My Business?

Buzzwords and acronyms within the technology community have been common ever since International Business Machines became IBM in the 1940's. Some 'buzz' is undeserved and the acronym quietly fades from business circles. Other acronyms are resilient and continue to evolve. Software as a Service (SaaS) is one such buzzword. There is no need within this brief to recount the gloom and doom news being spackled within every business, national, and technology news source. By now, everyone has some understanding of the downward cost pressures indiscriminately affecting every market. It is this current global economic need to leverage services in order to realize efficiencies while mitigating risks, coupled with the current phased technical evolution of SaaS that make utilization of Software as a Service an attractive option.

Components of the aggregate business methods behind the collective Software as a Service have been introduced in various forms over the last twenty years with varying degrees of success. In basic terms, almost all software is able to be positioned as a remotely hosted service offering, and successful utilization of the software is dependent on the underlying infrastructure.

Enter the concept of Cloud Computing. Despite all of the hype in technology circles 'The Cloud' is really nothing more than the latest generation in an evolution of what has been known for over a decade as 'The Net'. As point to point network links have transformed into true grid models, and layers within the Open Systems Interconnection Standard (OSI) model have become blurred through the advent of more intelligent and efficient technologies, making hosted large scale business service offerings a viable option in a truly borderless, global sense has become a reality. As the costs of maintaining systems and services in house escalate, large and mid-tier companies that wish to retain their local expertise but reduce the overhead of systems, environmental maintenance, and resiliency are exploring alternatives to a fully outsourced model. Smaller sized companies can also utilize this model for "first mover" advantage and focusing on their core business competencies. For many, Software as a Service fulfills that need.

TechTarget.com describes Software as a Service (SaaS) as "A software distribution model in which applications are hosted by a vendor or service provider and made available to customers over a network, typically the Internet.

TechTarget.com further denotes; "SaaS is becoming an increasingly prevalent delivery model as underlying technologies that support Web services and service-oriented architecture (SOA) mature and new developmental approaches, such as Ajax, become popular. Meanwhile, broadband service has become increasingly available to support user access from more areas around the world.

SaaS is closely related to the ASP (Application Service Provider) and On Demand Computing software delivery models. IDC identifies two slightly different delivery models for SaaS. The hosted application management (hosted AM) model is similar to ASP: a provider hosts commercially available software for customers and delivers it over the Web. In the software on demand model, the provider gives customers network-based access to a single copy of an application created specifically for SaaS distribution. IDC predicts that SaaS will make up 30 percent of the software market by 2007 and will be worth $10.7 billion by 2009.

Benefits of the SaaS model include:

• easier administration,
  
• automatic updates and patch management,
  
• compatibility: All users will have the same version of software,
  
• easier collaboration,
  
• global accessibility.
  

By now a large portion of the business community has at least a partial idea of what SaaS encompasses and many of us have dealt with situations where the concept is employed and evidenced. Prime examples of this are found within our clients whom are looking for ways to continually meet the growing demands of their business while concurrently streamlining IT operations. Examples are found within our Attestation clients, where SAS70's are utilized to assist in validating compliance mandates of service providers, often providing software services and various other hosted solutions.

More Companies are turning to SaaS

Software as a service (SaaS) represented approximately 5 percent of business software revenue in 2005 and, by 2011, 25 percent of new business software will be delivered as SaaS, according to Gartner¹

Additionally, Gartner is further cited by Computerworld as stating:

"Nine out of ten companies plan to grow their use of software-as-a-service (SaaS) in the next year, according to a survey by Gartner. More than one third of respondents (37%) plan to replace on-premises software with SaaS to drive down total cost of ownership (TCO), Gartner found. Those surveyed cited cost-effectiveness and ease of deployment as primary reasons for adoption. Other major drivers included replacing on-premises solutions that had not met performance expectation, or changes in sourcing strategy. The survey involved eight major countries worldwide and 258 IT executives that make purchasing decisions of enterprise software. Most respondents were either currently using SaaS, or planned to use it within the next 12 months….(and finally)…. Despite the increase use of SaaS, most respondents to Gartner's survey said no governance policies had been developed. Only 38 percent of total respondents that are currently using SaaS have a process or policy that guides the evaluation, procurement and deployment of SaaS. The majority of these organizations are based in Europe and North America. Another 26 percent had no plans at all to address this issue." ²

SaaS concepts have had almost a decade of ups and downs from an adoption perspective mainly due to the evolution of required supporting infrastructure to provide not only a cost effective, but viable practical option to 'in house' systems. In the past there have been failures mainly related to latency and scaling issues that were often not directly related to the software itself, but rather to supporting infrastructure and the somewhat limiting linear or 'spoke' methods utilized to transmit data. As has proven to be the case with technology, the delivery methods over the past several years there have improved exponentially, which in turn have provided proven ever-increasing successes using the SaaS model for business' in the areas of: CRM, HR; IT Support, Hosting and Security, Accounting and Finance, Video and Bridge Conferencing, Web Hosting and Content Services, Corporate Email, and even ERP solutions.

As it relates to market impact, Gartner asserts: "… said adoption of SaaS varies widely across software markets, contributing as little as 1 percent of total software revenue in some markets and more than 75 percent in others. For example, in enterprise content management (ECM) and search, SaaS adoption is in the range of 1 percent to 2 percent of total software spending. Within e-learning and Web conferencing, SaaS accounts for more than 60 percent and 70 percent of total market revenue". "SaaS adoption is highest in applications that support simplified, common business processes or large, distributed virtual workforce teams," said Sharon Mertz, research director at Gartner. "Ease of use, rapid deployment, limited upfront investment in capital and staffing, plus a reduction in software management responsibility all make SaaS a desirable alternative to many on-premises solutions, and they will continue to act as drivers of growth." ³

The following trends are expected with respect to SaaS in the next 3-5 years:

• CRM Software as a Service Compared to all CRM Software, by 2011, 25 percent of new business software will be delivered by SaaS.
  
• SaaS Penetrates the Enterprise Market
  73% of large companies say they have adopted or plan to adopt SaaS solutions in the next 18 months. The survey polled 100 IT and business executives from Fortune 500 companies. According to survey responses, the most common SaaS solutions were on-demand CRM software. The survey also noted that SaaS growth in the enterprise is being driven by faster implementations, easier maintenance and better pricing.⁴
  
• SaaS and SOA Drive Market Growth
  SaaS and service-oriented architectures (SOA) are the two most influential trends driving the business application software market⁵. A survey among 850 enterprise sized companies found that 74 % of respondents were "favorably disposed" towards acquiring SaaS solutions, with companies currently spending 19 % of their application software budgets on hosted, subscription-based solutions. The research commentary also commented that "nearly every company – or division of a larger enterprise – is a customer or a prospect for SaaS platforms". In an interesting merging of the industry's top two disruptive platforms, the study also predicted that while SaaS and SOA were currently on parallel development paths, "we expect them to converge in the future", paving the way for a "tremendous battle between the largest software vendors and the newer SaaS providers".
  
• On-Demand Gaining Traction
  Customers are becoming increasing comfortable with the on-demand delivery model. The cost-savings benefits surrounding software delivered on-demand have resonated with the marketplace and customers are now looking at on-demand delivery of software to help increase employee productivity and efficiency within customer organizations.⁶
  

What about the Risks?

At this point in the economy there are several key constraints such as: downward cost pressures continue to squeeze IT budgets the business counting on IT still growing capabilities, and additional top line growth. Given these, it is no longer a risky proposition for corporate IT leadership to entertain the idea of integrating SaaS solutions as part of an IT providers technology suite of service offerings.

Currently, SaaS offers an on-demand, cost-effective, attractive alternative to in house legacy systems that are able to leverage relatively standardized application models and modules. Other benefits of a SaaS solution often include hosted continuity and recoverability; reduced staffing and environmental costs, and reduced solution development cycles.

From a Risk perspective, there are concerns regarding SaaS solutions specifically as they relate to security, provider maturity, portability of data, and multiple complex dependencies. By design SaaS and Cloud environments utilize shared, leveraged space and bandwidth to enable on demand functionality, while trying to provide seamless integration and collaboration between internal business groups. These groups maybe utilizing interconnected SaaS offerings often raise privacy and multi-tenancy issues. SaaS providers often are either new to the arena, or are start-ups, which add to their maturity and stability risks as they provide mission-critical services. Other risks include portability of data, and multiple complex dependencies on other hosting providers if the back end infrastructure is not owned by the SaaS provider.

What should I expect, and Who are the major players in this space?

What is somewhat unique about this current period in the evolution of SaaS, is that major software and solutions providers have begun an apparent migration from providing purely End User Licensed (EUL) products to a hybrid purveyance model. EUL's are typically utilized in house by corporations and business users,. The hybrid purveyance model included localized application software, co-hosting said software, and providing remotely managed services utilizing not only their own proprietary base of applications but coupling with competitors application suites. This is done in order to provide business customers a more practical, remotely accessible, virtually seamless, heterogeneous business environment. Further assisting in this growth is the advent by these same providers of making base platforms available to encourage the construction of, and collaboration with other external SaaS solutions. The result of these collaborative efforts within the realm of technology have served to enable business to choose a virtually 'platform independent' set of business solutions. Ultimately, the result of these multiple, layered, platform indiscriminate solutions is the adoption of what is now a major component of the 'cloud computing' concept.

Among the major vendors that appear to stand out in this area are Oracle, Microsoft, IBM, SAP Salesforce.com, and Google. These would be considered Tier 1 providers that not only provide SaaS enabled applications and services, but also the base platforms for development and implementation of SaaS solutions, and a solid 'brand recognition' in the market.

A link to each of their SaaS offerings follows:

• Oracle: http://www.oracle.com/technologies/SaaS/index.html
  
• Microsoft: http://www.microsoft.com/serviceproviders/SaaS/default.mspx
  
• IBM: http://www-304.ibm.com/jct01005c/isv/marketing/SaaS/index.html
  
• Salesforce.com:http://www.salesforce.com/
  
• SAP: https://www.sme.sap.com/irj/sme/en/solution/solutiondetails/index.html
  
• Google:http://www.google.com/apps/intl/en/business/index.html
  

Noticeably missing from the list of expected Tier 1 providers is Novell, mostly due to their limited corporate approach and intermingling with the open source community which currently fails to yield a formal, mature, organized approach to SaaS.

Another, more traditional and possibly familiar way to look at the placement of SaaS providers is to group them by the type and level of services provided. These groupings would include:

• Pure Play: Vendors whose sole service offering model is SaaS, such as Salesforce.com
  
• Software Vendor: Vendors who provide a variety of services, with SaaS being an integral option such as IBM, Microsoft, Oracle
  
• Niche: Vendors which provide a particular type of SaaS offering such as CRM, Host Analytics, Data Warehouse, IDS / IPS, Compliance, Storage, or Email, and
  
• Hybrid: Vendors which provide SaaS platforms, as well as a limited number of hosted services, such as Amazon EC2, Netezza, and Google Apps
  

The Bottom Line, Our Perspective

Either way you slice the market, the collective success of vendors is dependent on the ability to provide the level of scalable adaptability expected by customers businesses as the SaaS offering continues to evolve. When balancing the cost opportunities and the risks to implement much of the concern around implementation and utilization of a SaaS solution can be adequately addressed by developing and confirming a Governance model prior to implementation. Regardless the size of a corporations SaaS endeavor, proper Governance should be considered key to the success of efforts.

In Summary, any IT group interested in streamlining operations, reducing footprint, and controlling costs while still enabling the ability for both planned and unplanned growth should, at this point strongly consider SaaS as a method of fulfilling the increasing demands of the business it supports.

References

• Gartner, http://www.gartner.com/it/page.jsp?id=496886
  
• ITWorld, http://www.itworld.com/SaaS/58645/gartner-SaaS-grow-90-organizations
  
• Ebiz, http://www.ebizq.net/news/8346.html
  
• Kelton Research , June 2008 survey published in CIO magazine.
  
• McKinsey & Co and the Sandhill Group , 2008 research report.
  
• IDC report, "U.S. Software On-Demand Delivery Model 2005-2009 Forecast"
  

Tech Target: http://searchenterprisedesktop.techtarget.com/sDefinition/0,,sid192_gci1170781,00.html

Co-Written with Jason Spencer

Enhancing Intelligence with Less

As the economy forces organizations to reduce headcount and cut budgets, IT and business units are being asked to do more with less. In attempting to tackle this challenge, the natural approach is to look at new or yet-completed projects as the first candidates for cancellation or postponement without taking a hard look at what that may do to the ability to meet strategic business and IT goals in the short, mid, and long term. With a focus on Business Intelligence, we'll take a closer look at some of the initiatives that may require some continued funding in the near-term, but that will result in exponential return in value in the future. Here are 5 things that you can invest in today in order to differ, reduce, and avoid IT cost, and maybe even look like a hero in the process.

• Understand Current State/Baseline BI Capabilities
  
• Create a Roadmap
  
• Sunset Mainframe Hardware
  
• Compile a Sourcing Strategy
  
• Move to Common Toolsets
  
• Dabble with Open Source
  

Understand Current State/Baseline BI Capabilities will help to support a more comprehensive understanding of where inefficiencies may exist. BI Best Practices should be leveraged to assess the integration of information throughout the enterprise. This exercise would look at every system or process that is providing information either to end users or to other downstream automated processes or systems. The dimensions that would be reviewed for each of the systems or processes would be:

• Business Unit Interaction
  
• Organization
  
• Governance
  
• Roles, and Responsibilities
  
• Program/Project Management
  
• Technical, Data, Data Integration (ETL), and Reporting Architecture
  

This is an activity that can be done at relatively low cost and will help to highlight overlaps or redundancy, ineffective systems or process, and data/information challenges. The output of this exercise can also be used to support budget or funding conversations by providing a comprehensive scorecard that identifies both tactical and strategic opportunities for improvement of the current BI environment or capabilities.

Create a Roadmap to avoid project overrun, re-work of systems, redundant datasets, and lack of user adoption. It's imperative to have a well defined future state vision and phased roadmap that allows you to incrementally evolve your BI capabilities without crashing and burning on the first rollout. The purpose is to gather the comprehensive current state view, functional, technical and information requirements of the business community and generate an actionable implementation plan. The information needs of the business should be prioritized and the data required is assessed for availability and quality. Next, the information and analytical capabilities are then mapped into a future state technical architecture. Organization and process changes are recommended based on functional drivers as well as potential impacts to the technical architecture. The resulting roadmap provides a phased plan (not big bang) for addressing the in-scope subject areas and associated technology components. Aside from the strategic initiatives, based on business drivers, outlined in the roadmap will likely also include tactical projects to allow for quicker delivery of value to the business community while still progressing toward the strategic end-state vision (think short-cycle quick wins)

In addition to foundational business and technology requirements, there are a few best practices that should be considered for inclusion as they will provide tremendous impact and increasing value to the business:

• Data Lineage – having an audit trail in a central location that contains details of how data is transformed between source and report.
  
• Data Governance – management of information that allows for consistent definition of metrics across the enterprise as well as a de facto decision of what should be used as the system of record for common data that may exist in multiple source systems.
  
• Audit, Balance, and Control – a framework that provides the complete audit trail of every job run as part of a cycle, balancing of expected input and output of each job to ensure that records aren't lost, and financial balancing of data at every sensible point between source and report. When custom error thresholds have been exceeded, all process jobs stop to allow for clean-up where the issue occurred instead of in the target data warehouse, reporting universe, or reports.
  

Once the end state vision has been defined, a business case, a ballpark pricing of each roadmap phase, and a high-level timeline for implementation of the roadmap should be included as part of the final package used for funding conversations. Having this information will allow you to make more informed decisions about where to spend diminished budgets without compromising business value..

Sunset Mainframe Hardware makes sense due
to the low cost of UNIX servers and storage systems compared to legacy mainframes. By moving applications off of legacy mainframe servers and into a distributed environment, can not only provide significant maintenance cost savings, but also a significant reduction in development and support resource costs due to greater availability and lower cost of resources.

Compile a Sourcing Strategy not just an offshoring decision viewed as an easy way to rapidly cut costs, but too often, the transition offshore is done without careful planning and preparation. This quest for quick near-term cost benefits may be creating significant long-term risks. Experience has shown that successful sourcing requires an appropriate degree of analysis in order to adequately assess the risks associated with the potential rewards. While there's a general misconception that the time from sourcing analysis to implementation must be long and drawn out, a well structured sourcing analysis can actually be achieved in a relatively short period of time. A strategic sourcing plan can set the foundation for success by providing for short-term cost reduction, longer-term efficiency gains, and effective risk mitigation.

Move to Common Toolsets because BI environments that grew from the cobbling together of disparate business unit or subject area systems typically leverage many different database, ETL, and reporting tools. This results in the IT organization needing to maintain a greater number of specialized resources just to provide support to the business community. This also results in the business community having to wait longer for each data-related request to be fulfilled since it requires the IT organization to execute each need. Due to this lack of ease in accessing data, business units begin to fulfill their own data requests using Excel and Access and "Shadow IT" emerges. By addressing a proliferation of different software tools and making tool centralization and standardization as part of your BI roadmap, you can work towards not only providing a one-stop shop for all information needs, but you can train the business community on the toolset and allow them to fulfill their own data and reporting needs. This not only allows for easier adoption of BI initiatives by the business community, but it requires fewer full time IT staff to support information requests.

Dabble with Open Source, it is never too late to test drive new and 'free' technology. A quick and easy way to bring your business users and IT team up-to-speed is by tinkering with software. With open source options proving themselves in the market place, now is a great time to start. There is little to no up-front investment to get some of these packages into a 'pilot' stage. Understanding new features, increased data visualization, and different reporting views can easily increase the Intelligence of your BI community.
Additionally
you can develop or increase your skills for Linux as an Operating system, especially for Database Management Systems (DBMS). The open source DBMS can be used for smaller, non-mission critical data warehouses and data marts.

Finally, when using open source as a pilot for future replacement of existing systems, make sure to build your business case on 3 different scenarios:

1. replacing the front end reporting / dashborading / visualization tool,

2. replacing the DBMS, or

3. replacing the production operating system.

The first two of these are major shifts in technical capability and should be thoroughly tested. However, the final scenario is one that had gained significant maturity over the past few years and is quite common in large enterprises. Combine the three open source scenarios to satisfy small projects as pilot's and prove out a money saving business case for your enterprise
with little to no upfront investment.

Doing more with less is becoming a topic that no one can escape, as we progress further through these tough economic times we are being called to squeeze even more, becoming increasing efficient while creating value. The age old battle between efficiency and value has been a tough ying and yang relationship that usually cascades one way or the other but never equally at the same moment in time.

Business value has to be created, IT needs to be efficient, and organizations will respond tenaciously to each one of these concepts with your help. By applying any or all of the discussed items, you will see increasing value, with decreasing cost over time.