This is post twelve of my coverage of the Serena Tag 2008 conference. It describes Jeff Kaplan of THINKstrategies discussing how to decide when to go on premise or on demand. THINKstrategies looks at the transition from on premise to cloud computing. Jeff found that the majority of the audience is using SaaS. After this check, Jeff pointed out the SaaS has been around for a while through such applications as WebEx so perhaps everyone has used some form of it.
Jeff asked, why SaaS? The world is changing. Barriers to competition are lowering. There are more distributed workforces. The nature of the workforce is changing and becoming more online. Jeff told us that his son is just going off to college and even his son’s school allowed him to use online productivity tools instead of MS Office. There are also changing economic and ecological conditions. Thomas Friedman’s new book Hot, Flat, and Crowded extends his ‘world is flat” concept to environmental issues and transportation costs. Technologies are also changing. Now we have broadband networks, new technology, and pay-as-you-go business models.
People have now been exposed to simple and effective SaaS experiences through the consumer web with Amazon, Google, etc. At the same time there is a record of failure of large scale on-premise applications with cost over-runs and high maintenance costs, as well as delayed schedules that make the apps obsolete when they come out.
A little while ago, Nicholas Carr wrote the work, Does It Really Matter? It was not popular with IT but touched a nerve with business executives who were spending too much on on-premise hardware and software. PMany business executives now want to move IT from a capital investment to an operating expense. Nicholas Carr has a new book, Big Switch, about moving IT to the cloud. He said that 100 years ago companies stopped generated their own power. They plugged into the grid. Now a similar revolution is underway.
What is SaaS? Networked applications, subscription pricing, enhanced user experience, real-time analytics, continuous enhancements, self-provisioned dynamic toolkits, aggregated data and benchmark studies (within and across companies), encouragement of best practices, and new ideas.
Jeff said to be careful about SaaS claims. Many companies are jumping on the SaaS bandwagon with online versions of tired old enterprise apps. He said to be sure to look for the above qualities. SaaS is not warmed over ASPs. It needs to have these qualities. ASPs did not. SaaS promises easier, faster, cheaper, safer, and better IT service. Jeff next focused on safety from this list. He said that most software security violations today have actually resulted from on-premise attacks and lost laptops. Jeff has not heard of any significant SaaS security violations. He has not read about them either. There have been some reliability issues but not security issues. And the press is looking for them.
Jeff said his research shows that about a third of companies are using SaaS, and a third are considering it. The early adopters moved in 2006. Now the mainstream buyers are moving in. The move is not simply for cost reduction but also about adding new functionality that cannot occur in an on-premise application. One new function is benchmarking, another is anytime, anywhere access, and a third is the ability to easily move up and down in service levels.
There are shifting adoption patterns. In the recent past, the move to SaaS was often triggered by renegades, who then spread the good news to their fellow employees. After this initial success, the CIOs have now gotten involved to retain control. Enterprise-wide acceptance has increased. More large brand name companies are moving into SaaS including Wachovia Bank (who played a big role at Enterprise 2.0 – see Pete Fields of Wachovia on What Impresses Senior Executives on Enterprise 2.0 and what Doesn’t Make Much Impact) and who adopted SuccessFactors (see SuccessFactors: Bringing Web 2.0 to Talent Management).
I interviewed one eLearning vendor who said that in the past few years they have begun to offer their courses and services as an on-demand solution. Now 98.5% of the customers who use their SkillPort learning management system are using SkillSoft’s on-demand service to host their content. The other 1.5 % still host their SkillSoft courses within their firewall. This on-demand hosting is up from last year when 95% choose the cloud. SkillSoft even finds that many clients who develop their own custom e-learning courses are giving them to SkillSoft to host. Since custom learning materials often contain strategic company information, here is one more example of the growing confidence in the security within the cloud. (see SaaS enters e-learning Through SkillSoft)
SaaS Showplace lists over 115 on-demand CRM providers, for example, in addition to the one below. It also has 44 categories of SaaS firms from accounting/finance to workforce/field service management (see Ever Increasing Expansion of SaaS into Multiple Applications). There are over 800 companies are listed. It is a gold rush era. So choices need to made on which vendors will survive. In Jeff’s last survey, over 25% said they were considering SaaS for IT management. The big vendors are also picking up SaaS capabilities by acquisition e.g., Google and Postini, Dell and Everdream.
This SaaS trend is creating headaches for traditional companies. They have to restructure architecture, business models, sales models, etc. The resellers and implementers are troubled also as their role is changing.
Jeff said that the future is moving software services to offering business services, and information services. He provided some key SaaS selection criteria: reliability, security, customization, compliance (SaaS can provide better records), integration, and finally - customer support. Start small, expand incrementally.
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