Software as a service looks set to fulfil the promise that ASP failed to deliver 10 years ago. We look at what’s changed, the implications for CIOs and how organisations can make SaaS part of their IT strategy.
Sometimes you have to step back before you can go forward. The technology boom of the late Nineties brought many innovations with it, several of which promised much but ultimately fell short of delivering the intended benefits to IT leaders and the businesses they served. Some had the germ of a good idea but never took root: the application service provider (ASP) model, for example, was a concept where software would be hosted in large data centres and rented to organisations as they required. The conditions weren’t quite right for ASP to flourish – the lack of broadband infrastructure was one such obstacle.
Sounds familiar? The fundamental concept behind software as a service (SaaS) – sometimes referred to as on-demand or cloud computing – harks back to the ASP model. But in the five years or so since SaaS first emerged, it has overcome the growing pains that blighted ASP and is bedding down in mainstream acceptance.
The research firm Gartner is bullish about SaaS and has said that much of this year’s growth in the IT market will come from services delivered on a pay-as-you-use basis. By 2012, it predicts that 80pc of large enterprises will pay for some cloud computing service and 30pc of them will pay for cloud computing infrastructure. In a recent briefing note, the company identified SaaS as a significant technology shift and forecast that software spending would grow more than other categories. “SaaS/cloud computing, service oriented architecture (SOA)/Web 2.0 and open-source software are causing huge changes to the software market. Many of these factors are impacting market growth as enterprises replace assets with per-use services,” said Gartner managing vice-president, Joanne Correia.
Sceptical CIOs with a few years under their belts have encountered many ‘next big things’, so what’s different about SaaS? Paul Turley, regional sales manager with HP Software, believes the model represents choice. “There will always be organisations for the foreseeable future that want to own, manage and operate their own technology for very valid reasons. There are others that want to focus on their core business and leave the management of their technology to others. In many ways, this is analogous to the outsourcing market; it works for some and for others it is not of interest,” he says.
SaaS is often typecast as being suitable only for small companies but its supporters, naturally, think otherwise. The CRM provider Salesforce.com has been one of the driving forces of SaaS worldwide and boasts Merrill Lynch and Dell among its customers – both with installations of more than 40,000 seats. Ireland isn’t quite at that stage of maturity and familiarity yet but it’s getting there, according to Colm Mulcahy, CEO of Saaspoint, a dedicated SaaS consultancy. “Irish businesses are now beginning to recognise that SaaS can offer speed of delivery to take advantage of those kinds of systems,” he says.
Turley agrees, saying the advantages of SaaS accrue to enterprises of all sizes. “Benefits of the SaaS model include faster time to deployment and less upfront consultancy and implementation, which align very well with the SME market as well as larger enterprises that want their people to become expert on using the technology and focusing on the business outcomes rather than managing the software,” he points out. “The benefits of more of a standard, out-of-the-box offering need to be weighed up against the loss of flexibility. For many organisations in Ireland, the benefits from an upfront cost and deployment perspective outweigh this loss of flexibility.”
The SaaS express
Mulcahy says the SaaS model’s initial success, in the form of Salesforce.com’s CRM offering, compromised some of the bells and whistles of on-premise applications in favour of agility and speed of deployment. “When Salesforce.com came to the market, it came with what it called functional sufficiency – basically that you satisfy the functional requirements to a 20pc level where the usage requirement is probably at 80pc, and it brought a product that was probably lower in functionality than some of the competition but covered 80pc of what needed to be done.”
Seamus Brennan, CEO of Cusppoint, a provider of document management as a service, says SaaS has moved on in terms of the features it can offer. It’s in the market to compete with other providers and, as such, the applications it delivers must stand up to the merits of its rivals. “You’d be very surprised what aspects of the solution get delivered in SaaS that are equal to or better than on-premise offerings,” he says.
Good timing may also play a part in helping SaaS become more deeply embedded this time around. Where the Nineties saw significant focus on technology for its own sake, the climate in the latter part of this decade has been about aligning IT far more closely with organisational goals. “Flexibility of business is driving the change, not IT,” says Tim Pullen, practice director with Saaspoint. “The reality was that if an organisation of any size was looking at a project of this nature, traditionally it was driven by the IT side. Now what’s happening is the business drivers and the commercial side of the house are driving the need for these things and they need it fast, and SaaS delivers that.”
It could be argued that Salesforce.com has been so closely associated with driving the service-based model that in many people’s eyes, SaaS equals CRM – another misconception, say those in the industry. “From 2002 to now, the whole platform of Salesforce.com has become far more function-rich with the capability to provide almost anything outside of CRM in terms of an application,” Mulcahy states. Google’s emergence as a serious software player is almost entirely based on software hosted in the cloud rather than on customer servers and PCs. Another marker on the model’s journey to maturity is how the industry’s biggest players have reacted. Microsoft, Oracle and SAP among others have started to offer some of their products as a hosted or on-premise option, giving customers the choice. Similarly, HP’s entire range of business technology optimisation products is now available via SaaS or in-house deployment with the option of migrating between the two. “For example, an organisation may want to start with a SaaS offering for their Service Desk in order to get up and running fast with a lower time to value. Once the solution is established and staff trained, they may then choose to bring it in-house at a later date,” says Turley.
SaaS’ supporters have been quick to seize on the high percentage of traditional software project failures as a way to make the case for their own model. Customer fears about problems with legacy integration are unfounded, they claim. According to Pullen, embarking on a SaaS project can often highlight silos of information within an organisation. “On a recent project, we were able to pull legacy information from 13 different systems and present them in Salesforce as a single overview of the customer. So it has major advantages but there is potential resistance within an organisation over this because of the problems it exposes. However, at the end of the day, the business sees the benefit because it ends up with something it can use very quickly.”
Recent high-profile data breaches in Ireland and abroad have thrust information security firmly under the spotlight. Could the prospect of having potentially sensitive data hosted in the cloud be a sticking point? Not so, says Mulcahy. “It’s probably one of the safest ways of storing a company’s data. You walk into most companies and the data security environment they have wouldn’t compare to what a SaaS environment can provide.”
Brennan says security is one of the key principles underpinning the SaaS model. Cusppoint recently became ISO 27001 certified and is starting on a series of further stringent security audits. “We think that’s going to become a requirement of all SaaS providers. It’s a big fear: is my information secure? Is it in a secure data centre? These questions should get back transparent answers from anyone providing a SaaS service,” he says. “You can’t have a chain of custody of a document in your office and then you get it hosted by an external provider that doesn’t have security certifications.”
As with any major technology project, there’s actually a lot more involved than simply swapping some infrastructure. According to Pullen, there is a cultural change required and ‘soft’ factors such as human resources must be taken into account. That’s why Saaspoint has started a new practice to cover this area. Pullen acknowledges that the model often represents a new way of working, which can involve frontline staff inputting data much more frequently than they did in the past. But he is adamant that CIOs shouldn’t fear SaaS. It plays to IT’s strengths by turning routine elements of technology into a utility, freeing up time for those in charge of technology to take on a more strategic role. “Initially, the IT department would stand in front of a SaaS provider and try to block entry. Now, it’s embracing SaaS because it’s growing so dramatically. Your IT manager needs to have experience of SaaS as part of his portfolio.”
Not everyone believes it’s so cut and dried. Joe Baguley, chief technology officer with Quest Software Europe, argues CIOs need to think about the future IT strategy very carefully. Moving to SaaS could be a quick win, but at the expense of longer term goals. “You’ve got to have one eye on the future; you need to think about what you’re doing with your infrastructure,” he advises. “If it was me, I’d be looking very closely at the integration points that the vendor can provide. If I get a web browser, how’s that going to help me import data into my financial system? You could be working yourself into a corner. It’s all wonderful from a balance sheet perspective but what about from a technical perspective? There’s a lot of ways in which it’s a great thing, but you need to think about the long term and a three-to-five year timeframe. That’s what a proper CIO should be doing.”
Despite the ambitious pronouncements of Salesforce.com founder, Marc Benioff – who takes delight in promising “the end of software” – a more realistic scenario will be one where SaaS lives side by side with on-premise applications. Pullen envisages that a hybrid approach will emerge. The majority of standard IT applications – the ones that add little value – will be delivered as a service with the rest maintained onsite. “Those kept onsite will be around the 20-30pc mark and they will be the things that make the business unique. It will want to keep its intellectual property around what makes its business. Everything else will be a utility, much like water, electricity and gas,” he says.
Ultimately, Pullen believes the simplicity of the SaaS model will win over doubters. “In the old days, you had to build the train and the tracks if you wanted to get from Dublin to Belfast; now you just buy a ticket,” he says. It could be time to start forming a queue.
By Gordon Smith