SaaS Hosting is the relatively new term that refers to Managed Hosting offering targeted as ISVs, specifically SaaS ISVs, as the customer. The concept is based on the premise that ISVs should host the service delivery infrastructure for their SaaS offerings, and free their own valuable resources to focus on product development, while allowing the SaaS Hoster to provide the operational expertise and even Level-1 support services for the ISV's end-customers.
SaaS Hosting was pioneered by companies such as OpSource and 7Global, who rightly saw the focus on ISVs as a way to differntiate themselves and create some blue ocean for their managed hosting offerings. But with the SaaS industry heating up in a big way, the end of the blue ocean for SaaS Hosting is nigh upon us.
A number of additional managed hosting providers have stepped up their marketing activities targeting SaaS ISVs as the potential customer, and my prediction is that many more will enter this fray. Today's list of self-advertised SaaS Hosters includes OpSource, 7Global, ServePath, Connectria, NaviSite, and Attenda. I'm sure that there are more that belong on this list as well.
One of the reasons behind the increased attention being given to SaaS Hosting is Microsoft's Windows-Based Hosting for Applications initiative, which is actively encouraging ISVs to build on the Microsoft platform, and actively encouraging service providers to offer these types of SaaS Hosting services and create a place for ISVs to soft-land when they are ready to launch their SaaS offerings.
One thing is very clear -- NO ISV should be running their own infrastructure (data center, network, servers, storage, backups, monitoring, etc, etc) for their SaaS offerings. It is dilutive to their core business and likely dilutive to their profit margins as well. SaaS Hosters can do this better and cheaper than a company can do by themselves.
But what to "SaaS Hosters" offer that differentiates them from any other Managed Hosting Provider? The differentiators typically include SaaS consulting services that help on-ramp the ISV onto the hosting solution. These include technology-focused consulting services to assist with the SaaS Enablement of the ISV application for delivery as a service, and business-focused consulting services to help the ISV with business planning, compensation models, and online sales/marketing, outsourced level 1 call center services. In addition, SaaS Hosters typically provide a much deeper level of support around the ISV's application including customized application monitoring, support personnel who develop a deep operational understanding of service operations for the ISV, and development of operational "run-books" (think NASA Mission Control) that provide the SaaS Hoster with the detailed operational procedures for the ISV's service offering.
In addition, some SaaS Hosters are now offering or planning solutions for customer self-administration, provisioning, metering / billing, and other infrastructure services that will shorten the ISV's time-to-market by providing infrastructure or administrative services that are typically required by the ISV but are not core to their actual offerings. These services fall into what the Telcos have typically referred to as OSS/BSS -- Operational Support Systems and Business Support Systems.
To summarize, the differences today between a Managed Hoster and a SaaS Hoster include:
- SaaS Consulting Offerings
- SaaS-Enablement Consulting Services
- SaaS Business Planning Consulting Services
- SaaS Go-To-Market Consulting Services
- SaaS Operations
- Application-specific Monitoring and Capacity Planning
- Application-specific operational run-books / procedures
- Customized backup configurations / schedules
- Personnel with specific expertise on the ISV application
- SaaS Support
- Level 1 Call Center Support for the ISVs customers
- Customized Service Level Agreements
- SaaS Infrastructure
- Customer Account Provisioning
- User Account Provisioning / Directory Services
- End-Customer Self-Administration Portals
- Self-Provisioning
- Knowledge Base
- Trouble Ticketing
- Account Management
- Billing & Reporting
- Online self-signup capabilities
- Billing Services including Credit-Card Billing
If you are an ISV and you are considering SaaS Hosters or Managed Hosters as a way to reduce both cost and risk relative to launching your SaaS offering -- you are doing the right thing. Keepthe above list of SaaS Hosting capabilities in mind when vetting SaaS Hosters. If the Saas Hoster doesn't offer these types of services or have a roadmap for when they are going to offer them, then you either need to be ready to provide these capabilities yourself, or find a different hosting partner.
To get my to my original point, the SaaS Hosting space is going to get busy and crowded in the next year. That is really good news for ISVs because there will be lots of options to choose from and an ever increasing maturity in the SaaS Hosting offerings driven by the increased competition amongst these providers. Is this bad news for the SaaS Hosters like OpSource and 7Global who got the industry started down this path? Not necessarily.
IDC estimates that there are 23,311 software companies in the United States alone. Current estimates from various sources are that there are 5,000 SaaS providers or SaaS-related vendors currently, and more being created/funded by the venture community every year, so the size of the SaaS Hosting market is increasing. When the dust settles on the SaaS Hosting space, the providers that offer a solid service and are able to combine that with customer-centric sales and marketing to demonstrate to the ISVs that they truly understand their challenges and needs, will rise to the top of the heap.