Planet

From bleeding edge to boom time?

jbrown — Thu, 19 Oct 2006 12:11:00 GMT

I came upon this article on Silicon.com recently which quotes a Gartner study indicating that by he year 2011 SaaS will account for 25% of new business software revenues and also stating that

"No provider offers the functionality capability or process management capabilities on par with on-premise software to support end-to-end cross departmental business flows." Interesting.. and a challenge I think!

Now I have to be honest here, I was expecting this to be a little higher... the market is about 5% today and we're only expecting a 5% growth per year?? When I see headlines showing Salseforce.com half-million user milestone and Google's provision of web-based applications I am left with the following question (one which I've posed before!)

What do people mean when they talk about Software as a Service?

I think that the ambiguity in the definition is large enough to allow discussions about the same 'topic' to actually reference significantly different functional areas. A case in point would be the Salesforce.com's application versus a hosted ERP solution accessed by Terminal Services / Citrix... both fall into the broad definition of SaaS but are not the same at all.

If we think of SaaS as the facility to subscribe to an application instead of having to buy it and the associated hardware/tech support/etc, Salesforce isn't SaaS. If we think of SaaS as a web-based application solution providing desired feature functionality at a controllable cost , the Terminal Services / Citrix ERP application isn't SaaS.

In an effort to make my own life a little easier I'm going to start qualifying the SaaS I'm discussing as web-based or hosted applications.

Tiers and Laughter

jbrown — Wed, 30 Aug 2006 17:59:00 GMT

In the ISP and hosting world we know that a fairly simple two / three tier structure exists, we have the ISP, possibly the Resellers and then the end users. It is my belief that this paradigm is about to undergo a fairly traumatic shift.

I believe that we will see a new three and perhaps even four tier structure emerge as a result of the adoption of SaaS. The structure will be born out of necessity and we need to make all best effort to ensure that that birth is a pain free as possible! The necessity is that ISP’s are not able (nor should they be) to provide application specific support for the SaaS products. Supporting applications is the job of the ISV not the ISP, and so we see the new structure…

ISP	Provides the infrastructure services required to provision and manage the user base and the delivery of applications. May also provide tertiary services such as email, web hosting etc. Ideally never needs to know about the hosted applications.
ISV	Provides the application specific knowledge and leverages the underlying technology to provision and ménage their environment. Ideally never needs to know about networks and servers.
(Reseller)	(Provides the support and provisioning elements of the ISV and simply sells the products available to them. Ideally never needs to know how the application is written or provisioned)
End User	Pays the money and uses the application(s) available to them. Ideally only ever cares about cost and availability!

It is in this transfer of ownership of the end product away from the ISP that is currently causing just a little confusion! ISP’s are asking “How to I support Application X in this new model?” the answer of course is “You don’t, that’s your ISV or their appointed reseller’s job”

There are always exceptions to this, and any rule, of course. And it is usually the early players who are at the forefront of these. Early SaaS service offerings are built from the ground up and owned and operated by the ISV. They may use and ISP to host the servers but everything from the OS upwards is theirs. This is great if you are A) an ISP who wants to fill a DC with dedicated servers, B) an ISV who has the technical resource available to manage their whole environment or C) an ISV who’s application is wholly self contained and needs nothing more than a server and a network connection.

I see the majority of SaaS offering in the future however utilising a managed hosting environment where centralisation of services and administration is critical to high value, low cost services being made available to any / all.

SAAS: Providers Key to victory

swinter — Mon, 28 Aug 2006 14:34:00 GMT

SAAS providers are challenged and to be successful there are several keys points we should talk about briefly. The following bullets are areas where a tightly run SAAS ship can reduce churn, increase profits, and maximize success:

· Effective Sales Cycle with Solid Order Processing

· Automation Automation Automation; Self Provisioning

· Quality Assurance

· Effective Reporting and Billing

· More Services = More Business = $$$$

Sales and Ordering

The sales cycle is extremely important, but must involve what I am terming an “Information Technology Work Process Engineer” (ITWPE – Fancy Term for a Sales Engineer) . When a SAAS provider is talking with a potential client, there should be a needs assessment performed by an entrepreneurial-focused systems engineer who can match the service packages offered with the needs of the client. Additionally, the ITWPE should always be on the lookout for new services to add to the arsenal of technology.

Automation

Once the ITWPE has mapped out the engineering need, there needs to be an electronic method of establishing the order. Remember, SAAS providers need to operate on a thin manpower to maximize profits. The electronic gathering of the order actually gathers information the engineers use to automate setup. After the order is received and processed. The customer is shown how to provision the environment using the automation tools.

Quality

The idea is to spend time up front during the sales and initial deployment to train the customer so they use provisioning tools to manage their environment. The advantages include less helpdesk calls and ability for customers to instantly make changes or sign up for new services. Also, during the setup you ensure Quality by making sure the automation sets up the users correctly.

Billing and Reporting

Billing and effective reporting are critical to success. In many cases such as Microsoft’s SPLA program, you report what software packages are used. However, you need to bill for what packages the customer s have available. For example, Microsoft requires that you claim usage for Exchange Mailboxes that have been accessed within 30 days. You should not report a mailbox usage that doesn’t meet the requirement (Paying for something you don’t have too). On the other hand, the corresponding user should be billed for this usage because they have the service available and are subscribed to the plan. There must be a mechanism, semi-automated, that generates a billing report and a provisioned report comparing the two worlds. You want to make sure whatever is provisioned gets billed and your reporting is in line with regulations so you maximize bottom line.

More Services

The complete customer experience is focuses around the packages you offer and service delivery. Always remember, the customer will usually tell you what basic services they need. An unspoken pledge is to continually add new technology enriched services. Typically, customers are not aware of technology other than base file storage, mail, CRM, and etc. The goal as SAAS providers is to deliver packages with basic and enhanced offerings. As offers intensify and client managers are educated, SAAS revenues increase.

Conclusion

SAAS providers who are successful communicate effectively through every stage of the customer experience. The keys to victory are in a circle of operations where one step depends, critically, on another. For example, the sales process may drive additional services you offer or customers may see a new product inside the self provisioning control panels they can subscribe too. I regret making this analogy, but to be successful SAAS providers must be a Wal-Mart of Information Technology Services with a plethora of services readily available to the clients, with a Wal-Mart Greeter handy for assistance.

Why should the SMB leverage SaaS?

swinter — Fri, 25 Aug 2006 20:53:00 GMT

First, let’s discuss the market in general. What is the target market for SaaS? The SaaS offering actually has a wide variety of markets. SMB customers should, would and will utilize the complete array of SaaS products. Small Businesses have a need for an “IT Utility Company.” A place to go to get reliable service a la carte.

The real SaaS product is not software, but the utility service. I like to compare SaaS with the local power company. Information Technology is typically dealt with as a cost center much like the electricity service. Can you do without Electricity? Information Technology is often operated in house by a professional staff. However, IT departments are overloaded, often understaffed, and/or lack skills to deliver high end services. And are not often a great way to deliver Line of Business (LOB) services.

Here are some examples:

· SMB companies less than 50 employees often outsource IT or hire desktop engineers. There is a need for SMB’s to have the same toys as the big boys, but you need system engineers to perform these tasks…. IT Utility Providers (SAAS based Companies) have high end engineers with proven records included in the monthly fee.

· The business of a small business is their core competency. A small business must focus on providing and servicing directly its client base with more efficient services and continue to find more better ways to market and sell these services. Developing and maintaining a customer relationship system, billing system, order entry system etc are not their core function. The requirement to learn how to build these applications and then maintain them only distracts critical business resources (time/money) from servicing the core business driver.

· Learn everything again for the first time. When you deal with a SaaS company/ISV whose primary focus is to serve a certain market with a certain application they become experts on the fine data points of this application. We have an ISV customer who focuses on providing back office online services to small and independent Insurance agencies. These guys really know there stuff on the ins and outs of the requirements of the Insurance echo system AND they understand how to make technology meets those needs. Instead of the small business needing to learn all this new the first time they can leverage the knowledge and learnings of this ISV for a much smaller use of the SMB resources (time/money)

In a nut shell, the real product of a SaaS provider is Information Technology in a Utility package. The selling of “Software as a Service” is weaker marketing than offering an Information Technology Utility. The positive of SaaS is having a provider do the hard work and the customer writes a check for the service. Small and large companies alike have a need for an IT Utility and the SaaS Services bundled into packages.

Of course this whole discussion could and should lead to the question of “shouldn’t a hosting provider create an echo system of targeted ISVs providing online applications. This hoster could then offer a menu of SMB applications from ONE Source on ONE Bill. Great question and I will discuss this in upcoming Blogs.