SaaS inSights

I recently re-read the book "The Big Switch - Rewiring the World, from Edison to Google" by Nicholas Carr and would recommend it to anyone who is looking for an explanation as to why SaaS is such a big deal.  The author does an excellent job of detailing the history of electricity and computing and draws the analogy that SaaS is as revolutionary to our world today as electricity was in its time.   Before electricity, companies would have to generate their own power and create the millwork within their business to take advantage of that power to produce their products.  Much like today, businesses have their own "digital millwork" of servers and applications and networks that they must maintain in order to perform their core business.  SaaS applications like inContact step in like an electric utility to provide the services that are needed by the business without the business having the maintain and manage the extra servers and applications that are extraneous to their core products.  The fundamental question is, Why do you want to be in the business of building and managing some applications when you can just have them delivered to you at a lower cost by a specialist in that application?  The Big Switch does a good job explaining the rational behind the switch that happened when we moved to electricity and the inevitable switch to moving to software delivered as a service.

Beverly Magda put together a nice list of things to consider when looking at a SaaS offering called "CIO SaaS Checklist" in InformationWeek magazine.  Here are the questions that she encourages CIO's to ask:

1.  Will the SaaS app require modification of IT or network infrastructure or need special integration?

2. Can I retire redundant IT infrastructure by using the SaaS application?

3. How long will SaaS deployment take vs. software?

4. What training will my IT staff require?

5. Can I redeploy existing staff to other projects with SaaS?

6. How does our end users' application experience compare with SaaS vs. software?

7. How does security of our data compare?

8. What's the operational reliability of SaaS vs software?

9. How will SaaS affect data backup and disaster recovery?

10. How much will I spend on a SaaS subscription over three years compared with total cost of infrastructure and application ownership and operations for software?

11. What's the level of support I can get with SaaS?

12. How easily can I upgrade or scale each solution?

13. Is the SaaS provider financially stable, and how does its IT and network operational capability compare to our own?

14. How will SaaS better serve our business?

15. Will business-unit managers, executives, and the board notice any difference with SaaS? 

Do you have other questions that you like to ask when making this kind of decision?  Please share them with me at greg.smart@incontact.com. 

This is one of the more interesting questions asked of me,  SaaS or on-premise, which is better?   This is one of those classic consultant questions with a classic consultant answer..."it depends." 

Every business is unique and there are several factors to consider when trying to decide "which is better" for you.  But there are a few factors that seem to really separate the field, 1. Money , and 2. Management.   Obviously there are more factors to consider, but these two usually help to really put you on one side of the line or the other to start out. 

Money

This factor basically boils down to your access to capital for spending on a new system.  If you have the money up front to spend on a major system, then access to on-premise solutions isn't out of your reach because you have the money to spend up front.  One single investment in the system and then you can start building it and putting it in place.  However, not everyone is budgeted for a major capital expense.  In that case, you will find many businesses who opt for the SaaS model because it allows them to buy the system as cash flow in operations allows them to spend. 

Management

This factor is meant to separate those who are capable and have the resources to manage a major system on their own from those who don't have the technical resources to keep a major system running.  This can be a big deal for some businesses.  You are about to take on the responsibility of acquiring and building, and maintaining a major system on-premise.  This means when it goes down, you are responsible for getting it back up.  This means that when you need to upgrade the OS with security patches on Tuesdays, you are responsible.  Not everyone has these kind of resources.  There are plenty of people who just want the system to provide the business benefit and can't afford the people to maintain a major system.  If you can afford the onsite resources and are willing to take up those responsibilities, on-premise may be for you.  If you are interested in having experts maintain and manage the system and just want the business benefits...you are probably looking for SaaS.

This is just a starting point for deciding what you want.  I have plenty of examples where companies that have plenty of money and IT resources opt for SaaS for other reasons.  And, as surprising as it is to me, there are companies who really can't afford the IT resources, end up buying a budget on-premise system to maintain for themselves. 

Please share the simple factors that you find are clear markers for decided on-premise vs. SaaS.  Drop me a note at greg.smart@incontact.com.

SAP is a skeptic. "SaaS offerings don't measure up in weaving together complex business processes that have to be managed and analyzed in real time, and SaaS vnedors will have a tough time living up to customer's expectations. You're now seeing software as a service pure plays being driven into complex conversations that they're lousy at." They claim that now more than ever companies need a full-featured, integrated applications platform for running global business operations. They would...they are SAP.

There is no doubt about it, SaaS is being invited into more complex conversations...but we are succeeding and winning.  SAP has good reason to be worried. 

Over the past few weeks I have been asked to provide some commentary on what cloud computing is and how SaaS plays a role in cloud computing.  Well, let me take a few minutes and offer some thoughts on this topic.

For a definition, lets start here: Cloud computing is the combination of hardware and network infrastructure and software applications delivered to end users over the internet.  Sounds a lot like Software as a Service doesn't it?  If cloud computing is different than SaaS, how can we differentiate them?  

I believe the answer lies in the amount of time involved in managing the services delivered from the cloud.   SaaS represents the highest level of zero-management services delivered from cloud computing.  A SaaS customer doesn't have to manage anything, they simply pay for the services they use and don't have to worry about the servers or software that they are using...it is just delivered to them.  SaaS customers don't know what hardware servers are installed, what operating system is on them, how they are connected to the internet and they don't even have to manage the software installed on the servers.  They simply use the services provided.

There are other uses of cloud computing that aren't SaaS.  Perhaps some examples will help to clarify different uses and put SaaS into more context.  Remember, cloud computing involves the hardware, network infrastucture and applications delivered over the internet.  

Example 1: Hosting.  There are many ISP's out there that will host your computer in their facility with access to the internet.  This is your machine, renting space in their racks with access to the internet.  This could be considered the first level of cloud computing with quite a bit of management on your part.  You had to buy the machine, you have to load up the OS and applications on the machine.  The ISP just physically hosts the box and powers it for you for a monthly fee.  Cloud computing?  Yes.  SaaS?  No.

Example 2:   Platform as a Service.  I am seeing more and more vendors who are providing really nice platform services such as storage, virtual appliances, and even custom application development services in the Cloud such as force.com.  For example, you can buy storage as a service and not manage the actual storage hardware, but you do have to manage the applications and use of that storage.  You can also buy virtual appliances such as windows server or Linux servers and not have to own or manage the equipment, but you do have to manage the server and software what it is doing for you.  salesforce.com's force.com is a great development platform for building custom applications.  You don't manage the equipment or servers, but you are responsible for the software application you built.  Cloud computing?  Yes.  SaaS? No.

Example 3:  inContact.com.  To run a contact center, you can choose to buy ACD equipment and power it, program it, and manage it yourself.  This would be "on-premise" solutions.  Cloud computing would mean that you can put your servers or software in the cloud, and still maintain some operational management responsibilities.   However, inContact customers don't  have to manage the servers providing the ACD functionality, or apply security patches or upgrades to the software.  They simply get the benefits of the inContact.com platform with zero operational management.  Cloud computing?  Yes.  SaaS?  Yes, because it doesn't require the management of the components of cloud computing, hardware, network infrastructure, and software applications.  

 Share your thoughts on the topic with me at greg.smart@incontact.com.

Deploying a SaaS application is new for many companies and there are lots of people willing to offer advice on how to evaluate and select the right SaaS solution.  Alistair Croll offered a good set of questions to ask when evaluating SaaS.  I like his advice because it offers a good holistic view of SaaS and makes the point that a long term vision of the SaaS option is critical to making a good decision.  

Alistair recommends asking the following questions,

• Adaptability: How easily can you modify the application? This can be as simple as adding fields or building dashboards, or as advanced as a programming platform.
• Reliability: How much can you depend on the system to function well? This boils down to four things: Performance, availability, scalability and security.
• Task productivity: How effectively can your users accomplish their goals? How many cases-per-minute or entries-per-day can workers do, and how many errors do they make?
• Price: How much will it cost — really? Because SaaS offerings are so varied in pricing, it’s hard to compare them. A better model is to create several benchmark subscribers (a 10-, 100-, and 1,000-person organization) and compare upfront and ongoing costs for them.
• Back-end integration: Can you plug it in to other things? Any enterprise SaaS offering will have to work with other systems, for everything from authentication to data sharing.
• Longevity: How long will the SaaS company be around, and what’s your exit strategy? With ISVs, you could ask for software in escrow. But as the sudden disappearance of Coghead shows, when a SaaS provider closes down, your entire IT systems can vanish with the flick of an “off” switch. Offers from Intuit and others to help stranded customers notwithstanding, this is a big problem.
• Ecosystem: How many third-party developers and integrators surround a particular platform with plug-ins and add-ons, and how active are they? A vibrant ecosystem means a more extensible, flexible solution.

Drop me a note with your favorite questions to ask when evaluating SaaS.  greg.smart@incontact.com 

I have always been proud of the customer service mindset here at inContact, Inc.  We believe that we don't just earn the business of our customers once, but that we earn their business every month as our customers are satisfied with the service and continue to subscribe to our SaaS business model.  Recently, an article published by Scott Sehlhorst on pragmaticmarketing.com illustrated nicely why our customers and many others out there are finding SaaS to be a better way to do business with software companies.    The bottom line is this: SaaS businesses like inContact, Inc. must have their customers interests at heart, otherwise they won't be sustained.  Customers of SaaS businesses are in control because they know they are sustaining the businesses that are truely adding value to their goals.

inContact, Inc. has a terrific portfolio of customers and we are pleased to provide the inContact services to them day after day, month after month.  Thank you.  We hope to always make you proud and continuously earn your business as we provide a state-of-the-art SaaS solution to you.

I would love to hear from you and your experiences with SaaS solutions.  Drop me a note at greg.smart@incontact.com.

I recently read a report from Gartner titled “User Survey Analysis: Software as a Service, Enterprise Application Markets, Worldwide, 2008” that had some interesting results regarding the adoption of SaaS products in enterprises.  The bottom line: first, enterprises love SaaS.  Second, there is still plenty of room for SaaS to grow in the enterprise space.

The report indicated that more than 40% of survey participants have already been using SaaS for more than three years.  That is terrific because not only does that indicate that there are lots of early adopters…but they are sticking with the model and not “trying it out” only to bail back to the old software licensing model.  I don’t believe that customers are locked in because of contracts either.  The nature of SaaS means that the SaaS vendors are earning the business every day while the customer uses the product and not just the day the customer bought the licenses or equipment.  Long term use is a great thing to see for SaaS products.

40% adoption is a great number, but that still leaves the majority of the market that is still in a wait-and-see mode.  So, there is plenty of room to grow for SaaS products.  SaaS products have a lot going for them in this regard.  Much of the movement to SaaS in the enterprise space has to do with enterprises seeking a better total cost of ownership as well as seeking out products and solutions that will solve the needs left unmet by on-premise solutions.  On both points, I believe SaaS has an advantage.   The case studies that I have seen indicate that total cost of ownership seems to tip its hat in the direction of SaaS products more often than not.  And since SaaS applications are typically more modern and more frequency in their feature releases, the chances of meeting performance expectations has the advantage as well.

Businesses are trying to do the same or more work with less.  This means that you have fewer people and less funding to accomplish the work you have been doing or even do more if possible.  Software as a Service systems are built to allow you to leverage the system without having to hire the people to build, monitor, maintain, and improve it.  So you get all of the benefit of the system without any of that investment.   This is good for businesses who need state-of-the-art systems like inContact but can't afford to build it, run it, and maintain it themselves.

Money is an issue for businesses today.  Financing new ventures is difficult right now because capital is hard to come by.  SaaS is great in this case because it doesn't require the capital right up front to have the benefits of the services of the system.  SaaS is famous for its pay-as-you-go model.  Many businesses may not have the capital for major system deployments, but they do have operating capital that can be used to deploy state-of-the-art systems like inContact and immediately get the benefits.

Today, investments needs a quick ROI.  Since access to capital is an issue right now and businesses are looking to maintain and even build momentum, a quick ROI is essential.   Again, this is where I am impressed with the SaaS model.  Because a business can get started quickly and produce results, the return on the operation is very fast.  It isn't like the business is trying to build a significant new system from scratch.  The SaaS system is in place and ready to perform its function for the business.  So getting a quick return on your investment with a SaaS system doesn't depend on the capabilities of the system, but rather the application of the system to solve the right problems for your business.

If you have had an experience with a SaaS system providing you with the ability to do more with less or turn around a quick return, I would love to hear about it.  You can reach me at greg.smart@incontact.com.

On January 6, 2009, salesforce.com suffered a 40 minute outage that was determined to be caused by a hardware failure.  The automatic failover apparently didn't work, but the salesforce.com technical staff performed a manual failover and things were back up and running quickly.

It is unfortunate that outage like this happen.  But they are inevitable.  SaaS providers like inContact and salesforce.com work diligently to create systems that are very reliable.  Reputable SaaS providers build strong redundant systems with automatic failover systems and manual processes to deal with events such as the salesforce.com outage on Monday.

Nobody is immune from failures like this.  This happens to both SaaS providers as well as big and small companies alike who choose to maintain their own applications.   Most companies don't deploy their systems in redundancy and keep a spare hardware replacements for the big expensive pieces in the architecture.  The typical scenario of a company who is maintaining their own applications instead of utilizing SaaS providers is that they are usually waiting for a hardware vendor to provide new equipment.  This could take several hours or even overnight shipments in order to get back up and running…not to mention the people involved who are always on call.

Good SaaS providers are very concerned about reliable service and they do deploy geographically redundant systems in order to avert the potential of outages.   Good SaaS providers also employ a staff to monitor 24/7 the operations of the application and react quickly when badness happens.  SaaS providers can be trusted.  I believe salesforce.com is as trustworthy as they come.

I am impressed with the scope of the deployment of the salesforce.com application platform and their ability to bring the whole system back up quickly after a significant hardware failure.  We at inContact are pleased to be part of the SaaS family and plan to continue the tradition of high availability in SaaS despite the inevitable combination of events that lead to unfortunate, but always temporary failures.