Intelligent Enterprise

I've been talking about the SaaS-only or SaaS-majority enterprise for some time now. In essence, it's a new or existing business that has most or all of their critical business applications — and data — delivered on-demand. While this scares the hell out of most IT shops, the courageous and innovative organizations that use Internet-delivered applications and services are finding huge benefits.

Case in point is this eWeek article about Shaklee's strategic movement into the SaaS space, finding many opportunities to save money and time over traditional approaches.

Back in the day, meaning 1995, I was doing developer-tool reviews for Byte Magazine, PC Magazine, DBMS (now Intelligent Enterprise), and a few others. Those gigs where a blast since I was able to play with the newest and coolest development tools out there, review them, and hold my thumb up or down like Caesar. I was younger, had more hair, a huge ego, and one of those new-fangled Pentium computers... life was good. Now I just have the huge ego.

What was cool at the time was cross-platform tools, or, tools that promised that you could write an application once and run it on any number of platforms. Long story short, most of them worked equally poorly on all platforms. The fact is that you can't be excellent on all of them. Pretty sure not many of those tools are around today.

While the number of SaaS providers grows, along with enterprise acceptance, we are really not breaking new ground. In essence, SaaS providers today provide visual systems, meaning they communicate with a human being. Also, they provide a single visual interface, and the users have to take both the data and behavior, as provided. We could call this an enterprise application that's not much more than a Web site, or an old-Web technology.

Moving forward, we have the opportunity to leverage discrete services for use within both SaaS-delivered and enterprise applications. These are typically Web services that provide a specific and narrow set of behaviors and data that are meant to become part of a larger application or composite. For instance, address-validation services, tax-rate-calculation services, stock-transaction services… you get the idea. These are not visual services, but can become core components of larger applications, and they are services you won't have to write, test, or host. Thus, you have the ability to build core applications by mixing and matching services that you rent, not create. This is the destination for the new Internet, and the next frontier for the existing SaaS players.

I figured we would see a few of these. As SaaS takes off, major software vendors who were slow in the SaaS uptake may find that others do it for them, whether or not they have agreements. Microsoft is first to toss a punch at their partner Fasthosts, whose new product, Office SaaS, is a bit too similar to Office Client, according to Microsoft.

From this article:

"Microsoft has said that the Internet service provider Fasthosts, which has started offering a subscription-based version of Microsoft Office 2007, is infringing on the software giant's license regulations — but Fasthosts has denied this claim."

In this article in CRMBuyer, "Compensating SaaS Sales: Turning Hunters Into Farmers," it's becoming clear that SaaS is not only changing the way we use software but also how vendors sell software.

"Things aren't the way they used to be in software sales departments. Traditionally, salespeople relied on hefty commission checks after landing big deals. Now, with the widespread adoption of SaaS products, vendors are adjusting their compensation models and salespeople are seeing smaller, but more regular, commission payouts."

I guess I could point to all of the press releases and blog posts, but there are thousands at this point and you already know what's going on. Indeed, as many expected, Microsoft is looking to purchase Yahoo for $44 billion, this to better compete with the pressure coming from the Google Juggernaut that's now removing some of the office automation business from Microsoft. Google is going to counter, for sure, and the bidding war could drive the price up — that is, if the government does not step in and stop the deal over antitrust concerns. You've got to love this business.

This week I'm speaking at the Open Group Enterprise Architecture Practitioners Conference in San Francisco. I did the Keynote presentation at the summer conference in Austin, Texas, and will be providing the Keynote at this conference as well. So, what does enterprise architecture have to do with SaaS? Plenty, and those who plan, work, and build their enterprise architectures today will ignore SaaS at their peril.

As announced last week, Salesforce.com's Force.com Development-as-a-Service presents "a new set of development tools and APIs that enable enterprise developers to easily harness the promise of cloud computing. Providing full access to the database, logic and user interface capabilities of the Force.com Platform, Development-as-a-Service unites the productivity of development and IT collaboration tools with the power of Force.com Platform-as-a-Service."

I had an experience over the holidays that provided me with a clear example of a downside of SaaS that I had not previously considered. The fact is that some "SaaS" players are fly-by-night companies with all of the creditability of a porn site, and perhaps fewer scruples. When you're dealing with unscrupulous SaaS players, they can hide behind the anonymity of the Web and thus are able to take your money and not deliver. Typically these SaaScammers are very difficult, if not impossible, to contact, locate and thus resolve an issue.

It seems that everyone is putting up predictions for 2008, so why should I be an exception? Here is what I think will occur in the world of software as a service this New Year:

As outlined in this article, SaaS seems to be gaining favor with end users, which should be no shock.

"Software-as-a-service is preferred by most end users over the kind of service support and maintenance provided by traditional customer relationship management (CRM) vendors, new research has concluded.

Datamonitor conducted a survey of 300 pharmaceutical and biotech firms across Europe and North America and stated that the on-demand CRM delivery provided by SaaS was more popular in the five areas of service analyzed."

The prediction by many in IT that end users would push back on SaaS is just not coming true. Indeed, the more that SaaS becomes a part of the enterprise application suite, the more the end users seem to like it.

I think this is the case for a few reasons:

We've talked about the SaaS-ification of existing applications before, and it's a prime activity for many software companies as they look to reinvent their applications as SaaS offerings. Unfortunately, the results often leave users wanting more. In moving to the Web, you have to leave many of the nice, dynamic capabilities behind, and thus have a "brower-based, unsatisfying, on-demand version of a desktop application," as blogger Dave Rosenberg describes it (though he applies a more off-color term than "SaaS-ification").

We've seen these types of applications before, with the online version of Microsoft Office being the best example. In essence, someone takes an existing enterprise application, recreates it as a Web-delivered app, and in doing so, dummies it down and reduced its features. Typically, these apps are less attractive and harder to use.

Everyone loves SaaS, or so it seems. However, the increased use of SaaS-delivered applications creates headaches for IT operations folks. What's core to the problem is the fact that enterprises don't directly control their SaaS infrastructure, and thus, things such as outages and performance issues are largely out of their control. Indeed, the best they can do is to send e-mail messages or make phone calls. There is no server to kick, no host to reboot.

The dilemma is that while IT operations wants to continue to control all applications, including SaaS, there is little they can actually do to resolve issues. Or, is that completely true? There are ways that IT operations can manage SaaS, and do so proactively.

I ran across this article in Computer World entitled "Nine things you need to know about SaaS." Pretty normal SaaS 101 stuff, but I was interested in number seven, "How mature is the SaaS market." The answer offered, as quoted below, came from SaaS expert Mike West, Vice President at Saugatuck Technology, a boutique management consulting and subscription research company focused on disruptive technologies.

The market is in its early high-growth phase, having passed the inflection point in the typical high-tech market scenario, West says. It's characterized by large numbers of fairly small vendors, with more entering constantly. In this case, the growth in the number of providers is being aided by some very large organizations, including Microsoft Corp. and IBM, and some small middleware vendors such as Progress Software Corp., which are helping business partners, particularly independent software vendors, move into the market.

In this post, Krissi Danielsson asks whether virtual software appliances compete with SaaS.

"The virtual appliance idea targets many of the same customers as SaaS, and the article points out that some companies may prefer the virtual appliance route since it would keep data in-house. Big vendors are starting to sell software to run in a VMware environment and VMware is boasting more than 2,500 virtual appliance downloads per day. But will these appliances rival SaaS? Time will tell."

So, what the heck is a virtual appliance anyway? For that answer, I found the best description on Wikipedia:

I spoke at Salesforce.com's recent DreamForce event on the topic of SOA on demand. I've held back on writing about the event because I wanted to check out other blogs covering the event and attempt to aggregate the analysis here.

First of all, the SaaS space is pretty easy to define. It's Salesforce.com and, with the possible exception of NetSuite and RightNow, a bunch of other little guys. The event was huge, with more than 7,000 users, partners, press and analysts, up from fewer than 5,000 a year ago. Get the trend here?

Well, it had to happen. Somebody who sells enterprise software had to push back on SaaS. In this case it was Oracle's Larry Ellison. Ellison told financial analysts in a quarterly earnings call last week that Oracle hasn't participated in the software-as-a-service trend because there's no money to be made there.

Let's face it. The government and SaaS have not mixed. This is largely due to three major concerns:

First, governments consider their business processes to be very specialized. Thus, neither packaged applications nor SaaS-delivered applications can meet their expectations.

Second, they see their security needs as going well beyond what SaaS can offer. In some cases there are laws that limit their ability to send information outside the firewall.

Finally, there is a clear control issue around SaaS... they want to hug their servers from time to time.

In this article in Computerworld, the author cites a new Burton Group study warning larger enterprises away from the new, and cheap, SaaS-delivered Google office automation solution.

"'At just $50 a year per user, Google Inc.'s Google Apps Premier Edition (GAPE) hosted office productivity suite could be one of the cheapest mistakes a large business makes.' That's one of the conclusions of a study by the Burton Group, which said GAPE offers lots of good value for business users, but lacks strong regulatory compliance features and poor administrative tools for user accounts. That means a quick deployment in a large business could be a 'career-limiting move' for IT staffers who advocate its use without knowing of its shortcomings."

The core issue is security, according to the report.

"While usability is generally good — except for users who build complex spreadsheets — critical data security and regulatory compliance features are missing…"

This article reports on Gartner's prediction that the SaaS market will hit $19.3 billion by 2011. That's in just a few years. SaaS has clearly come a long way.

"The worldwide software-as-a-service (SaaS) market reached $6.3 billion in 2006 and is forecast to grow to $19.3 billion by year-end 2011, according to Gartner. SaaS is hosted software based on a single set of common code and data definitions that are consumed in a one-to-many model by all contracted customers, at any time, on a pay-for-use basis, or as a subscription based on usage metrics."

As the number of SaaS deployments expand worldwide, many analysts forecast a strong upward trend in outsourced applications. Indeed, by 2011, research firm Gartner claims that 25 percent of new business software will be delivered as SaaS.

Clearly, this seems to be the trend. As cost pressures come down on management, the use of SaaS will become more commonplace. In other words, it's not something that's just in style, but something that can quickly show an improvement on the bottom line when considering the cost of implementation and maintenance, as well as the value of the business processes it provides. Few companies have the resources to recreate or even compete with SaaS products such as Saleforce.com, NetSuite, and/or the emerging Web services marketplaces. And why should they when SaaS products are a fraction of the price of purchasing complete packages or building those services yourself?

Those who leverage enterprise applications have two major complaints. First, the apps are too complex and too difficult to use. Second, they perform poorly, which is what I'm focusing on here.

The truth is, it matters not what type of application it is, SaaS, or traditional enterprise systems such as an ERP or CRM; ease-of-use and performance are always shortcomings in the minds of end users.

After my post last week on PaaS (Platform as a Service), I've been thinking more about PaaS and its relation to SaaS, and I figured I would back up a bit and put things into context.

I think we are moving in three clear directions:

• First, the movement from visual to service-based interfaces.
• Second, the movement to outsourced or virtualized business processes.
• Finally, the acceptance of an on-demand platform for applications, services, and now development and enterprise architecture.

What's the new buzzword? It's Platform as a Service, or PaaS.
In this article Salesforce.com promotes its Apex platform as a PaaS, something that goes well beyond the notion of a SaaS and that has the potential to change the game in how we consume all IT resources, not just applications.

From the article:

"Salesforce.com has announced the August release of Salesforce Summer '07 — the twenty-third iteration of the company's CRM application. In addition to service upgrades, the Summer '07 edition will introduce Platform-as-a-Service (PaaS)— giving programmers and developers the power of customization through Apex Code, a programming language. Once the new edition is deployed, Salesforce.com promises technology departments and software developers the ability to do what end users have done for years through Software-as-a-Service (SaaS)— automate computing."

According to this article at MyCustomer.com, by Stuart Lauchlan, Microsoft is gunning for Salesforce.com and plans to declare a price war with a lower subscription price. Microsoft Dynamics Live CRM is Microsoft's answer to on-demand CRM, and subscription rates will be $44 per user, per month for the professional version and $59 per user, per month for the enterprise version. In addition, there will be an introductory price of $39 per user per month for the professional version, which will offer a complete suite of CRM software through Microsoft Outlook and browser clients, and will also use Microsoft Workflow Foundation. All of this was revealed at the Worldwide Partner Conference in Denver last week.

Virtualization has been a hot topic for the last few years as corporate America seeks to do things faster, better, and cheaper. Lately, I've been getting a lot of cross links with SaaS, so perhaps it's time to drill down on this topic a bit.

According to Wikipedia, "Virtualization is a broad term that refers to the abstraction of computer resources. One useful definition is 'a technique for hiding the physical characteristics of computing resources from the way in which other systems, applications, or end users interact with those resources. This includes making a single physical resource (such as a server, an operating system, an application, or storage device) appear to function as multiple logical resources; or it can include making multiple physical resources (such as storage devices or servers) appear as a single logical resource.'"

The notion that an enterprise can run entirely on SaaS sends many traditional software folks running for their Red Book IBM manuals, and rocking back and forth muttering "Say it's not so. Say it's not so." However, there are some small businesses out there that are approaching the state of SaaS-only operation, and many companies are sure to follow.

As highlighted in this article by Computer Weekly, SMBs using SaaS face a complex integration challenge.

"According to research firm Saugatuck Technology, as more companies use SaaS, the need to integrate those applications with the rest of a company's systems grows. In fact, 17 percent of SMBs are using more than one application delivered via SaaS, according to the Westport, Conn.-based firm's findings."

Indeed, as SMBs first moved into SaaS, they looked at SaaS-delivered applications as something new and interesting, and managed it as a silo. With increased use of SaaS, and as the business matures, there's a need to link SaaS-based apps with the rest of the enterprise. That type of integration is hard, but many SMBs now see the need.

In my past life I was CEO of Bridgewerx, a company providing integration both as an appliance and as SaaS. Bridgewerx used a pretty sophisticated model for its time, and it's a good approach, since both models sell the notion of convenience and economy. Therein lies the synergy.

Indeed, Phil Wainewright, ZDNet blogger, agrees with me in his posting of June 15.

Shamus McGillicuddy writes in this article posted in Computer Weekly, "XO Communications recently announced a new partnership with Jamcracker, a Santa Clara company that offers a delivery platform for third-party SaaS providers. Via Jamcracker's platform, XO will offer a suite of SaaS business applications to SMBs in the 75 metropolitan areas it services." The concept is that smaller SaaS providers are lining up behind larger telecom players, in this case XO, to better penetrate markets that are underserved.

Jamcracker is an aggregator of SaaS providers, enabling them through a platform that provides provisioning and billing and all of the essentials that a lot of ISVs need in order to convert their products to SaaS. To further its SaaS offerings, Jamcracker is taking its wares to existing network players that have better connections with smaller businesses that are the more likely users of SaaS.

At Google's Developer Day event on May 31st, the company announced Google Gears, an open-source technology for creating offline Web applications.

For those of you who think "offline Web" is an oxymoron, perhaps you're right. However, this type of technology is sorely needed to get around a key limitation of SaaS - the ability to use your SaaS applications when you're disconnected from the Internet.

This article By Eydie Cubarrubia highlighted a recent survey showing that a surprising number of public sector IT workers are pushing back on SaaS, coming to the conclusion that:

"On-demand software isn't so hot in the government sector. Two surveys released Thursday revealed that more than a third of respondents 'were slightly or not at all familiar with the emerging software-as-a-service business model.' The survey went on to say that 'Internet-based software will be used by government agencies only in 'small niche' areas.'"

"The surveys, conducted by GCN (Government Computing News), a government information technology news publication, and Government Futures, a government industry research firm, should serve as a warning that the SaaS sector cannot afford to rest on its laurels."

I'm tracking with this as well. In my recent dealings with the government, there does not seem to be an interest in SaaS. Why? Well, the government agencies feel that SaaS does not relate to them because of security concerns and, most of all, that their long procurement processes don't lead toward SaaS.

I've been blogging about the "platform on-demand" space for a while now, clearly a destination for many SaaS players with Salesforce.com leading the way. Indeed, Salesforce has been cobbling together an offering for some time now under the "Apex" brand. This week at its Salesforce Developer Conference, the company announced that it has added enough features to now offer Salesforce SOA, or SOA on-demand.

I'm working with a few VC players who are considering investing in startups. So, what's all of the rage these days in the VC community?Why it's SaaS.

Truth be told, there is SaaS everything these days, including pet management on demand, SaaS-delivered engineering systems and, my all-time favorite, SaaS applications that track other SaaS applications. Indeed, it's difficult to find a software startup that doesn't have a SaaS strategy or that's not an "all-in" SaaS player.

So, is this a bad thing? Well, it can be.

I happened to catch this article by Jon Brodkin of NetworkWorld. It basically recounts recent research from Saugatuck Technology, highlighting some of the issues and opportunities when working with SaaS.

"'Use of software-as-a-service has more than doubled since the beginning of 2006 and will double again by the end of the decade, creating challenges for customers and vendors as they attempt to integrate hosted offerings with on-premise software,' according to research released this week by Saugatuck Technology."

As I began to discuss in my last post, we're now seeing SaaS companies move into the platform space, selling beyond enterprise applications into databases, application development, integration and even operating systems, all on demand. Case in point is the Platform Edition release by salesforce.com last week.

Last week Symantec announced Symantec Protection Network, a software as a service (SaaS) platform. The press release states that the service is designed to deliver easy-to-use security and availability offerings to small and mid-sized businesses using the same pay-as-you-go model of existing SaaS players.

"The first SaaS offering from Symantec, Symantec Protection Network – Online Backup Service will enable cost-effective, reliable backup and restoration of business-critical data from the convenience of a Web browser. Today marks the beta launch of Symantec Protection Network – Online Backup Service, scheduled to become available later this year."

I came across this post by Ann All, questioning the true commitment to SaaS by the larger consulting players. I think it's a good point to consider.

"So, software-as-a-service could be a good thing for folks like consultants and systems integrators — unless it ends up putting them out of business."

In essence the use of SaaS could lead to fewer consulting dollars, and thus the larger consulting firms could be pushing back on SaaS to serve their own interests. Clearly, for SAP, Oracle, and PeopleSoft (now a part of Oracle), planning, installation, and customization projects of days gone by were big bucks and took years to implement in some cases. Now these firms are finding that their clients can get up and running in days using subscription-based services such as Salesforce.com, RightNow, or NetSuite.

I noted back in February the release of the enterprise version of the Google Apps hosted services for businesses. While many wrote about it, the best description is here on Cnet.

"Google plans to launch… a subscription-based version of its Google Apps hosted services for businesses, which offers more storage and customer support than the free, ad-supported version. The Google Apps products, previously called Google Apps for Your Domain, also now include Google Docs & Spreadsheets, which combines online word processing and spreadsheets, and they will support Gmail on BlackBerry devices."

I had a call the other day with an analyst in Europe. The topic of the call was the same as many others; how is SaaS moving into the market, what are the opportunities and how will enterprise software cope with SaaS? Good questions, but most financial analysts who have large stakes in huge enterprise software companies don't like my answers.

Last week I did a keynote at the Enterprise Architecture Conference in New Orleans. I spoke on SaaS, SOA and Web 2.0, and always have a bit of a poll as part of my talk. How many people are using SaaS now? About half of the hands went up. How many of those people were using SaaS two years ago? Almost no hands up. How many people will deploy SaaS in the next two years? Almost all hands went up. Hmmmm.

I spoke about Rich Internet Applications (RIA) at Ajax World last week… great attendance, good speakers, good topics but no SaaS. Okay, a little SaaS. I think the SaaS players need to be serious about Ajax and RIA, else their customers make the call for them.

Ajax is changing the Web. As true dynamic Web interfaces are taking the place of static, pump-and-pull HTML/HTTP, we are seeing a sea change in what users expect from Web sites and SaaS.

As larger organizations move toward SaaS, a few organizations are pushing back on this new model citing data privacy concerns. So, is data privacy a real issue? Or are IT managers reacting more to the lack of control than to data privacy? Let's do a few reality checks.

I'm seeing a number of software products "SaaSifying" as software as a service becomes an interesting way to deliver software and is more accepted in enterprises. One of the most innovative is the EA WebModeler from Agilense. You can find it at this site.

As explained by Steve Hunter, Agilense CTO:

"EA WebModeler is a business transformation enabling product. EA WebModeler helps organizations understand, cost, plan, and execute enterprise change by enabling organizations to build an actionable picture (model) of their current business and IT landscape, and develop models and plans of a future landscape."

There are mashups and then there are mashups, as I'm finding out. However, if you're looking for a clean definition of a mashup, here's WikiPedia's:

"A mashup is a Web site or application that combines content from more than one source into an integrated experience."

What has occurred is that public Web APIs, such as those stood up by the likes of Google, are allowing savvy developers to take content and behavior from one SaaS and mash it together with another, thus forming a new application custom-made to solve the business problems of the end user.

Since there is plenty written about mashups I won't dwell on them here. However, the number and level of sophistication of mashups have grown exponentially in the last several months, and this trend will only continue. This could be the next great thing that happens to the world of SaaS, and a new way to sell the value of SaaS. Here's why.

One of the selling points to management on software as a service (SaaS) is the assertion that it will eliminate internal support costs. A few companies I'm working with are finding that support costs don't always go away, and that's especially true for larger companies. I'll explain.

Truth told, the SaaS approach does avoid core expenses like hardware and software maintenance, but it still requires local support to be effective. Many SaaS players get into an organization by having management buy subscriptions on their credit cards, thus bypassing IT, but more formal and effective enterprise SaaS deployment programs require more internal support than many realize.

Here are three areas to consider.

In a recent blog, Nicholas Carr writes that "large companies appear to be jumping en masse onto the software-as-a-service bandwagon, according to a new survey of CIOs by management consultants McKinsey & Company. The survey found that 61 percent of North American companies with sales over $1 billion plan to adopt one or more SaaS applications over the next year, a dramatic increase from the 38 percent who were planning to install SaaS apps in 2005."

With the release of Windows Vista, I'm reminded of the release of Windows 95 more than ten years ago. The hype was huge, I had a beta copy, and many felt the world would change forever… It did not.

At the end of the day, operating system upgrades have a diminishing effect over time. I mean, most users don't exploit features of an OS, or understand the advantages of upgrading; they're happy as long as they can get e-mail, surf the Web, drive a spreadsheet and write a letter. To this point, operating system vendors, such as Microsoft, are finding it harder and harder to make new releases compelling. Windows Vista, however, could be a bit different when considering software as a service (SaaS).

SAP, in the light of weakening demand for its software, has announced plans to expand faster into the on-demand market, focusing on mass selling versus the slow-to-go enterprise sales that made the company so large in the last 20 years.

I was on a plane the other day, and I heard one salesman say to another (sounds like a bad joke, eh?), "I have that Salesforce.com." The other salesman said, "I have that Salesforce.com, too… a very fancy Website."

Website? Perhaps SaaS is much more than just a Web site pretending to be an enterprise application. Indeed, it's really another set of enterprise processes that are delivered in a different way, critical to the overall meta-processes that drive your business.

I'm working with a few mainstream enterprise application companies that have seen the writing on the wall and are looking to SaaS-enable their applications. However, moving to the platform of the Web is much harder than it appears, as they are finding out.

What's important to enterprise customers is that they understand this pain, even though they may not be going through it directly. It's not a matter of remarketing and hosting that will get their current enterprise application vendors to SaaS. It's much more involved and complex than the application vendors, and customer, assume it to be. That's important to recognize whether you're a vendor or an end user.

We are moving toward a day when most of our enterprise applications may be delivered as services, and thus provide a more economical way to approach information technology management. This is also the great equalizer since businesses, large and small, will have access to the same number and quality of services, much as they do with Web sites today. Shared services will create many opportunities, including better agility and the ability to operate a business with fewer IT resources.

All you have to do is to look around you. With the advent of Software as a Service (SaaS), firms like Salesforce.com and NetSuite are cleaning up with soaring subscriptions. Moreover, the Web is getting the right interface with rich client technologies, such as Ajax, emerging to provide a much better, dynamic user experience. Let's face it; the Web has grown from a simple information delivery platform to a grouping of many valuable exposed services with rich dynamic user interfaces. It's really the global services-oriented architecture (SOA), and those who learn to leverage it now will be well ahead of those who ignore the trend.

There is always room for improvement. While I'm out there working with the SaaS guys I am finding a few areas where many can improve. Or, where they fell short in 2006.

1. SaaS guys did not value the nonvisual interfaces, as much as the visual application engine.

SaaS guys need to learn how to make all of the functionality that's available through the visual interfaces available through the nonvisual interfaces as well...typically Web services. Today, most do not, and as we look to extend the reach of our SOAs to incorporate our SaaS partners, this requirement is on the critical path.