Tag Archives: SaaS

Cloud and the end of the PC era

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I was asked to comment on the question “Are we close to the end of the PC era?” at ebizQ. It was a good enough question to prompt this post.

Indeed we are – I’d say that we’re already beyond it. I think that the proliferation of web applications is the curtain call of the PC era, leading the way to the Cloud era. I consider myself an avid PC user and cherish its stand-alone autonomy, yet I already use my PC mostly to access web based applications. And without web access, much of the stand-alone value would become a moot (or should I say Stale?) point.

The PC era introduced the practice of Business Empowered IT, in which the central IT department was short-circuited by business units who needed situational solutions “now and here”. That practice is endowed to the Cloud era, but in a more mitigated manner.

After the heady drunkenness of Business Empowered IT adoption, enterprises woke up to the hangover of unmanageable application portfolios and business disruptions due to rogue code. The result was a backlash trend towards centralized IT, which made PC’s a physical extension of the computing centre.

But it did result in a role change, in which Business got the lead role in requisitioning new solutions and IT projects.

The introduction of the Cloud and SaaS brought back some of the PC era Business Empowered IT practices, as the well-known example of Salesforce.com demonstrated. But at a very different level. What we see now is actually Business Empowered Solutions (or Business Technology, as Forrester termed it), in which what really matters is the process and not the IT implementation.

That is further amplified by the rapid adoption of mobile computing, in particular smartphones and tablets. As long as you have web access, who cares about the device?

And as one would expect, in the Cloud era we see completely new business practices and enterprises, which are the embodiment of Business Technology.

Take for example eBay and its Partner Network business (ePN). This whole business revolves around web sites and applications which reference eBay offerings and catalyse sales of eBay merchants. That’s actually a business which is already derived from existing Cloud business, and which could not exist without a thriving internet economy.

The PC, or any other IT equipment, has become immaterial and a commodity.

So here we go – applause to the good old PC, and Hello Cloud.

The 3 U’s of Business Technology

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I attended yesterday the annual customer event of Creativ Software, and was dazed to see Business Technology at the down-to-earth level.

Creativ is a small ISV with a big part of the Swiss market for non-profit organization management software. Their customers are non-nonsense people who do not care much about technology, and the nature of their business forces them to run a lean operation with a very compelling and personalized attention to their constituencies.

Yesterday, I witnessed some 100 such users express “wows” and “aha!” and wide smiles when the Creativ team showed them their new “OM V10” product. It was not about the visual design, which is great. It was about the small things that you wish every day were done with more insight into your work. It starts with context persistence across the board, and reaches as far as automated background updates of the contact addresses via third party services. All of that, of course, without having to install anything on your workstation or device…

You may ask at this point where Business Technology comes into this. In my view, that IS Business Technology. It is the intimate and extended use of technology that performs parts of the business. Creativ’s solution is a useful and usable part of the NPO business environment and it is also used – in personalized and fit for the purpose variations – not only by a few subject matter specialists but by the broad community of stakeholders.

How did Creativ achieve such a feat?

About two years ago, when I worked with Magic Software on the elaboration of
the uniPaaS RIA platform, I met with Andy Schwengeler – Creativ’s CEO – to get his reaction to Magic’s new offering. Andy was adamant about usability and architecture. He told me that he was willing to go as far as to redevelop his entire solution if he could achieve a rich user experience as well as the latest flashy and intuitive designs, with zero Client management (or in other words a Cloud based RIA architecture) and a SaaS capability. He finally chose to work with uniPaaS RIA and the Extreme Programming methodology, and brought into the loop one of his most demanding customers as a watchdog. I heard very little from him until a few weeks ago, when he surfaced and invited me to the event.

I had the opportunity to chat a bit with some of the developers and get their take about this achievement. What they said further confirmed the blurring of the distinction between business and technology. In fact, technological advancement further challenges solution vendors for line-of-business expertise.

So there are some things that stay the same even in this age of accelerating change. The well-known recipe for success is still a valid one. If you want to be a successful solution vendor, you must know the relevant business practices better than most of your target customers. Because in order to achieve Usefulness, Usability and Usage, you will have to deliver a solution that embeds and abstracts much of the particular processes and practices which are the fundamentals of their business.

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Tips about (Cloud) Service Culture and Contingencies

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A recent discussion at the ebizQ forum is “How Should Companies Prepare for When the Cloud Goes Down?”. It triggered this post.

What do companies do when the electricity goes down or the phone is out? I am not familiar with outage statistics of the Internet at large or specific Cloud Services providers, but I venture to guess that their track record is not worse than that of the major utilities – probably even better. What is often missing is feedback from those service providers when they experience problems. I rarely saw providers that acknowledged a service interruption while that interruption took place. This is the most frustrating part – you do not know if the fault is within your sphere or if it is external.

A very recent example is Orange in Switzerland – following the announcement of iPhone 4, their web site became overloaded and registered users could not access their account – unrelated to their interest in the iPhone offering. Yet, the only message you got when trying to log on was that it cannot present you a personal iPhone offer due to the high demand – and no word about the general login problem. It took about a week until you could log-in again. I expect providers to follow the example of Salesforce.com and be transparent about their on-going service level.

Then comes the contingency aspect. Those who need constant electrical power install UPS systems. Those who need constant communications use multiple alternative networks. And those who need constant computing have DRP and facilities and processes in relation to their service tolerance. Why should using the Cloud be different?

Now let me get back to the popular apprehension about the Cloud going down – and while we’re at it what about the risk of your Cloud Provider going under? One of the most popular SaaS integration applications at Magic Software is the replication of Cloud based data – simply providing an integration link between a Cloud application (such as Salesforce.com) and a local DBMS hosted on the company premises. I consider this as some kind of life insurance policy – not too expensive, not a perfect solution, but something that would help you survive in case of the ultimate disaster.

And putting things in proportion, data is probably safer and more available at Salesforce.com systems than in most companies’ data centres…

My recommendation? Do your due diligence when choosing a Cloud service, require transparency from your Cloud provider in particular on the service state, and set up a contingency to cover your disaster tolerance.

How to survive the dark side of Cloud Computing

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The last couple of weeks were rich with meetings and discussions about SOA, RIA and Cloud, in between the Forrester IT Forum in the US and the SOA Forum in Switzerland. What strikes me is the “lemming behavior” of a lot of software vendors who decorate their offering with Cloud and XaaS feathers, oblivious of the revenue precipice that aTransition to a Cloud related revenue modelwaits them right ahead.

I have touched upon this subject in my article on RIA and Cloud Computing Apps, as well as in a blog post last year (The coming out of the hybrid SaaS model). It’s ripe for an update.

What we have seen in the last couple of years is an increasing offer of Infrastructure As A Service (IaaS) providing quite elastic on-demand pricing, and an increasing number of software vendors using such infrastructure to offer Cloud hosted applications. The evolution of IaaS technologies facilitates the deployment of traditional on-premise applications over the Cloud, and tempts their vendors to slap on those “Cloud Feathers”. What seems to be put aside are the business model implications.

What the pure SaaS vendors (such as Salesforce.com) experience is a growing pressure of SaaS users towards more granular pricing – real pay per use and not only flat subscriptions. And sooner or later we will see this becoming more and more available. The consequence is a further reduction of software usage costs for customers, and by implication lower revenue per user for the vendor. Vendors will try to compensate by looking for cost reductions – both in developing and maintaining the software and in deploying it. So how can software vendors make money and increase shareholder value in such conditions? They would have to look for more productive and cost efficient software platforms, and implement new business models that tap into the entire ecosystem for shared revenue. And they should be prepared for a very tough transition, which might become fatal.

I recently came across a comment by a Magic Software shareholder that “the licensing model is difficult to understand and costly compared to other tools many of which do not even have licensing models. (this makes MGIC less attractive to potential new developers)”. What is perceived by the commentator as a limitation is in fact one of the bright spots which gives this company a much better position in the growing Cloud market. Magic software already creates most of its revenue using a shared revenue model – tapping into its ecosystem for shared revenues with its customers and partners. It gives the company a very robust outlook and resilience to the upcoming shift in the software business model.

I’m looking forward for your opinions.

More about Cloud Architecture and Serious Business

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An interesting discussion is developing on ebizQ whether Cloud Computing Too Embryonic to Use for Serious Business Purposes. It shows a consensus that we have to look at the meaning of Cloud Computing in the Enterprise context.

I tend to distinguish between the infrastructure and the software architecture that can support the delivery of enterprise applications in the Cloud (to power users over the web), and the acquisition of such infrastructure and software on a per-use (or other non perpetual) basis.

My personal experience shows that Enterprises are indeed implementing “Cloud Architecture” solutions which are substituting fat Client-Server implementations, but mostly using the traditional business model (perpetual ownership and in-house or hosted location) – when it concerns core and customized solutions. Cloud based infrastructure and applications delivered as a service and on-demand are indeed still limited to “commodity solutions” – collaboration, CRM, etc…

I have described a nice example of these a few months ago (the Segway story and their uniPaaS solution). I’d like to hear more if you have similar or contradictory experiences and observations.

Green IT from a different angle

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I just returned from a few days of hiking in the Swiss National Park. Leaving behind the daily comforts and making do with whatever you can fit into the backpack is something I enjoy doing infrequently, yet this time IT just would not let us go. To start with, as we approached the park, we passed through Saas (no kidding – that’s a real village).

GreenIT
Stopping at the Park’s visitors’ center for a last update, we were offered the WebPark SNP (that is the device in the picture). As you can see, besides the basic trekking map and GPS you can also enable an attractions service, which alerts you to points of interest, plants and animals as you walk in their proximity. It can also alert you to specific conditions if such arise. As you can expect, payment is via a daily fee – a very tangible and pragmatic WaaS (widget as a service…).

Web Park is a European project focused on providing visitors of protected and recreation areas with location-aware services. These services can enhance the quality of the user experience and facilitate the protection of habitats and natural resources by better informing users on their surroundings. It offers a combination of pull and push services, multiple location technologies and multiple data sources.

Back in the office, it continues to provide food for thought – a good way to transition back from vacation.

Are we living in SOA?

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ebizQ is running a great complement of industry forums (www.ebizq.net/blogs/ebizq_forum/2009/05), which provide me with posting stimulus. I just posted a comment in the SOA forum, which I want to share here. The topic is “Do You Believe SOA Related Projects Will Increase or Decrease in the Future?”. It reminded me of the initial pitch we developed to explain SOA, and with the continuing noise around “is SOA dead” I think that it is a good occasion to bring it up again.

I want to give credit to my past colleague Avishai Shafir (presently Director of Product Marketing at BluePhoenix), who came up with the idea of the analogy: Imagine a world in which we have to supply all our needs on our own… – that would set us deeply back in time, won’t you agree? If you think about it, modern society is based almost exclusively on services: Trade, Health, Transportation, Finance, … and these services are founded upon Specialization, Standardization, Regulation and Scalability, among others. Come to think of it, we live in a SOA! Yet in the IT world, we’re still very much in the primitive autarchic era in which every solution/application has to supply all its needs on its own. Now, imagine how far could Business Technology (that’s the next thing beyond IT) evolve with SOA and ubiquitous services – may be as far or even beyond what modern human society achieved by building on a SOA.

So let me supplement this with a question of mine – Do you agree to the statement that we are living in SOA?

 

The widening gap between SaaS demand and supply

The growing customer demand for SaaS solutions and the shift from perpetual license models bears mostly bad news to the traditional software industry. The high margins of applications vendors cannot be sustained in a SaaS model, nor the extensive and expensive on-site consulting and services of large SI’s. Worse, the switch to the new models is very costly. In order to develop and deliver a SaaS solution, a vendor needs twice the capital – and it takes at least twice as long to break even. Vendors who already service a customer base have thus to more than double their costs by maintaining virtually two businesses – one to continue and serve their on-premise customers, and one to develop and later deliver the SaaS version. Once this is achieved, they have to maintain two code bases on two different platform and technologies.

In the current business and investment climate, it is almost impossible for vendors to engage in such transitions and investments – they are more busy with survival.

So at present we have a growing demand for SaaS, and a stagnant supply of some 40 successful SaaS solutions that has little chance to grow and match the demand for more variety, due to the technical and financial barriers mentioned above. Consequently, we could expect some M&A activity as successful SaaS vendors would acquire failing traditional vendors with good IP, and then start porting that IP to their platforms. But that would take a few years – until new solutions become available in quantity.

Which means that we have a growing vacuum – on one hand stagnant supply, and on the other growing demand. Hence the increasing recognition of hybrid models and the appearance of application platforms such as Longjump and Magic Software’s uniPaaS, positioned to can take advantage of that vacuum and grow on it.

SaaS Enabled Application Platform (SEAP) vendors who already have an ISV ecosystem, like Magic Software, might alleviate this situation. I’m familiar with Magic Software’s ecosystem, so I’ll use it as an example. It consists of quite a lot of ISV’s (about 2500) with a broad variety of vertical solutions. Many of them are small, but their continuing existence over the years means that they have good competence in their line of business and loyal customers. Some of them are more professional and have compelling and leading solutions, such as Intelys (French market leader in Real Estate ERP), Creativ (Swiss market leader in NGO ERP) or Dove Tree Canyon (US leading provider of Warehousing and Distribution solutions). Many of these ISV’s see the expansion of their offering to SaaS as their growth path. To do so, they’ll have to migrate to uniPaaS and RIA they will have to improve their User Experience and processes to match current best practices. Yet all this effort would require a fraction of the cost and time compared to traditional vendors, and be much more sustainable. They would be able to pursue a more balanced business model with both short-term on-premise revenues and longer term SaaS based revenue, and fill up the growing vacuum in SaaS solutions.

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“Private Cloud” and RIA gain momentum alongside SaaS

I wanted to share with you some results from a campaign we’re just concluding. The campaign targeted at CIO’s and Chief Architects of Switzerland’s large enterprises. We asked them about their interest or experience with RIA and Cloud development and implementations. Over 16%  responded positively - are both developing in-house and considering RIA’s.

I think that we see here a fundamental architectural shift, which is more visible perhaps in the SaaS application market but is nevertheless gaining significant foothold as “private cloud”.

It might be useful to segment the SaaS phenomenon between the Usability aspect and the Business Model. Private Clouds and RIA go after the Usability, which I start to think is a stronger driver than the Business Model.

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The coming out of the hybrid SaaS model

The current controversy that considers SaaS as mutually exclusive with On Premise is, in my view, more related to the current state of technology, than to business or functional issues.

Clearly, if On Demand applications have to be developed and deployed on entirely different platforms and technologies (RIA and multi-tenant) than On Premise applications (Windows and JEE or .NET), then it is difficult, cumbersome and costly to support both.

 The topic is not a theoretical issue – I consider it the critical enabler for the growth of SaaS. The majority of ISVs are facing a tough challenge when it comes to offering SaaS as they and their customers are looking to cut costs, yet to offer a SaaS portfolio an ISV is faced with a potentially large upfront investment needed to offer a SaaS version of their products. I will expand on the ISV challenge in a separate post.

 That is not a pipe dream – the first application platforms that supported this proposition (Magic Software’s uniPaaS) hit the market almost a year ago, and just recently PaaS provider Longjump announced an On-premise version of their PaaS. There’s even persistent speculation that Force.com would follow suite.Clearly, on-demand business requires a different business approach than on-premise – but I view it rather as a super-set than a mutually exclusive path. And as we see in the SaaS integration business, many vendors offer a SaaS pricing models to on-premise installs – and doing so for applications should not be much different (assuming customers provide a compliant infrastructure and operate it).

 Now, consider the proposition in which the same application platform (and consequently application) supports various deployment modes (single and multi tenancy, Fat, Browser or RIA client). The Client appliance aspect becomes immaterial. A software vendor using such a platform can unify its development and support cycles and have a single cycle of updates and upgrades. The SaaS hosting center (and not necessarily only one) becomes yet another “on premise” customer, hopefully with many more users than a “regular” on premise customer. And customers have the power of choice and can evolve and migrate their software usage in accordance with the evolving business requirements.