SaaS & Cloud Considerations

Key Points
• Know the difference between the different types of online, subscription-based services such as cloud, SaaS, and platforms.
• Understand the areas where SaaS and the cloud make the most business sense.
• Costs, functionality, and service levels are criteria customers should consider before signing a contract.
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Online, On-Demand Services Can Cost-Effectively Meet Many IT Needs

Until recently, the popularity of cloud and SaaS services has largely been fueled by technology—ubiquitous high-speed Internet and virtualization software—and convenience—the ease of providing new IT functions without buying, deploying, and managing any hardware or software. Today’s economic meltdown may catalyze even faster adoption of these hosted services as beleaguered IT managers face continuously escalating user demands with rapidly shrinking budgets and headcount.

Chris Howard, vice president and services director at Burton Group, characterizes the impetus behind outsourced, subscription-based services as a cost-driven one, as renting these services from a dedicated provider is generally less expensive than building, staffing, and operating them in-house.

Types Of Hosted Services
Lacking standard definitions and compounded by overuse in marketing materials, the terms “cloud computing” and “SaaS” are often used interchangeably; however, there are distinctions between the two. Howard describes cloud computing as providing a “raw” or “dumb” compute utility—what amounts to basic compute resources without any business applications or processes. In contrast, he sees the SaaS model as augmenting cloud-based resources with packaged, ready-to-use software and supporting administrative processes.

Jeff Kaplan, founder and managing director of THINKstrategies (www.thinkstrategies.com), defines SaaS as the remote delivery of commercially packaged software solutions sold by subscription. On the other hand, the cloud, which focuses on raw capability, is sometimes used as the foundation for more complex services such as virtualized server platforms and even SaaS solutions.

Where SaaS Makes Sense

Kaplan says a misperception about the software-as-a-service market is that it targets only SMEs that need to provide enterprise applications but lack a large IT staff or budget. He admits that SaaS initially appealed to such resource-starved organizations, but he’s seeing accelerated adoption by enterprises of all sizes, across industries and business units.

According to Kaplan, SaaS has moved into many application categories, such as online collaboration, Web-based conferencing, and even such back-office functions as financial systems. He notes that although SaaS vendors originally appealed to business units, with IT often serving as a roadblock, there are now hosted solutions for IT itself—everything from cloud-based storage and network security management to help desk and ticketing systems.

Howard advises IT managers to consider rental for applications and functions that have become commoditized—things such as email, testing platforms, and even basic office productivity tools. Trisha Gross, president and CEO of data integration service Hubspan (www.hubspan.com), believes that virtually any commonly used IT service is now a candidate for the cloud. She adds that the only applications not a good fit for the cloud are those unique to a business or where IT requires, and is willing to pay for, complete control over the infrastructure.

SaaS initially found wide acceptance as a way to implement complex, costly software. In its SaaS Buyer’s Guide, industry research firm Aberdeen Group identifies two key SaaS opportunities: business process suites—complex software such as ERP and CRM systems—and business process extension—using SaaS to automate and extend supply chain processes, supplier collaboration, and logistics. Echoing Gross’ point, Aberdeen writes, “In essence, CIOs are adopting an IT portfolio approach of investing internal IT resources on business differentiating areas, with the goal of using external technology experts for non-core processes.”

SaaS Evaluation Criteria
One of the problems in evaluating cloud and SaaS solutions is their sheer variety, as different levels of buyer control or customization means they can’t be uniformly characterized. Elements they share include pay-as-you-go and usage-based pricing and reliance on the Internet for delivery. Thus, both offer low startup costs, one of their primary advantages; however, THINKstrategies’ Kaplan adds that outsourcing application infrastructure also yields long-term savings by eliminating power usage, operational staff, and hardware and software upgrades.

The growth in cloud services and the SaaS market has been a mixed blessing, according to Kaplan. The proliferation of vendors has led to a wider array of solutions and more competitive pricing; however, this abundance has caused customer confusion. Kaplan cautions that because many new SaaS vendors are startups trying to capitalize on a hot trend, their long-term viability is suspect given today’s economy; thus, he advises prospective customers to carefully evaluate a vendor’s financial viability, funding sources, and history or track record. “Find out who else is using the service,” adds Gross, saying that large reference customers can provide some assurance that the service has reached critical mass.

When assessing vendors, a report from Info-Tech Research advises examining their infrastructure and operations, including data center facilities, business processes, support staff, and ease of data access and integration. Given that valuable company information will be stored remotely, Kaplan stresses understanding the vendor’s data management practices—where data is stored, how it’s protected, and how easy it is to access.

Like any outsourced IT service, SaaS or cloud customers need an SLA specifying both performance and uptime guarantees, along with escalation procedures. “SLAs are absolutely critical,” says Hubspan’s Gross.

Although the economic meltdown is fostering interest in SaaS and cloud services, Kaplan says today’s acute financial uncertainty is putting IT departments under such stress that most have become so risk-averse that they’ve frozen most new projects. Therefore, although many IT managers are kicking the tires, fewer are ready to take SaaS and the cloud out for a test drive. Yet Gross feels that although some in IT feel threatened by cloud-based services, these services do offer an effective strategy for doing more with less while letting internal IT staff migrate to more valuable business-focused activities.

Cloud/SaaS Pros & Cons
Surveys conducted by Craig Roth, vice president and service director at Burton Group, have found that although cost reduction is an important reason enterprises are considering SaaS, it’s not the leading factor. Here are some of the major pros and cons.

Pros
• No in-house maintenance
• Shorter rollout time for new applications
• Applications usable anywhere via the Internet
• Faster update and improvement cycles
• Short-term financial benefits (no acquisition costs) and lower long-term cost (no hardware and software upgrade cycles, no ongoing operational costs)
• Predictable, easily budgeted costs
• Better or more up-to-date functionality and support expertise
• Easily scales up and down with application demand

Cons
• Increased information security risk
• No or diminished functionality if Internet connection is lost or degraded
• Applications less customizable
• Data backup and recovery entrusted to vendor
• Risk of higher long-term cost
• Functionality and interface can change without notice
• APIs and database schemas often proprietary
• Inability to monitor system performance and uptime with same tools used for internal systems

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BY Kurt Marko
Source：PROCESSOR

March 27, 2009 • Vol.31 Issue 11
Page(s) 27 in print issue


Copyright © by Sandhills Publishing Company 2009. All rights reserved.