Why SaaS?

Greetings!

The temperature has cooled down here in North America and winter is around the corner. It is still relatively warm and in the cold weather it's nice to write about some warmness, which is SaaS! Sure, everyone knows the latest success of Workday. The question is why or how SaaS is succeeding in the marketplace? This may not be true for all applications but definitely business applications are going towards SaaS model.

IMO, there are 3 main factors for the success of SaaS:

1. Runtime Environment
2. Data
3. Mobile

Let me first highlight few points from a SaaS innovators summit that I recently attended here in San Francisco. This summit included select group of technology executives, VC's and CIO's. The tech executives are all pro-SaaS and no need to highlight anything. One investor made an interesting comment: from Sausalito to San Jose, I make investments only in SaaS for enterprise applications!

I will highlight the CIO panel here and if you want to hear more about the summit, please ping me separately. (uday dot s at-sign comcast dot net)

There were 4 CIO's from big corporations. The moderator started the discussion asking about what % of applications are SaaS today? The answer was 90%, 50%, 25% and 20%. Then moderator said it makes sense to ask first 20% and 25% CIOs about SaaS adoption. For everyone's surprise they both said they are going to adopt SaaS aggressively in next few years!

• 20% CIO
• I am sick of having repeated discussion with CFO about "do more with less". If it is SaaS, its just a binary discussion. I just need to pick the right vendor. I am also sick of dealing with servers to DBA!
• 25% CIO
• I don't expect any IT application developers in my organization in 5 years from now. They will be doing something else! 
• 50% CIO
• He was interesting. His acceleration from here onwards going to be cautious. He is taking safer approach/too much legacy and will have hybrid environment. But he was super supportive of SaaS too.
• 90% CIO
• He said, don't ask me when is the next 10%. I am just wearing CIO hat for this panel as my official title is already changed! I don't have any legacy and so it was easy for me to take SaaS route from the beginning.

The common theme across all 4 CIO was:

1. Support of SaaS model.
2. Need to handle legacy environment and migration is taking time.
3. SaaS integration is painful even today. We need a solution that can integrate many SaaS apps.
4. Not outsourcing Active Directory any time soon.
5. BYOD is real.

This event was in 48th floor in TransAmerica Pyramid in San Francisco (lovely conference room- if you are on the window seat and you can turn towards wonderful bay-view if the speaker is boring!). After the event I need to take 2 elevators to come to ground and another 12minutes cold/crispy late evening walk to garage to take my car. All along I was thinking about one thing: "IT ecosystem is changing for ever".

OK. Lets get back to the 3 factors that I highlighted in the beginning of this article.

1. Runtime Environment
• Before, the product team builds a software product on a particular OS. Then they have to port to different OS to support wider market. This is pain. 
• Now, the software products are distributed applications. It no longer runs on a single desktop or a single server. You have a complex network environment with distributed servers and storage systems as runtime environment. It is not an easy task to reproduce the application in another environment for deployment. This is more painful. Here is an example of politely saying 'no': http://bit.ly/U3RN9C 
• The summary is "single runtime environment" is a blessing for product teams in SaaS. It is even more blessing for IT team as they don't have to deal with software upgrades as there is no software in the first place!
2. Data
• In the past, all software product teams have to deal with sample applications and seed-data to perfect their software. Then they will discover "real bugs" in the customer environment! Then release service pack after service pack to fix bugs. It was a painful experience from product teams to marketing to sales to customers.
• In the SaaS model, product team gets "real data" and "real use cases". Then they discover bugs in their own backyard (data center) and quickly fix it. The pain stays with the product team itself and nature forces them to perfect the application quickly!
3. Mobile
• The enterprise is increasingly accepting BYOD for accessing any-service, any-time, any-where in any-device model. This model aligns well with SaaS than behind the IT firewall with VPN challenges.

Ok. Good. Let's take a step back and ask the 2 Marc Benioff's questions:

• In 2000: Why enterprise software is not like Amazon.com?
• In 2009: Why enterprise software is not like Facebook.com?

My answer is that software teams were frustrated with many runtime environments and lack of data to perfect the product quickly in the old enterprise software model.

If you are still not sure about SaaS, please read this article:

"What went wrong? U.S. Airforce blows $1 billion on failed enterprise software"

http://venturebeat.com/2012/11/15/enterprise-software-nosedive/

Summary

The SaaS is clearly succeeding in the business applications. The enterprise IT is going through a major transformation now. The IT has reached an inflection point now with SaaS. The role of CIO is going to be even more critical for any business to succeed in this globally competitive environment. CIOs are  dealing with BYOD to legacy to SaaS to data security and more! There will be many, many applications that will continue to run inside the firewall. There is no question about it.