Q&A: The Future of SaaS

We look at where software-as-a-service is heading.

IT is increasingly interested in bringing software-as-a-service applications in house. We examine what enterprises should look for in an SaaS provider, and the trade-offs of moving SaaS inside the data center, with Bill Miller, executive chairmand and chief technology officer of XAware, a company offering middleware toolset for data integration, especially SaaS applications with other data sources.

Enterprise Strategies: When you founded Storage Networks back in 1997, the concept of storage networks was to deliver data storage as a service. The term SaaS hadn’t been coined yet. What benefits were you promoting from that SaaS product at the time, and how did enterprises respond?

Miller: We were promoting two benefits; first, flexibility to quickly match infrastructure to requirements and second, lower costs derived from the economies of scale available from a shared larger scale operation.

What did you learn from that model?

Larger customers wanted to build the service internally rather than use an outside service provider. We ended up making a business out of helping them to do that. We provided consulting services and software instead of storage services.

Do you see SaaS making the same progression today? Have customers moved past the “buy the service” mode and want to install it themselves?

I think we are beginning to see this. Many larger organizations have resisted SaaS. Some use of SaaS may have been able to sneak in through departments or business units, but there has not been any significant adoption. SaaS has been more of an SMB business, but large companies are feeling the pressure to deliver the benefits of SaaS to their business units. They are beginning to adopt the SaaS delivery model to internal applications. Part of doing that is redesigning applications around SOA back ends and RIA interfaces.

One of the benefits of SaaS is that you effectively outsource the headaches and management to a third party. You don’t have to worry about backup and recovery, about capacity planning, or having sufficient staff to handle the task, and the service provider can do so (theoretically) at lower cost. Why are enterprises willing to give up these benefits?

Trade-off is control and trust. You might think you are giving up the headaches, but you’ll still get a headache when something doesn’t work, and you might not have a throat to choke so nearby which can make it even worse. Enterprises have to worry if a service provider will actually provide what’s promised and execute well; the efficiency argument breaks down for Fortune 100. Another trade-off is ability to integrate with current IT infrastructure. That becomes easier when you control the entire application from end to end.

Does that mean fewer IT shops will want to use SaaS as a service with an external provider, or will they still appeal to SMBs?

External SaaS as service providers will continue to appeal to SMBs, but those service providers will find it difficult to penetrate the Fortune 500. They may want to make allowances, like we did a StorageNetworks, to enable the larger organizations to run their software and methods internally.

Where do you see SaaS heading? Are there particular tasks currently not addressed that will attract SaaS providers, for example? Are enterprises demanding more from their SaaS providers?

Since SaaS applications really started by targeting the relatively simpler needs of small businesses, there are a lot of unaddressed challenges in serving the much more complex needs of big organization, especially with integration in the entire business process and information architecture. Enterprises have spent years and billions of dollars getting their various applications, processes, and data systems to play nice together and look to users like a seamless business process. Along comes SaaS, which looks relatively better and easier to users on the front end, so they want it, but SaaS misses all of that holistic integration into the web of the business, and it isn’t real easy to add it.

Growing up and into the enterprise will continue to challenge the SaaS providers and the IT staff who are being asked to make this work for the enterprise. It will change the way SaaS vendors look at their business and their offerings.

If a company isn’t ready to bring a SaaS application in house, what should IT look for in an SaaS provider to avoid the problems of trust and reliability you’ve mentioned?

They’ll look at the maturity of the SaaS provider’s infrastructure and operations, the processes, procedures, policies, the quality of the staff. Good near-real-time visibility and reporting will help. That certainly helped our larger enterprise customers get comfortable with StorageNetworks becoming a core part of their information management.

Of course, as we have discussed, many of the largest enterprises never will overcome the trust barrier, and will not see a scale benefit from an outsourced service provider model, so will keep apps in house, even if they look more like SaaS apps to the in-house consumers.

What are the biggest problems IT faces today when it uses a software/hardware service?

Limited control over functionality of that service. If you want something different, you may not be able to as readily get it.

What best practices can you suggest to help IT avoid those problems?

Along with convincing yourself that the provider runs an operation that is worthy of your trust, make sure that the apps and providers you chose offer you enough integration, customization, and control points, and make sure they give you good visibility through near real time reporting and monitoring.

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