Alex Barnett blog : salesforce, Microsoft, SOA

8 Trends in Software as a Service Platforms

alexbarnett — Sun, 13 Jan 2008 17:40:00 GMT

To kick off the new year, I presented to around 40 or 50 members of Utah Technology Council (UTC) last week. The title of the topic they asked me to speak about was "Trends in Software as a Service Platforms". I searched around for some ideas and came across two recent posts predicting trends in SaaS for 2008, one by Phil Wainewright "Eight Reasons SaaS Will Surge in 2008" and Jeff Kaplan's post "Top Ten Reasons Why On-Demand Services in 2008". I decided to borrow liberally from these (thanks Phil and Jeff) and mash these two together (along with a couple of thoughts of my own) and present "8 Trends in Software as a Service Platforms" to an audience made up of CTOs and VPs of engineering and development for software companies in the Utah area.

In preparation for the presentation, my boss (Martin Plaehn) at Bungee Labs suggested I write up my presentation as notes blog them afterward, so here they are.

8 Trends in Software as a Service Platforms

SaaS is just part of the web mega-trend
Mainstream opinion says “Yes” to SaaS
Software vendors stampede into SaaS
All is being virtualized
Explosion of Web APIs
Economic factors favor SaaS
Enterprise and SMB IT embraces SaaS
SaaS platforms proliferate (PaaS)

1. SaaS is just part of the web mega-trend

Most of us have witnessed and many of us have been a part of the transformation in the way goods and services have been digitized, virtualized, delivered and consumed. Software, the data behind that software and the functionality that software provides is no different - software is subject to the very same transformational forces.

Just think about how even a class of product that is natively digital - such as software - has been transformed in the way it is delivered and consumed. For prosperity's sake, I've still got a few of those ZX81 software cassettes stashed away somewhere, gathering dust, looking ever more antiquated with each passing year. How will today's mode of software delivery and use look to us in a few years from now?

The web wants to connect things, and that's interesting. But connecting and interacting with "live" data, information and remote functionality make things more interesting.

At the fundamental level, the web connects things. It connects people to people, businesses to businesses, and people to businesses. Since the early 90's, the web has enabled the connection of so many things to so many other things at an ever accelerating rate, and yet we crave even more connectivity. But we increasingly also want the ability to interact with those things.

And it is the nature of these connected things that have changed since the early internet. The early web was good at connecting to static views of information and accessing limited and rigid functional services, very much a read-only mode. Then, as we learned a) the ability to read more dynamic-type information - at least regularly updated, and b) access richer remote functionality, we created whole new opportunities for ourselves. Next, we grew our ability read and write against dynamic, near real-time data and information and to program against remote functionality to create a new class of web applications leveraging those capabilities - and hence a new order of business and experiential opportunities have emerged. Some label this as "Web 2.0".

At its essence, it is the "liveness" of these real-time read-write data, information and functional sources available as "always on" services and the increasing ease to connect to, interact with - specifically change those resources available as live, programmable services that allows us to create new value out of those resources, opening up brand new market opportunities for businesses and the compelling, rich "live" end-user experiences of tomorrow.

2. Mainstream opinion says “Yes” to SaaS

Not surprisingly, Wall Street loves the the predictability of subscription services. It's good for cash flow, forecasting and business planning.

The venture firms also relish the opportunities that are opening up in a software as services-oriented economy. The ability to circumnavigate the incumbent software players with new disruptive technologies and propositions that are significantly easier to try and access for prospective customers compared to traditional software evaluation, along with usage and subscription-based business models verses the old licensing model makes investing in services-based software companies very compelling propositions from the venture firms' point of view. We should also see healthy M&A activity based on these similar opportunities in the coming year.

And then there's the trend for offshore / IT business process outsourcing. These providers will surely get in the game and make their plays through investments in and acquisitions of SaaS vendors that align well with their current core businesses.

Add to that the excitement we're reading about the SaaS space from the IT Analysts, journalists and bloggers, plus the new book by Nick Carr (author of “IT Doesn’t Matter”) - delivered by Amazon to me last week: “The Big Switch: Rewiring the World, from Edison to Google”. I think there's little doubt Carr's excellent analysis of the computing industry as an analogy to the electricity industry's shift to a utility model will be on business bestseller list for much of 2008. His messages resonates with corporate executives and end-users agree with him:

IT is a needless hassle,
it should be as easy as electricity and
be as reliable as a utility

3. Software vendors stampede into SaaS

The Big Software Players are following the early SaaS successes

CRM as a case in point. If you've been following the CRM software market, you'll know about the noises Oracle-Siebel, SAP and Microsoft started to make in the 2007 about what they are are lining up for the 2008 in terms of CRM as a service. Their efforts to emulate Salesforce.com's success delivering CRM as SaaS will be key strategic bets from the incumbents' point of view - and loud, price and functionally competitive propositions from the point of view of their existing and prospective customers.

CRM is just one of the multiple horizontal solution categories to transform from on-premise with traditional licensing model to a service-based delivery and subscription-based revenue model. ERP, supply chain, e-commerce, HR and many more...the horizontal solution list goes on. And then there are the vertical solution players...

Here's another data point to consider regarding the move by traditional software vendors to a SaaS model:

“15-20% of application ISVs have already either begun new skunk works initiatives or gained access to SaaS assets and development experience through M&A activity”
(Source: Key Trends in SaaS: 2008 and Beyond, Saugatuck Technology)

4. All is being virtualized

Virtualization is a technology trend.

Virtualization enables hardware as a service. The demand for virtual machines met by hypervisor software (VMWare, Xen, Hyper-V) and the success of Amazon's Elastic Compute Cloud (EC2) in the last couple of years point to a continuation of further virtualization of applications and hardware. Virtualization is accelerating the move from traditional on-premise software to services.

Virtualization is a business trend.

We continue to become a mobile workforce. The younger entrants into the workforce in service-oriented economies expect and want to be always connected. It's very hard work, if not impossible to get your traditional on-premise applications and centralized servers sitting behind a firewall to serve today's mobile workers. SaaS and managed services meet the needs square on.

5. The explosion of Web APIs is upon us

According to ProgrammableWeb.com, there are 559 commercial and public APIs available today, most of these are new and there are plenty more to come. How many will we see go live this year? And how many private web APIs are there and will be developed and consumed in the coming year?

Data from ProgrammableWeb.com

6. Economic factors favor SaaS

On-premise software requires upfront capital investments
To lower costs, many companies hold back on their capital investments to mitigate their risks, especially in recessions
Adopting on-demand services on a pay-as-you-go basis will be a perfect sourcing strategy for businesses seeking greater cost-controls and flexibility – the utility model

All well and good, but the real economic value of SaaS is that fact that it unleashes new value of previously isolated data silos and functionality.

7. Enterprise and SMB embraces SaaS

When it comes to IT, who doesn't like

Low-maintenance?
Low cost?
Low-resource profile?

IT and business folk like these things, and externally delivered SaaS applications deliver these benefits.

8. SaaS platforms proliferate (PaaS)

The more mainstream SaaS becomes the more the large vendors will be forced to offer effective platforms for ISVs, enterprises and SMBs.

If the move by the software vendors from traditional on-premise software to a services model is to be successful, they will need to provide programmable interfaces - not just end-user interfaces - to their services for their customers. Customers need and want the ability to access, intergrate and create new value out of live, programmable data, information and functionality living in the cloud. And in turn these same customers will want their custom-developed composite applications and integrated data available as programmable services - yet more APIs.

Customers want to unleash new value of previously isolated data silos and functionality through the development of their own applications programmed against those resources. And in turn these same customers will want their own custom-developed composite applications and newly integrated data available as end-user interfaces and as programmable services - yet more APIs. These customer needs will drive the software market to provide platforms to provide businesses and developers with with end-to-end:

programmable services and data integration
application development, testing and collaboration tools
deployment and scalable delivery

...all as a service with a utility model.

(hey...I needed to mentioned Bungee Connect just the once ;-).

2008 will mark a the proliferation of such offerings as "platforms as services" (or PaaS) through 2009, where then the consolidation will begin. Interesting SaaS and PaaS times ahead.

Update 2/20/2008: see "Time to Define "Platform as as Service" (PaaS)

The presentation seemed to go down pretty well and we had lots of interesting discussion throughtout. One of the topics we discussed was data security in a SaaS world. Don Kleinschnitz (VP, Development at Symantec) followed up with a mail linking to his blog covering Security 2.0 topics.

Again - thanks to Phil Wainewright and Jeff Kaplan for their post and to Martin for suggesting I blog this.

PaaS, more than SaaS

alexbarnett — Wed, 18 Jul 2007 15:01:00 GMT

In May 2007 I attended Salesforce.com developer conference where Salesforce SOA was announced as an add-on to the Apex platform. Industry analysts focusing on the area of SaaS considered the move as significant, but not surprising (see Phil Wainewright's take on the new in May 2007 as an example).

The game is moving on. PaaS, or "Platform as a Service" could be the acronym that defines a new web-oriented model where more than just specific vertical "services" are delivered as SaaS (e.g CRM, ERP, etc).

PaaS speaks to a more generalized services platform concept. If the "web as a platform" is the notion of multiple services in the cloud, then where does the "composition" happen? There are several Mashup design patterns to chose from. These patterns are along a continuum - from pure browser presentation mashups to client-side mashups to server-side services and data mashups (composite applications). If architecturally speaking you land in the composite applications pattern for delivering your SaaS apps, then this is where PaaS comes in.

This last week there is further evidence that Microsoft and Salesforce want to benefit from the opportunity in the power of PaaS. From SaaS out, PaaS in, by Angela Eager at CBRonline.com: Sub heading is:

"The Salesforce.com Summer '07 release is all about the platform, with software-as-a-service evolving to platform-as-a-service, a move that will antagonize and incentivize big league players Microsoft, SAP, and Oracle."

Angela's analysis includes a comparison to Microsoft's own forthcoming offering, including "Titan"

"Salesforce.com might be the first to deliver an on-demand platform but it certainly will not be the only one, and the on-demand specialist is starting to feel Microsoft's breath.

Releasing snippets of information about the forthcoming Titan offering at its partner conference last week, Microsoft chief Steve Ballmer said Titan referred to a CRM application-development platform on which developers would be able to build customized applications that could run on their servers or on Microsoft's own servers.
Although the Microsoft offering is not yet available, and even after launch it will take time for some of the planned functionality to be available such as running custom user applications within the Microsoft data center, it will be a direct challenge to Salesforce.com. With similar platform offerings, users will have a choice for the first time, which has the potential to cut into Salesforce.com's growth."

Maybe "Titan" is the news I was looking for last week, but we're seeing hints at more than just Dynamics APIs as SaaS from Microsoft. There is still no real hard news on this today, but watch out for posts by the likes of Phil Richardson, a Microsoft Program manager in the Dynamics team (and my ex-neighbor in Redmond) like this where Phil hints:

"Soon (can't say exactly when) I'll be starting to blog about Titan features....Once marketing gives the go-ahead you can expect to see boatloads of Titan content on this blog. I'll be focusing primarily on features which are targeted at VARs & ISVs - but I'll make sure to throw in some end user features."

And then Phil hints a little more this week...

"Some vendors have the 'heads in the sand' and refuse to talk services seriously (with no offering or a token offering). Other vendors only offer SaaS and trash talk those who aren't pure services players. There is no question that our industry is moving towards services and Microsoft's CRM has a strategy which is sensitive towards these industry changes. As we announced: we are using our Titan Project to create a Microsoft Hosted version, a Partner Hosted version and an On-Premise version. I use the term 'version' loosely as the final number of SKUs is up to marketing. I believe we are entering an time in the industry when customers will start moving away from self hosting 'non-unique' business functions. Anything which can be achieved by configuring on the shelf apps (like Microsoft CRM) will eventually move to hosted services (if I knew exactly when 'eventually' was I'd be a rich man). Our strategy understands that customers and partners will find themselves in varying degrees along the on-premise to hosted spectrum. Some will want everything 'in the cloud' and others will want everyone their own datacenters. Some might want to prototype in the cloud and move to on-premise etc etc. I believe vendors need to interpret these changing times appropriately for their business."

(hey Phil....trackbacks? comments? common dude!)

My take is that Phil hints to more generalized services platform concept from Microsoft. PaaS, more than SaaS.

Delivering on PaaS is hard though. Yesterday, Dan Farber's post Salesforce.com transitions to platform as a service highlighted one of the greatest challenges in this PaaS space - uptime at scale:

"Collins said that salesforce.com consistently provides above 99.9 percent availability. “Three nines is the best quality of service you can get today from any on demand player,” he said, claiming that the best deployments of Siebel and Oracle are closer to 96- to 97-percent available.
In any case, as salesforce.com scales up the enterprise and companies have more dependence than for just CRM on its platform, three nines, which doesn’t include times when the service is up but suffers performance problems, won’t be sufficient for customers who can’t afford 8.76 hours of downtime a year."

Uptime is just a small (but critical) component of the whole PaaS vision. Developer tools for PaaS is another kettle of fish (see Dana Gardner's post on Software Development and Deployment as a Service, or "SDDS" - on this topic). It's how Bungee Labs sees the future. But that's for another post.

And of Dynamics Live CRM SaaS APIs?

alexbarnett — Wed, 11 Jul 2007 04:18:00 GMT

Todd Bishop reported today of Microsoft's intended entrance next year into the B2B SaaS market with its announcement at the annual Worldwide Partner Conference in Denver, providing details on pricing and partner revenue-share plans for a hosted service version of Microsoft Dynamics Live CRM:

"Businesses use CRM programs to handle sales, service and other customer interactions. The new "Live" CRM option, to be offered by Microsoft as an online service, is part of its broader effort to expand beyond traditional software licensing into subscription- and advertising-based offerings.

...Microsoft announced plans for a subscription rate of $44 per user each month for the professional version of the new Microsoft Dynamics Live CRM, and $59 for the enterprise version.

Salesforce.com lists prices of $65 for the professional version of its Web-based customer relationship management service, and $125 for the enterprise version. List prices in the online CRM market are commonly in the ballpark of $70 to $100 per user each month, said Liz Herbert, a Forrester Research analyst. "

Phil Wainewright commented on the catching up Microsoft needs to do in this SaaS / CRM space (something I've commented on previously), hence the lower price-point when compared to Salesforce.

"Undercutting Salesforce.com is an obvious ploy for Microsoft to attempt with its CRM Live product, so the pricing it announced today shouldn’t come as any big surprise. Salesforce.com has always priced at the high end of what it could get away with, and it’s benefitted from five years of being allowed to get away with it, plowing the proceeds into an astonishing sales and marketing drive that’s blasted revenues past the half-billion dollar a year mark."

(screenshots here)

Although Microsoft will be offering Dynamics Live CRM at no charge during an early access beta starting this year, it is unlikely they will go "live" until the second half of 2008 (I'm speculating), presumably once the "Windows Live Data Centres" are ready to do so...a brand we are promised we'll hear a lot more of in the future.

Salesforce.com responded. In a phone call with Todd Bishop, VP of Corporate Strategy, Bruce Francis, took a typically aggressive tone (that is, typical of Salesforce.com, not Bruce) in reacting to the news:

"What it looks like is that Microsoft is just marking down an inferior product to what customers are actually paying right now. Also, one thing that I haven't seen is the url where I can sign up for a 30-day trial. ... I know a great multi-tenant on-demand service when I see one, and I see more of them every day. ... We could talk for hours about all the great on-demand services that are out there that I can sign up and use. Where is Microsoft? Microsoft has a price list, not a product."

But where is the news of Dynamics Live CRM web / SaaS APIs? No mention of these anywhere that I've seen, but if Microsoft wants to take on Salesforce.com they'll need a strong story here - the latter has a mature programmable surface today with a fairly healthy ecosystem of developers.

It's one thing to have on-premises software that can be extended and integrated with other software and services through SOAP APIs behind your firewall (Dynamics has a healthy story in this department today), but it is quite another (increasingly necessary) thing to provide APIs as part of a hosted SaaS service. I would have thought the provisioning of SaaS APIs would have been a central component of Microsoft's messaging today so am a little surprised by its omission.