Lifted from the Frank Coluccio Technology thread:
What the Establishment Is Saying About SAAS
By Chris Preimesberger
2008-10-28
Thanks to the pervasiveness of broadband, increasing storage capacity, and improvement in networking software and hardware, software as a service is becoming a strategically important alternative in the enterprise, particularly during the current U.S. economic downturn. As SAAS grows into a major marketing, sales and administration tool for enterprise business, it is gathering "establishment" client/server enemies as it disrupts IT system after IT system.
Software as a service has many variations and aliases, which include the terms cloud computing, on-demand applications, grid computing and others.
The idea of subscribing to SAAS for business goes way back to the big-hunk mainframe computers of the 1970s, which companies such as IBM and Amdahl built and subdivided for those services. Later, in the late 1990s, companies that provided services via the Internet or through private networks were called application service providers, which became the forerunner of today's SAAS.
Thanks largely to the availability of broadband I/O bandwidth, increasing storage capacity and improvement in networking software and hardware, SAAS is becoming an increasingly important alternative in the enterprise, especially during the current U.S. economic downturn.
Web-based startup companies that cannot afford to build their own IT infrastructures simply do not have to; they can lease all the bandwidth they need, use open-source software for the application and build on architectural templates in the SAAS cloud without having to put up a lot of capital to do it.
As a result, SAAS continues to grow, slowly but surely, into a major marketing, sales and administration tool for enterprise business.
And, as with any disruptive new technology that threatens the business of established older technologies, negative talk—most often during vendor sales-pitch sessions—invariably materializes, catching the attention of potential customers that might be in the market.
We thought we'd bring some of these conversations into the forefront, so that potential SAAS customers might be prepared for them.
Our main source for this story is Service-now.com CEO Fred Luddy, who has been in the tech/software industry for more than 30 years, starting with the Amdahl mainframe company in the mid-'70s. He started the company after spending 13 years as CTO of Peregrine and Remedy. His marketing director, Matt French, contributed.
Service-now.com, in business since 2005 and claiming several hundred paying customers, provides an ITIL management service suite on demand for a wide range of sectors, including financial services, telcos, transportation, hosted service providers, the media and government agencies. Services include incident/problem/change management, service cataloguing, and knowledge management.
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Seven Myths of SAAS Debunked
By Chris Preimesberger
2008-10-28
As with any disruptive new technology that threatens the business of established older technologies, negative talk about software as a service has elicited plenty of fear, uncertainty, doubt during sales presentations and negotiation sessions. Service-now.com CEO Fred Luddy and marketing director Matt French, who run a SAAS provider, offer their responses to that FUD.
What the Client-Server 'Establishment' is Saying about SAAS
Myth No. 1: SaaS is not secure.
If SAAS were not secure, it would have to be true that the Internet is not secure, Luddy said.
"That means people using banking applications would be using those in an insecure environment," Luddy said. "The truth is, that almost all traffic goes over the Internet backbone, and there are multiple techniques that can be used to secure any sort of transmission over the Internet, mostly encryption."
Myth No. 2: Using SAAS is a risk to compliance.
Co-location-type data centers that host SAAS apps must be SAS 70 Type II-certified data centers, and that satisfies compliance with most all industry regulations.
"Our public data centers that we use [in a co-location environment], in most cases, are probably more secure and have more redundancy than many of our customers' environments," French said.
"This goes not only to application security, but to physical security. We have key-card access (to the data centers), camera surveillance, fire-suppression systems—just a lot of things that our data center provides that even our largest customers don't provide."
Myth No. 3: Over a three-year period, SAAS licensing is more costly than typical client/server application licensing.
That's flat-out invalid, Luddy said. "There's a lot of FUD being put out by older, legacy vendors. Truth is, for our class of application, our SAS license tends to be less cost than their maintenance fees. Straightaway, hard dollar to dollar to the vendor, we are significantly less expensive," Luddy said.
"If you throw in the fact that customers don't have to pay for infrastructure, DR [disaster recovery] strategy, upgrading, backup/restore and other items, SAAS becomes significantly less expensive," Luddy said.
Myth No. 4: SAAS is suited only for small and midsize businesses.
Legacy client/server software companies often claim during sales presentations that SAAS applications have only limited functionality.
"They have had some success with this statement, because Salesforce.com, the poster child for SAAS—well, their initial customers were smaller organizations. A lot of single-individual businesses, too. But there's nothing architecturally restrictive about SAAS that says it has to be for a small company or has to have limited functionality," Luddy said.
"Take a look at all the capabilities of all the social networking [sites]—those are services people are using. Millions, if not hundreds of millions, of people are using those on a daily basis. We sell to companies that have hundreds of thousands of employees, and our service works fine for them."
Myth No. 5: SAAS is offered only in a hosted model.
Wrong. "If a customer decides that it is easier for them 'politically' to want to host the app in their own data center, then we permit that customer to simply download the same exact set of code that we use, place it into their environment, and they then can run it just like any other application," Luddy said.
"It's still SAAS to us, for two reasons: It's still a subscription model, you pay for what you use annually; and we as the provider still are responsible for the upgrades, patches, etc."
Other SAAS providers also offer this option.
Myth No. 6: SAAS applications are not customizable.
"That's reasonably laughable," French said. "We anticipated early on that every one of our customers would have to change our application somewhat significantly. For two reasons: the first one is organizational. To compare McDonald's Corp. with Fidelity Investments with General Motors, for example—they each have extremely different organizational structures. No way are we going to say, 'You'll have to change your organizational structure to meet ours.'
"The second reason: Geographical, organizational or whatever other needs are going to cause companies to have different process flows. We had to actually come up with a more customizable application in our SAAS offering than our competitors do in their client/server versions," Luddy said.
Myth No. 7: Nobody is adopting SAAS.
Adoption of SAAS has been accelerating slowly but surely during the last three years, all the major IT analytical firms have reported.
"If you walked into Morgan Stanley, even two years ago, they were surprised as a company to realize that they had 700 licenses of Salesforce.com. It was all grassroots; people throughout the organization as individuals just decided, 'Hey, I'm going to use this software, since it doesn't have to be installed, and I can just use it,' " Luddy said.
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