I can think of many reasons to be at SaaS University in Washington, DC, July 20-22, beyond my session and Scio´s workshop. But I want to be clear: The sessions at SaaS University are always changing, always relevant to developing SaaS products and successful SaaS businesses. It is the only venue available with a focus on helping SaaS vendors navigate a complex business model.

This time I have the honor to be presenting a session on the second day titled: Increase Your Bottom Line Value with Multi-Tenancy.  Here is the session summary from the University agenda:

There is a lot of debate about multi-tenancy.  Most of us understand its value from a technical point of view, but what can actually translate to our bottom line?  How does it change what we are able to do to increase operational efficiency and customer retention?

Multi-tenancy is not a magic bullet, despite what you may have heard. Implementing your SaaS application with a multi-tenant architecture offers great returns, BUT ONLY if you understand how to leverage it along with metrics, operational automation, your ecosystem, and the network effect of your customer base – effectively.

This session will answer questions concerning the value of:

• Different architectures for implementing multi-tenancy and maintaining flexibility.
• Reliability, scalability, maintenance, and product evolution to your clients.
• Multi-tenancy in operations across your product organization.
• Implementing metrics in a multi-tenant application.
• Your customer and user network, delivery network and ecosystem under multi-tenancy.
• Methods of implementing multi-tenancy without breaking the bank or slowing product release

This session is strategic for C Level executives and product managers planning, implementing, or enhancing a SaaS offering. Participants will come away with a clear understanding of how they can leverage multi-tenancy at every level of their service and increase their bottom line potential.

This session is replacing a similarly titled session by planned Lincoln Murphy because of a scheduling conflict he has encountered. I want to thank him for his recommendation that I take his slot. I must say, although I want to keep the same broad focus for this session, my approach to this subject is different than Lincoln´s. My background with multi-tenancy comes from planning SaaS products with Scio´s customers and many years of working with companies on Internet-based business models.

In itself, multi-tenant architecture is not new.  The same could be said of the SaaS business model. What is still new is the broad market attention to on-demand services and the opportunities that virtualized infrastructure gives to business. The knowledge of how to leverage architecture and technical choices to impact product features, customer value and operational effectiveness is what is lacking in my experience. This is what I will lead discussions on in my session at SaaS University.

In addition, if you aren´t aware of it, SaaS University has a third day of full day workshops that provide a ¨deep dive¨on specific subjects. Our own session is Charting Your Course to SaaS, which will help it´s participants navigate all the choices they face in developing a SaaS product while they develop a road map that can get them to market and positive cash flow sooner.  I can also personally recommend Jim Geisman´s Right Pricing Your SaaS System: Beyond the Basics – Advanced Workshop. Jim and I had the opportunity recently to give a workshop together and I greatly enjoyed the experience, and I know our audience did also. Ideally, product teams should consider sending representatives to both workshops because they are complimentary points of view that are very important to understand.

So, with that background, here is the overview of our one day session at SaaS University for July 22, 2010:

Charting Your Course to SaaS – SaaS University, Washington DC, May 22

This is the third time we’ve offered this comprehensive workshop on SaaS and it continues to evolve as we respond to the needs of our participants. Following our joint workshop with Jim Geisman of Software Pricing Partners, we’ve continued to tighten the content and for SaaS University, will offer a more interactive format for this workshop, especially during the afternoon. The aim is to keep it small enough to allow everyone a chance to move the discussion toward the issues that interest them most.  It remains however, the only workshop that covers the business, operational and development issues that are critical to success in SaaS.

Companies that can benefit by attending this workshop:

• A new venture or as an ISV with on-premise products considering developing a SaaS offering
• A service company with significant vertical expertise than could be delivered and monetized in a SaaS model.
• An existing SaaS provider who made choices opportunistically that now constrain growth and cash flow.
• A SaaS entrepreneur with limited funding that needs to achieve positive cash flow early with products that evolve with the market.

Company challenges this workshop can help overcome:

• Building out a suite of products but are unsure of the strategies, metrics, and operational models needed to grow.
• Developing a framework for sorting out technical and strategic choices required to move to the SaaS business model.
• Facing significant operational problems including efficiency while keeping churn under control in an existing SaaS product.
• Developing a product roadmap and unsure of what can be accomplished and timeframes

Topics to be Covered:

• How is a SaaS Product and Business Different?
• Reference Framework for Creating Your Roadmap
• Making Strategic Development Choices
• Operating A SaaS Business by the Metrics
• 10 Ways to Fail at SaaS
• Applying Lessons Learned to Your Issues

Who Should Attend?

This workshop and seminar is important for anyone considering a SaaS product, in the process of developing a product or offering a product that hasn’t reached its potential, including: Entrepreneurs, CXO’s, product managers and key executives in startups, vendors moving to SaaS or existing SaaS companies.

About Your “Professor”

Mike Dunham, Vice President, Service Engineering for Scio Consulting, has over 25 years background in the development and introduction of new technology working with startups, government and the largest enterprise software companies. He has worked with Scio for five years, regularly authors articles on SaaS and the software industry and hosts a series of podcasts on SaaS best practices. Mike leads Scio’s professional services helping companies develop and bring to market new SaaS offerings.

The workshop costs $695, but you can get an Early Bird Price of $495 when you combine it with your SaaS University registration - total package price of $1290. As a way to bring together a great amount of information in a short period of time, the combined package is a great opportunity. As we get closer to the event, I’ll expand on the agenda, but this is a great time to start planning and get your team together to attend SaaS University in Washington, DC!  I hope to see you there…

Last week our team, like lots of other members of the SaaS community, attended the OpSource/SIIA SaaS Summit 2010 – titled, “All About the Cloud.”  We had a busy and meeting-filled week, as I’m sure many did.

Because SIIA and OpSource gave this conference jointly – it was somewhat different than the OpSource led conferences we have attended in the past. Instead of being an industry conference tilted towards a single vendor’s customer base and prospects, it was much broader, bringing in a wide array of SaaS vendors and industry providers.  Since OpSource has been an industry leader for some time, I wouldn’t attribute the change entirely to the influence of SIIA. More likely it was the combination of the two constituencies along with a bit of a push from the uptick in the economy. Whatever it was, it was one of the biggest groups I’ve seen for SaaS/Cloud conferences in a few years.

It was perhaps most surprising to see the “maturity” of the industry in our guests. Most of the vendors were not from start-ups or ISVs moving to SaaS – instead they were established SaaS vendors – regardless of the lifecycle stage of their product offerings.  This shifted the conversations we had at our booth from “what does it take to build a SaaS product?” to “how do I scale my architecture?” or “how can I extend my offering to bring new services to my customers?”

This is a good thing to see, but I wish the presentations had been more geared to the audience and less to information about vendor’s products, but it could be said equally that no one knew for sure how the attendance would balance out long enough in advance to plan for it. I think that will even out next year, now that there is some history in the combined event.

Jim Geisman and I gave a workshop following the summit that was quite successful as we “filled the house” with as many guests as we could comfortably engage with. It was a wide-ranging group with representatives from some of the largest software vendors in the market to some new entrants from Latin America.  If there was a common theme among them it was the need to understand the options and structure of product development and pricing for SaaS. The folks from DreamSimplicy were good enough to feature a video of our workshop on their website.

There is certainly a void when it comes to clear information that isn’t filtered by a supplier’s agenda. We all do it – but there are also some who push their value above everything else. And, unfortunately, there are several instant pundits in the industry who really have less background than opinions.  From that point of view, I am proud to be associated with someone like Jim Geisman for this workshop because his background shows in the depth he can bring to the subject of pricing.  To say you can’t “afford to get your pricing wrong” may be a bit of an overstatement – companies change their pricing and survive – but it can certainly be as much of a market killer as developing a product that misses the mark.

In no particular order then – some notes and learnings from the Summit:

• Pick your strategy, play through, check your metrics, adjust and play again. I saw several companies who were trying multiple strategies for product, pricing, marketing, etc – simultaneously.  The result is – every attempt is a one-off with no way to measure one against the other logically or if the strategy might or might work if tried more than once.  The people trying to execute on all these ideas are playing a difficult game. Which idea really has legs? Which one do we really want to go with? And by the way – what do their customers think of this apparent lack of single purpose?  It’s difficult to navigate no matter where you stand.
• Look for your weak spots, eliminate them or optimize as well as possible. I heard many stories of early decisions that will eventually put a SaaS company in a no win situation.  Your infrastructure maintenance costs are eating into your cash flow at an ever increasing rate as you grow. Or – perhaps you want to change your pricing or offer a discount and it seems like the only way to do it is take payments manually and adjust the books, unless you want to redevelop your pricing and billing system…. It is easy to say you might have seen these things coming, but that’s Monday morning quarterback speak.  It sounds too simple, but there is help in the Theory of Constraints: First, optimize the situation as well as possible, looking for ways to manage the issue at best you can. Don’t stop there, leverage the stop gap only as long as needed to develop a true solution to the problem.  If you’re losing opportunities or burning cash in SaaS, you’re killing yourself, slowly but certainly.
• If you have an opportunity to speak to your peers and prospects, give them value. This sounds a little simplistic, but it’s worth a thought.  We need to take every opportunity we can to expose our products to new customers, especially in this tight economy, but you can’t spend the time you’ve been given with a blatant sales pitch.  The audience paid to sit in front of you.  What can you give them for their attention? Knowledge. What do you know? What have you seen? What experience do you have you can share? If that is the sum total of your talk, it will be remembered. If it is embedded in your new product announcement, it is more likely people will hear it.  To many of the presentations at conferences today are symptoms of our economy.  Our audience is looking for positive news and knowledge, just like we are.
• SaaS is a business model – not a technology. I still see far to many attempts to sell SaaS as a technology and the same is true when we switch to using “cloud” as a substitute term.  There are technical advances that are becoming available because of the growing SaaS/Cloud market, but they are just enhancements of what otherwise is a service-led, cash flow based, business model.  Companies in the field need to be successful at reaching an adequate size market with a positive cash flow and technology can only assist in achieving that goal.  Understanding the business of online services and planning to scale effectively is critical to success.

I hope to get more chances this year to get out and be in the field and at conferences to hear and share more ideas and experience.  It is a great opportunity to learn more about what is happening “inside” the business of SaaS.

It is that time of year again – when analysts and writers of all stripes put their bets on coming trends for the new year. There’s some interesting stuff in them – check the links. But, since our predictions last year were right on the money – I expect nothing less this year.

Of course, I do have to say if you didn’t read our prediction last year, it was about what would appear on the blog in 2009. Hardly something to crow about since I knew then what I know now – this is our field and it will continue to be our focus. But… this year, while not particularly emboldened by such shallow success – I am going to stick my neck out – a little.  Over the past year, despite a dismal international economy, we did begin to see some trends that carry enough weight that we at Scio will be refocusing our services in the new year.  Nothing too dramatic really, but moving more towards the emerging best practices in the industry.

So – that said – here’s our:

Top 10 Trends for SaaS and Cloud Services in 2010

1. SaaS will continue to grow in acceptance and prevalence in the marketplace but – the term itself will fade in favor of “Cloud (insert your term).” There is no end of analysts predicting the continued growth in 2010 of SaaS as a business model for software vendors and a positive direction for software users. That part of the prediction is about as safe as predicting rain will come to Seattle sometime next year. But – we’re not going to call it SaaS much anymore?  Is all that marketing ink going to disappear? No. But the truth is we get tired of hearing the same old tune everyday and it starts to become little more than background hummmm.  Everything “Cloud” is ascending and marketing loves it because it is by definition a nebulous, foggy term that can be floated for nearly any purpose. I could just as easily say the same thing about the time worn acronym Service Oriented Architecture (SOA). At the heart of all well-designed services is a SOA strategy – but we don’t really talk about it explicitly. Marketing has hit that nail for over 10 years and still very few know what we’re talking about.  The same is true of SaaS. Discuss the term and we get tied up in preconceived arguments about security, lock-in, lifetime costs, and multi-tenancy without discussing the business case for vendors and users. Next year we’ll be shedding those arguments and just selling mature services without acronyms. And to add one more log to the fire that will lower the prominence of the term “Software as a Service” – vendors of virtualized infrastructure have already hit commodity pricing thanks to Microsoft’s Azure and Amazon’s offering – the only place for them to go is to add application suites to their “cloud.”

2. Real business value in SaaS will continue to improve, be better understood and measured more explicitly. There is a growing understanding of the difference between an ASP implementation of a standard premise-based application and a service that designed for the delivery medium that is embodied in SaaS. It is much more than technology or an offset of costs for infrastructure and resources.  That said, the metrics on both the vendor side and end-user side of the SaaS equation need more clarity and uniform acceptance. As a buyer of a SaaS offering, I shouldn’t care if it has been adopted by hundreds or millions of users.  What matters is who is using it successfully and what is their context? If I am going to base a critical part of my business on a SaaS offering, I need to understand if the lifetime value of customers is substantially greater than the cost of customer acquisition. I need to have confidence that the adoption of the service is higher than abandonment. I need to know the service will have enough value to continue. Having that confidence is a product of a conversation between the SaaS vendor and their customers/end-users.  It takes some real thinking on the part of the vendor to engage in that level of collaboration – but we will continue to see the most successful services providing a model of this behavior and inspire others to do likewise.

3. Service ecosystems will rise. Best case SaaS should be designed to meet the market embodied in the Long Tail. As we and others have said many times, the economics of SaaS and efficiencies of modern development cannot really be leveraged without a good-sized market. You can often reach sufficient market size by targeting your service to the second and third tier markets in a vertical but the time required to reach positive cash flow in SaaS can still cause many problems. Whether a specific service can be sold to a wider market or not then – it is wise to consider an ecosystem approach and I believe many will in the coming year. Salesforce and Google both exploit their ecosystems to bring a broad range of services together on their platforms and as was mentioned in our first point, cloud infrastructure vendors are heading in the same direction. In verticals, I can imagine a focused service teaming up with a general operations package for instance – especially one that could be pre-configured and integrated to the vertical application providing a “suite” for users. This can give users the benefits of single sign-on, data sharing, perhaps a lower total cost (assuming the vendors recognize the value in packaging joint services) and a “desktop” for most tasks they do everyday.  In fact, in the long run, I don’t expect to see many “stand alone” services – it just doesn’t make sense for the users or the vendors. We will see a lot more applications “joining forces” strategically or being acquired in the next year by integrating, combining user data pools or through “Mash-Ups.”

4. New services will focus less on “doing it all from day one” and more on their roadmap. In the “brave new era” of SaaS, one of the big impediments of developing a service was all the decisions you had to make and all the business operational aspects you had to have a handle on to arrive at requirements and start development. Many entrepreneurs felt they were being asked to either start with the equivalent of the original Wright Flyer or with a development burden so large they could never reach a positive cash flow with a reasonable investment.  Now however, there is a wide array of mature, tested services that can be easily integrated into a service product to provide standard approaches to operations, integration, sales, and many other business and technical requirements. With an extensible architecture, there is a great value in picking “best of breed” services to do the “dirty work” while focusing custom development work efficiently  on the real value proposition for a service. The time to market and up front investment decrease dramatically and the risk of running out of cash on a reasonable investment is contained. As none other than one of the leading investment groups has proclaimed, “Less is more!” And rather than worry about “lock in” – thoughtful entrepreneurs will realize at the point in the road where the cost of the integrated services begins to be a part of overhead that is worth investing some development time in – current development practices can allow extensions to the application without an expensive rewrite.

5. Integration requirements will drive standards for service-based communication and interaction. If cloud “ecosystems” are going to rise, if online services are really going to dominate the market for innovative products in the near term, standards for integration and service-to-service interaction need to be recognized and grow dramatically. Despite the continuing whines of a few holdouts – no serious vendor of online services should be considering parallel deployments – both on site and across the Internet. Developing a product that can address both markets eventually becomes “SoSaaS” – a product so hobbled by its split identity it cannot truly leverage the value of either delivery model. Instead, with an extensible Service-Oriented Architecture (SOA), open APIs and standard integration tools, online services will offer ways to leverage local data, applications, and other online services in ways that are in the end much cheaper and more reliable than traditional custom integration services.  This doesn’t mean SaaS vendors won’t offer on-site applications – but in many cases those applications will be hubs for addressing local integration needs and compliance issues.

6. End-user clients and platforms will continue to evolve and increase in their importance and differentiation. We’ve all recognized for a while that standard PCs and “browsers” have many deficiencies in addressing the needs of a growing market for on-demand services. Over the past year, we’ve seen the release of ever more capable “netbooks,” smart phones, and rumors abound that Apple will introduce a market changing tablet in the coming year. Regardless of what Apple does or doesn’t do – it is plain that an increasingly mature field of online services  means that fewer users will require the same platform they have used for decades. The coming products will certainly be more mobile, more connected, and less tethered to common operating systems.With the rise of applications like Google Chrome, the Chrome OS, Android, frameworks like Flex, and the increasing number of “app stores” for the various smartphone OS platforms, it doesn’t appear likely that the growth will slow down any time in the near future.  As is already happening – 2010 will be a year of increasing market fragmentation as each camp heads in its own direction. I don’t expect consolidation and standardization to begin for at least another two years. For online services this means more opportunities to reach specific markets, but it also requires a level of user experience (UX) and user interface (UI) expertise that few developers have had to address so far. In the short run, the best path is going to be a roadmap of planned deployments to different platforms, starting with the one that is most “ubiquitous” in the vendor’s target market. In the long run, we can expect to see more development environments address the most prevalent options – but there is going to have to be more consolidation for that to be truly effective.

7. Customer collaboration will become a more integrated and critical part of product management and business operations. Just like “SaaS” and “Cloud,” “Social Media” has been so over-hyped in the last year that it has become nearly useless. Some see any mention of the subject as a red flag. “A time-wasting, spam-heavy, productivity killer,” they say. Others have found social media to be a strong implementation of “opt-in” marketing (count me among them). Regardless of which side you are on, I think we can all agree that online services require end-user and customer collaboration to be successful. We’re seeing product management, marketing, support – all aspects of SaaS product operations move toward closer collaboration with their user base and I expect it to continue in the new year and to become accepted as “standard practice” among winners in the field.  To that end, integration of collaboration tools and services into the applications themselves as part of the operations side will grow a great deal in the coming year.

8. Agile will continue to grow in acceptance and will become the dominant approach for both development and business operations “in the cloud.” To understand this prediction, don’t confuse yourself with the “Agile vs Waterfall” software development debate that never seems to go away. Please also drop the religious approach to the Agile Manifesto that some have adopted. Think instead of the implications of a more dynamic, competitive, integrated, and collaborative delivery platform and try to imagine doing business as usual. I don’t believe you can. The philosophy of Agile, rather than the methodology specifically, is a fit for online services that is hard to ignore. Tie that to a product development team that is using Agile methodologies and delivering a nice, steady drip of product improvements to your customers and you really don’t have any choice.  You either align with success or get run over. This means too, however, that ISVs with existing product lines have to think about how they will handle change. Organizational change is never easy and many have decided to basically put the new product into a separate product group. It isn’t the best strategy for the long run, but it may be the only way some vendors can manage the change.

9. There will be a growing awareness of the requirements and responsibilities implied by “mature services.” Let’s be honest – most companies market ahead of capability.  Whether it is to “test the waters” or jump start sales, it leads to a lot of hype and fuzzy specifications that customers see through quite easily.  The fact is though that as online services become more accepted and critcal to their customers, they will have to be more reliable, secure and scaleable.  Some of this falls on the vendor to insure their operations and platform are truly “enterprise-class” but there are a growing number of options that allow vendors to adopt best-of-breed environments and platforms on a “pay as you go ” utility model and avoid the high cost of upfront investment. Taking advantage of them means more consideration of Service Level Agreements (SLAs) and open service histories, but these are emerging and they will continue to be key in contract negotiations in the coming year. We still see people new to the field looking for an infrastructure provider before they start development on a product, but with more standardization and more recognition of the needs of mature services – I believe we will see more understanding that you can and probably will both migrate among providers and have more than one at a time during the lifecycle of a online service.

10. SaaS vendors will stop trying to sell split versions. Ok, this is me, beating a dead horse. But really – if even half of the predictions in this list come true (and I don’t think it is even remotely a stretch to imagine it) – you can’t offer products that will both install locally and as an online service off of one code base and not cut off most of the value your SaaS version could deliver. That doesn’t mean you won’t continue selling to your installed base if you have one – but it does mean you can’t sell the same product you’ve sold to your installed base as an online service. It also means you will probably have to put the online service on its own path to success – not tied to your existing customer base. In time, if your online service is as successful as it should be – you will probably be able to drop or sell off the on premise version – but that is a consideration for the roadmap. So, let’s all hope for the best outcome and stop trying to reinvent the past.

Ok – that’s it.  What do you think? What’s on your list? What did I miss? I went way over my usual allotment for space with this one – but it seemed to need it and I didn’t want to split it up so late in the year.

Here’s to Success for Everyone in the NEW YEAR from the Scio Team!

Although in reality, business services provided through the Internet are nothing new, the number and breadth of services now available is certainly worthy of note. As a Gartner report recently opined – we are most likely at the peak of the “hype cycle” which in “Gartner speak” leads to the “slope of enlightenment” and eventually to mainstream adoption in the enterprise.

But as asked by Mikael Blaisdell in our LinkedIn Group, Haut Tech Conversations -

“Service certainly appears to be the key element, at least in the name of the business model — but to what degree is that actually manifested in the strategy, organizational structure and behavior of SaaS companies?”

In response to his comment – I would only expand that SaaS vendors are well named but Cloud-based and “on-demand” services in general should also be counted in that basic business question. Is the “Service” we’re offering actually part of the product itself? is it something loosely bolted on – a CRM afterthought? Do we understand the real paradigm shift that is taking hold and we are a part of when we offer an online service? or are we just putting our software up for a subscription sale without a thought as to how the relationship with our end users has changed in the process?

This is more than just a passing question. It is key in the transition to a service-based business model both for individual vendors and for the industry as a whole. To be successful as a service business, every part of the company needs to be examined for strategic alignment and tactical responsiveness. Knowing where to start and where you are going is critical. Fully considered, responsive and properly executed service is the most important element in customer retention. Customer retention in turn is what keeps the cash flow on target in a subscription-based business model. No matter how much hype your marketing department is able to generate, at the end of the day it is the value of the services the subscription delivers that keeps the customer coming back.

So – here’s the rub: We’re moving into a service-based business model when all our recent industry experience is more straight-forward vendor to purchasing relationships. As Steve Plunkett, CTO of Servitizer recently pointed out in his two part blog series – this is an exercise in going back where the industry came from. Companies like IBM and HP made their name from providing the infrastructure, hardware and support, bundled as services, to enterprises before the ubiquitous personal computer and commodity servers entered the picture. When personal computing became the reality, those service providers transitioned to being hardware and software vendors – divesting themselves of accumulated knowledge, services and consultants along the way. Now they face an army of new entrants in the field that are quickly “eating their lunch” as they try to transition back to being service-led. Just like I mentioned at the individual business level – every part of the industry is having to rethink their roles – Software vendors, infrastructure providers, VARs, and outsourcing organizations all face tectonic shifts in their business models and customer relationships.

I’ve been in the business long enough and in the right areas to see the transition and in some cases to have made a little money helping companies get from service to simple vendor relationships and from being an organization that was dependent on outside services to one that could operate entirely on an internal resources. We’ve gone full circle. We’re back to helping companies and vendors cross to service-led models.

But – quite honestly I don’t have all the answers. Regardless of the fact that we are circling back, there are still a lot of differences both in customer expectations and the capabilities services can offer. So comes to this: The first in our series of Haut Tech Conversations and best practice blog entries around the issues and technologies involved in running a SaaS, Cloud or on-demand service.

This is the kick off blog post. In a real way I started this post by opening a Linkedin Group called Haut Tech Conversations. I invited a lot of my friends in the industry and am continuing to plow the field for more. I posted some starting points as discussions and the links from the first paragraphs of this entry come from the conversations that grew out of those. I didn’t write this alone and I don’t intend to carry the ball alone either.

The name for our LinkedIn group is not a whim. We’ve set up a podcast feed on BlogTalkRadio that is not coincidentally also called Haut Tech Conversations. The real value of BlogTalkRadio is that we can host a podcast that can be streamed live, with guests, panelists and listeners chiming in. We can release it via iTunes so people who could not join us live can download the podcast and listen at their leisure.

As the title of this article proposes, our first subject is the core of the exploding Internet services market broadly – Services as a Product. Our guest will be Steve Plunkett, CTO of Servitizer. whose core business is helping companies that are moving into this market manage their service-based products. We will also have three panel members – Luis Aburto, CEO of Scio Consulting, Mikael Blaisdell of The HotLine Magazine, and Lincoln Murphy of 16 Ventures. As the name suggests – this is not intended to be a webinar or canned presentation. This is a conversation – first between myself, the guest and our panel, then with members of our live audience and finally – with the broader social media sphere that we all leverage as a part of our efforts.  Our show is scheduled for Wednesday August 19 2009, 10 am CDT. You can find show details and our call in number  on the BlogTalkRadio show page for Haut Tech Conversations

What I hope will happen is for others to present their own take on the subject in their blogs, on the LinkedIn group and here so we can sum up before the next podcast in our series. I encourage you to join us on LinkedIn, Facebook, Twitter, your blog or here to continue the conversation. As has been said many times – no one of us is smarter than all of us.

In addition – we also have a webinar titled Leveraging Cloud Services, coming up with Rick Nucci – CTO & Co-Founder of Boomi, Rick Chapman, CEO of Softletter & SaaS University, and our own Luis Aburto, CEO of Scio Consulting. We will be covering the broader aspects of “integration” and why using cloud services rather than trying to build connections to both outside functionality is a key consideration for SaaS vendors. I can tell you personally as I’ve worked in the field of enterprise integration – it isn’t a simple issue. Keeping track of all of the shifting pieces can be quite a challenge for a company with a line of business focus. If being part of the broader SaaS ecosystem is on your radar, I hope you will take advantage of this opportunity. Please take a few minutes and sign up for this important webinar:

Leveraging Cloud Services – Thursday, August 20, 2009 – 1pm-2pm CDT. Registration is free and open to all.

As anyone who follows me knows – I use Twitter and TweetDeck to watch the “virtual conversations” about SaaS happening around the ‘net when I can. Today some time was freed-up by a conference call that was delayed so I fired up TweetDeck and took a look around. Imagine my surprise when I read a meme had started around a blog post touting single-tenancy for enterprise SaaS applications.

I’m not going to link to the original post – the writer has his reasons for pushing the idea – they are not entirely wrong, his context is different than mine and most readers of this blog. But I strongly felt the “take away” that might be given to people considering developing a SaaS application was shortsighted to say the least. Without getting into “religious wars” over a complex subject – let me first say that single tenancy does serve as a reasonable tactic for ISVs in some situations:

• Limited instances for a group of large clients that require hosting and will pay the cost differential for an application that really has no direct future as a fully developed SaaS app.
• As a short term response to market pressure and provide an alternative to a competitor’s offering.
• As a beta of a future SaaS application to “get a feel for the market” in a specific vertical where the ISV has not had an offering before.
• …and similar short term, limited implementations with narrow specific goals
• Or when you are using a PaaS like Apprenda’s SaaSGrid that actually leverages a single tenant .Net application and provides hooks to services that can enable the application to operate as multitenant and scale properly.

Let me also say that as Bob Warfield of SmoothSpan pointed out recently – multitenancy in itself is not a solution to all architectural problems for SaaS applications or a guarantee the application can be maintained and operated efficiently. Or – as a friend at OpSource recently pointed out, “A single instance of a multitenant application that just keeps growing forever without the ability to spread across infrastructure intelligently is actually less reliable than a single tenant architecture.” You will know this is happening when you and everyone else using an On-Demand application is suddenly caught dead in the water without a lifeboat by a system upgrade. Even a multitenant application needs to be able to seamlessly operate across several instances to be scaleable, maintainable and reliable.

So to address the most common FUD (Fear, Uncertainty and Doubt) thrown at multitenant SaaS architecture:

• Cloud Computing has solved the problems SaaS application developers need to think about by making it a simple job to put a new instance online as needed and abstracting the “servers” under the application.

Cloud hosting options are in themselves good alternatives for deploying SaaS applications. There is a lot to like about an abstracted infrastructure. Cloud hosting is mature enough for enterprise IT to consider as an alternative to deploying on their own internal infrastructure just as they consider outsourcing other aspects of maintenance and support. But – as an alternative to a multitenant architecture it doesn’t solve the major operational problems posed by individual implementations for each client. For a version upgrade – how long will it take to bring each individual instance through testing and QA up to the current version? Will you be able to move all client instances to the new version in a coordinated way or will the fact that each client has a separate instance lead to a number of “orphans” that fear change and lag by one or more major versions? Will the overhead you face actually prevent you from applying necessary patches and bug fixes until the next “major upgrade?” And what about subscriptions, implementation of instances, payment settlement, self-service, and monitoring of usage? Most cloud-based infrastructure doesn’t address these operational issues and they will all cost you money in terms of overhead as a SaaS ISV even if they don’t cause any support issues and subsequent subscription losses.

• Most multitenant applications use individual database instances for every client so the idea of a truly multitenant application is a myth. Enterprise clients want data isolation and abhor the very idea of “blended data.”

It is certainly true that many SaaS applications have been developed with an architecture that provides an individual database implementation for each client. Whether it is is “most” or not is an unknown – SaaS vendors seldom actually disclose their underlying architecture. However, to extrapolate from the fact that many services are implemented that way because it is what “clients want” is simply silly. First – the idea that single implementations for each client are inherently “more secure” is an answer from a marketing team that has nothing else to say. If there are security risks in the environment surrounding the databases or the way the databases are implemented – single implementations will not lower them unless you believe that by being just “one tree in a forest” you have somehow “spread the risk.” Second – single implementations are inherently less maintainable (see above), have higher overhead costs and are more likely to have delayed implementations of necessary database tuning, patches and upgrades. Delayed implementations mean less security and lower reliability. Third, application upgrades almost invariably require some changes to the database or at least a cycle of testing and QA. Individual implementations mean every instance needs to be updated, tested, and perhaps rolled back if there is an error. It also means a loss of transparency and that some clients may resist upgrades if they are aware of the isolation as a “strategy” (again see above). If this results in database inconsistencies between versions you can end up with application “orphans” again and no easy way to isolate the clients involved without forking your development (and if you don’t know what that means in terms of headaches you’re in over your head).

• Big clients are very concerned about upgrades and want strong control over version migration, especially for applications that are used broadly across the enterprise.

This is certainly true when clients have the primary responsibility for end-user support and system maintenance because the application is locally installed. It is very short-sighted however to believe that a client organization won’t expect the SaaS vendor to accept responsibility for a large part or all of the end-user support and provide embedded training and self-help. This is service offering after all. Would your HR department expect IT to solve problems if Expedia didn’t place a travel reservation for a company executive? SaaS is a form of outsourcing and should be sold as such. If your business model is based on the belief that you can somehow just host the application and leave the support and change control to your customers you should take a moment and read Ben Kepes recent article on the idea that SaaS is just an extension of the old ASP model.

• A SaaS application cannot match the look and feel of their client’s environments or provide ways to be easily customized to fit client operations.

The idea that SaaS applications are somehow required to be “cookie-cutter” with little flexibility is based on a very limited knowledge of current development patterns (or just plain lazy development). Yes, a single code base is a key to maintainability, testing, QA and reliability in a SaaS application. But that doesn’t mean that flexibility cannot be built in from the ground up. It does require understanding what clients might want. It requires allowing a certain amount of “self-service” or at least apparent application “hooks” that services can exploit. On the flip side – if you customize individual instances the risk that a customization will cause incompatibilities rises exponentially in relationship to the number of different customizations. So, as an ISV you have enabled professional services and disabled your operations and reliability.

Finally – the idea that a SaaS application and a premise-based are the “same” should raise flags if you have followed some of the marketing ideas we have written about in the past. Being on the Internet gives applications an entirely different context – if they are not exploiting that idea I would question how much value the SaaS implementation is really giving customers or the vendor.

So – in the end the old adage is true – beware of advisors only carrying hammers to fix problems. They are very likely to believe every problem is a nail…

Addendum –

• The “single-tenancy meme” spread across blogs recently too – read more about the subject in Bob Warfield’s article on the SmoothSpan Blog. It is a well-written response to the misconceptions that have been springing up.
• Bob Warfield of the SmoothSpan blog and I will be talking with Jon Hansen on his PI Window on Business broadcast April 30th about SaaS and cloud-computing and you’re welcome to join us. You can read more from Jon on his blog too!
• The replay of the broadcast is now available on Jon’s site.

The number of negative predictions for the future of SaaS and Cloud Computing have reached a crescendo in recent weeks. There has also been a significant push back from both pundits and bloggers “in the field.” Is SaaS and cloud computing just more hype? Has it reached the level of being a “must consider” alternative?

Phil Wainwright summed up my reaction to the many statements, articles and blog posts that have greeted 2009 with negative reviews of SaaS and Cloud Computing:

“…being attacked is always better than being ignored. After years of indifference to SaaS, the conventional software world has suddenly woken up to the threat and started attacking it in the hope it will all go away.”

The most out spoken critics are among the leaders of the largest software companies. Bill McDermott, SAP America’s CEO, Larry Ellison, Oracle’s CEO and Lawson’s CEO Harry Debes have all made a point of giving some unusually negative assessments. The desperation driving them seemed to be particularly apparent in this statement from Harry Debes:

“Getting signed up as a SaaS customer is fast, but getting out is just as fast. Whereas traditional software is like cocaine–you’re hooked. It’s too difficult and expensive to switch providers once you’ve invested in one. If it were easier to jump ship, a lot of people would’ve hit the eject button on SAP a long time ago.”

I don’t know how Lawson markets to its enterprise customers, but I don’t think they would take the drug user analogy too well. It is true however. Investments in hardware, data center infrastructure, IT staff, process change, integration and software licenses are a barrier to exit for many enterprise customers. But in this economy – does that mean it won’t happen? I doubt it and that isn’t even the biggest objection to his statement. What about the millions of SMB (and Debes was quoted as saying for Lawson, anything under $50 million is SMB) companies that have no desire to invest in additional infrastructure or skilled IT staff? Will they pass up the benefits of a good product that doesn’t require the capital outlay? What about the “line of business” (LOB) units that have limited budgets and no desire to engage their corporate IT to install an application for 20 to 50 seats?

He had one other comment that bothered me greatly. He said Lawson had started a SaaS application some years ago and then “did the math” – finding it would “be 10 years before we made any money!” I have to ask – what were you building that would cost so much? Did you consider leveraging any tools or frameworks that might lower the development cost? I am sure if you were trying to reproduce all the functionality of SAP in one application as an example, it would be a huge undertaking. But if you were to go the route of NetSuite and modularize your approach, it should never reach a level that requires that much investment before you have a strong product for release. A poor choice for the initial feature set is not a case strong enough to proclaim all SaaS products are doomed to failure.

The recent system-wide failure at Salesforce has spawned many comments that it was the sign that SaaS and cloud-computing projects were about to sink. I enjoyed JP Seabury’s write-up on Force Monkey. His account of how he had built a simple application to access their local copy of their Salesforce data was a good example of exactly the sort of business contingency planning that needs to be done regardless of where an application is deployed. And his justification for depending on Salesforce rather than his own resources was spot on:

“When the Salesforce.com outage started, dozens of IT engineers jumped into action, working to first isolate the problem and correct it. In the aftermath, today and for the rest of the week, dozens of technical teams will be working to understand what went wrong, how it went wrong, and what they can do to prevent it from happening again.”

“The best part? None of those people are on my company’s payroll. It’s a good thing — I couldn’t afford that many IT and support staff. Yet I am very thankful that they’re on my “cloud”, helping me run my business. I wouldn’t be able to administer such an incredible CRM tool without their help.”

His account goes further to contrast that experience with their local problems during a four day ice storm on the East coast – during which their sales team continued to operate remotely because Salesforce was available regardless of their internal problems. For his company – the benefits of using a strong SaaS application have far outweighed their risks.

During the current recession, vendor viability has also been a concern. Regardless of the benefits of SaaS, if business spending is reduced, the uptake of new products will also be reduced. No ISV can guarantee they will always be in business, but Vinnie Mirchandani offered some best practices that should be adopted by vendors and required by customers regardless of the economic situation. With proper consideration and mitigation, there is no more risk in a SaaS company disappearing than a traditional ISV on a licensed model. In each case a failure will have consequences that need to have mitigations in place from the start. But as Frank Scavo points out - there are some sales teams for SaaS companies that are spreading their own form of FUD (fear, uncertainty and doubt) to retain customers. If you have strong agreements that make the mitigation measures clear up front – as features – both customers and vendors are on a better footing from the start.

So, in the long run – I’m with Jeff Kaplan – a lot of these idea are just silly – or perhaps intentionally misleading when they are voiced by CEOs of traditional vendors. There is no reason to believe that either the subscription model or Internet-based service delivery are going to go away. In fact, there is every reason to believe that they will only become a more important alternative as we go forward.

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FUD Rains on SaaS http://bit.ly/x2aw

We don’t often “push” our own services here, we see our mission on Haut Tec to be a part of the conversation around Cloud Computing and software technologies in general. But, I’m excited to say – today’s announcement is one of the exceptions:

As a part of their continued efforts to bring value to their customers, Scio Consulting and Apprenda have announced a strategic partnership to offer enablement services for software companies looking to bring their products to the on-demand business model rapidly and efficiently by using Apprenda’s SaaSGrid™, a Software-as-a-Service (SaaS) delivery platform.

SaaSGrid drastically slashes time to market for independent software vendors (ISVs) by automatically weaving a SaaS architecture and business functionality into their non-SaaS web applications, while providing significant long-term value via web-based application management capabilities.

“Essentially, we’ve done for on-demand software development what the operating system did for desktop software development. We’ve created a cloud operating system for SaaS, which provides a new layer of abstraction that takes the burden of creating SaaS-specific technology, architecture and business components off of ISVs shoulders,” said Apprenda’s CEO, Sinclair Schuller.

ISVs that choose SaaSGrid as a foundation shave off massive amounts of development time and capital requirements that would have previously been allocated to SaaS delivery intricacies. This allows ISVs to bring their solutions to market faster than ever before, utilizing SaaSGrid’s out-of-the-box functionality.

SaaSGrid's zero effort multi-tenancy isolates your customers by handling data partitioning, request routing, and authorization security as part of the package.

“It is a pleasure to partner with Scio, a company that shares our enthusiasm and vision of an on-demand future,” said Sinclair Schuller. “Software companies that want to create new SaaS offerings often need assistance with their business and product strategies, with developing their SaaS applications, or with modifying the code of an existing on-premise application to move it to SaaS. Our relationship with Scio enables us to help customers more easily obtain such services and make a smooth transition to SaaS with SaaSGrid.”

SaaSGrid has been evaluated by Scio Consulting and found to be an excellent tool for reducing costs and time to market for their ISV customers.

“Scio has been developing custom SaaS applications for years utilizing .NET and open source technologies . Using Agile practices and our Nearshore Development Center in Morelia, Mexico, we are typically able to deliver new SaaS applications in 4-9 months. Now with SaaSGrid, we will be able to build SaaS applications for our clients faster and more economically than ever before,” states Luis Aburto, CEO of Scio Consulting.

Rather than requiring the use of a proprietary technology stack, SaaSGrid applications are built using the industry-hardened Microsoft .NET stack and the SaaSGrid SDK. The SDK hooks into Microsoft’s Visual Studio, and provides an integrated development environment that allows a software company to write business code, user interfaces, and databases locally by using popular .NET languages like C#.

Update:

If you would like to hear an in depth discussion of SaaSGrid – Listen to the podcast Paul Miller of Nodalities did with Apprenda CEO Sinclair Schuller.

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Scio Consulting Partners with Apprenda for Rapid SaaS Product Enablement http://bit.ly/huw5

In the third segment of our four-part series on The Long Tail, we’re exploring successful SaaS aggregators who have effectively mastered the concept and dominate their field.

Once you have grasped the concept behind The Long Tail and begun to integrate it into your thinking, you are going to find yourself looking for good examples of its use. As I started on this article, I found that it was fairly easy grab strong examples, but when it came to putting together a list – I realized that in the SaaS context, it becomes a little more difficult. The first question became – what really is and isn’t SaaS? Or more critically – when is a platform just eCommerce (as we used to say…)? And finally – does it really address a wide range of needs in specific ways – or is it just generalized Software as a Service?

Let’s start with a fairly easy one – Google Docs. Google Docs is an online replacement for a desktop word processor, spreadsheet, calendar, email client, photo sharing, personalized websearch – and a whole lot more. There is an ad supported (“free”) individual version that is pretty much a front end for all the web-based services Google offers. There is also a Premier Edition that has some additional features and guarantees for $50 per user per month without the ads. Because the Premier Edition is business-focused, it includes the core business productivity applications like the word processor, email, storage, and scheduling.

It is certain that Google Docs is SaaS application. It is a straight-forward replacement for a number of desktop applications many people use everyday. You can run your “instance” of Google Docs from computers other than your own because all the data and functionality is accessible from a web browser. Does the individual version qualify even though there is no subscription? Yes. No one ever said SaaS had to provided by a cash-based subscription. If Google can afford to offer the whole suite by leveraging advertising on some parts, you “pay for it” in effect by being an audience for the ads.

But – is it a good example of leveraging The Long Tail? No, not directly. To be clear, Google does offer many applications that can be leveraged for special uses and customized in various ways, with services like Google Gears. But there is nothing about the document features that is specifically attractive to a group like authors and accountants would find many functions missing from the spreadsheet application.

Google does have some excellent Saas business models that leverage The Long Tail however. Google AdSense allows web publishers to add advertising to their sites without developing a system to acquire advertisers, manage content placement or receive payment. The software picks ads based on the site content and the user base of the publisher’s site and pays based on “clicks” – the choice made by users to go to view the advertiser’s content. Because of its ability to be highly targeted and to adopt a “pay as you go” model – it is one of the best examples of SaaS and The Long Tail.

With that example – what about Amazon? I followed a series of “conversations” on Twitter the other day about what is and isn’t SaaS. When I mentioned Amazon, the opinion seemed to be – no, it can’t be – it just an online store. Certainly, from an individual buyers perspective – it is an online store. But, from that same person’s perspective, it does “suggest” items to its users based on their purchases and search history. It allows them to save their information for future purchases, post “wish lists” that will allow others to ship gifts to them, and participate in product feedback. So, in return for being able to show you advertising for products, it does offer services that would be hard for an individual to duplicate. That may not fit everyone’s definition of “Software as a Service” – but it is a service online.

However, think about it from a vendor’s perspective. Amazon provides services to vendors that allows them to integrate their inventory into Amazon’s “store front.” The vendor doesn’t need to build in customer preference, search, wish lists, shipping, or even build a website. Amazon will do it all for a “transaction fee” on sales. If Amazon didn’t exist, all the vendors on that platform would have to provide the services directly, use someone else, or not sell online. The fact that Amazon has the largest online audience, a good interface, and personalization for customers makes it an unbeatable service. Add on their data storage, application services, and off platform advertising and it becomes apparent that Amazon has many services for online businesses delivered in a strong mix of SaaS, eCommerce and infrastructure that is well positioned to leverage The Long Tail concept.

From that strong example, let’s consider Netflix. Netflix offers DVDs and now movie feeds as service to subscribers. On one level, it is tempting to describe Netflix as “Movies as a Service” rather than software. But, consider what the service provides online for its subscribers: They can browse real-time catalogs of the titles in the library and their availability. They can keep lists of what they have seen and what they want to see when it becomes available and their is a slot in their “queue.” Users can leave and check reviews of other users, see previews of movies and check the status of their returns and movies being shipped. They can choose to stream movies and show them in their home theater systems if they are computer attached. What provides these services? Software. It isn’t software others could leverage to provide their own rental services and it doesn’t provide access for others to share in the Netflix customer base. But it is a service, and it is software doing the work – end to end – right down to the system that queues DVDs for shipping, labeling and receiving.

Finally, let’s consider one of the most discussed SaaS offerings – Salesforce. Salesforce has gone so far into SaaS, it has truly crossed the line to cloud-computing, no matter how you define it. Salesforce is a CRM system at its heart, but it has been integrated and leveraged many ways by its AppExchange and AppStore, where other companies can offer value-added services, and its partners to become a full suite of related services. Does Salesforce leverage The Long Tail in providing its services? Yes. The ecosystem provided by the AppExchange and AppStore serves ISVs who leverage the Salesforce software and infrastructure to provide vertical services and customization. Salesforce CRM has diversified its offering to verticals, provides ways for customers to customize the process flow and presentation of the service to their users, and there are several integration tools that allow data to flow to other applications in a business. Salesforce is trying very hard to serve a small to mid-sized market as well as the largest enterprise customers. It isn’t an easy balance, but it is succeeding at many levels.

For those that hoped this article might be a list of the top Long Tail leveraging aggregators – I have to say that is something you will still have to define for yourself. From this overview, you should have a good grasp of the concept to analyze what you find, but it is a growing field and there are many viewpoints. Regardless, my point in writing this article is to say that the leaders in SaaS leverage The Long Tail in many interesting ways – but most effectively by being the head of a broad range of services that continue to be of value to many users with specific needs.

In our next article, we’ll close this series by considering how Social Media drives the power of The Long Tail down to the individual.

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SaaS: Top Long Tail Aggregators http://bit.ly/RXdM

Our words from 2008 in a word cloud from Wordle.net

It doesn’t take a lot to see what we’ve been writing about in the month and a half Haut Tec has been around. So, just because it is the time of year when everyone is putting together predictions for the new year and hanging them out to view, I’ll make a bold prediction for our future – more cloud computing, SaaS, Agile, RIA and the business of On-Demand services. We’ll find other subjects I’m sure, but these subjects are core of our work and in fact – the issues that lead on most lists of computing technology for the near term.

From my recent experience, I can also say we’ll be discussing social media and (glup!) Social Marketing in 2009. I’ve started leveraging this area just recently and I can say without a doubt, if you are on the web and you are not leveraging the new forms of social media like Twitter, Facebook and LinkedIn (which isn’t all that new really, but many people are still discovering it) to find potential customers and partners, you’re going to be left at the dock next year and in years to come. Come to think of it – blogs are a form of social media so we’re there too – but the point is a lot of people have not figured out that if you are going to be centered on the Internet you need to fully leverage all of the tools available. In fact, just to follow that thought, here’s my contact list for those who have already figured these things out:

• Scio’s Facebook Page
• LinkedIn Public Profile
  
• Twitter
• Facebook

And yes, I am an open networker, a member of a lot of LinkedIn groups, I “follow back” on Twitter and accept friends on Facebook. I’m sure there will be others too – I’ve been networking on Twitter this week – like a lot of people – and it is exploding with new users.

We’ll also be continuing our series about The Long Tail and many more areas – I also hope to hear from you if there are subjects we’re working on that you would like to hear more about. I expect us to plunge into Agile Product Management soon – Luis Aburto’s Agile post was our most popular subject so far. We’re also continuing to expand the ISV Resources listing so if you’re interested, there is new information there for you.

Addendum – We’ve just been added to the cloud-computing feed on Alltop as you can see from our new badge on the sidebar. Thanks to Guy and his team at Alltop!

So, here’s is looking forward to a bigger and better year in 2009 for everyone!

Próspero Año Nuevo! from your Friends at Scio!

SaaS and cloud-computing in general are the hot topic in technology now – and why not? They promise to lower costs and improve productivity during one of the worst downturns in memory. But, along with the promises to buyers, has come some products led primarily by “gold rush fever” and little else. What is different this time around? Most SaaS and cloud-computing products have a ‘try-before-you-buy” strategy or at least price points that allow individual business units, SMBs, and proof of concept tests with low to no implementation costs and no capital expenditure (CAPEX). It is a critical difference in this economy.

In his article “‘Cloud-Rush’ Attracts Shady Characters,” Jeff Kaplin explores a few of the scandals and problems that have cropped up with SaaS and cloud-based services. The problems he and others have discussed recently are certainly issues buyers have to consider strongly before they bring in an Internet-based service. Companies using SaaS applications have to consider the security and reliability of the offering, the cost versus benefit, data portability, and the long term viability of the company behind the offering. But – let’s not get too carried away. How different is that from licensed, on-premise software?

SaaS:

• Operating expense for the units used but little to no infrastructure costs internally.
• Training and realignment of internal processes (potentially).
• Initial implementation can be small and scales effectively – with a relatively flat price structure.
• Security is a risk but is part of contractual agreement with vendor.
• Data portability is a risk but should be part of contractual agreement and offsite data backup should be part of the contract.
• Reliability of the provider and the network connection between the buyer and vendor are a risk.
• If a vendor fails or you decide to leave, can you port your data to another (doubtful)?
• Will the vendor continue to innovate or allow the product to languish and collect income without significant updates and growth?
• Can you customize or integrate to some degree to achieve higher productivity and improve processes?

Licensed:

• Up front, capital expenditure for the license, servers, underlying services (OS, Database, etc). License may be by seat, but is often in broad increments that make low count initial deployments impractical.
• On-going costs for internal IT resources, infrastructure and maintenance as long as software is deployed.
• Training and realignment of internal processes.
• Security and reliability is a risk, but is internal. While this may sound like it is “more under control” because of budget priorities, in practice IT maintenance budgets tend to be cost cutting targets. Internal security risks may actually be higher than in a vendor situation.
• Companies with many offices or remote workers will have to come through the firewall to access systems.
• If vendor fails you may be left with a white elephant that is no longer being updated, has no support guarantees, and continues to impact IT costs and resources. Data may be extractable, but it may not be useful in a replacement application and extraction and transformation can be costly.
• If another product enters the market that is a better match, capitol expenditures and on-going maintenance costs may limit return on investment for new solution.
• Integration and customization may be possible, but at a cost – which can be considerable.
• A premise-based solution may not be practical for companies with many remote workers and the need to collaborate with customers and/or suppliers.

So for all the worriers who say, “What if my SaaS vendor fails – what will happen to my business? – I say ask yourself the same question when you sink a large sum into a premise-based solution. What will happen to the license expense, server costs, training, and on-going maintenance costs if the software doesn’t work out for you? For the ones who say, “What about their security? What is my guarantee they are looking after things properly? Will they be online when I need them? – I would ask the same questions internally. When the budget crunch hits, will the server maintenance updates be delayed? Will there be a security audit this year? Can we avoid losing one more IT person in the downturn?

And then, ask yourself one more set of questions: Can I try the product with a relatively low expenditure on a limited number of users in my organization? Can I drop the experiment if it doesn’t work well without significant cost? For most SaaS and cloud-computing options, the answer is yes. In fact, many offer a trial evaluation period up front for no cost. For the vendors, it should be a relatively easy thing to include if their platform is truly scalable. For buyers, it is a significant advantage.

In the end, every question that is asked of SaaS and cloud-computing vendors can and should be turned on its head. Ask the same question in the premise-based context and see what the results are. The results will be different for existing licenses versus new, for enterprise versus SMBs, but significant advantages remain for a well-planned SaaS application. This is borne out in recent studies by the Cutter Consortium, “SaaS User Satisfaction Skyrockets to a Whopping 97%” and the Gartner Group – both of which show increasing adoption of and satisfaction with SaaS solutions.

But just like everything else, it remains a buyer-beware situation no matter what you decide. Whether in your back room or the cloud, there are costs and risks you have to consider. And for SaaS vendors offering competitive services, increasingly the choice is going to them.

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Try Before You Buy – A Winning Strategy http://bit.ly/MwVU