SaaS in the Spotlight

This article first appeared in the November/December 08 issue of IDM Magazine.

Software as a Service (SaaS) applications are becoming increasingly popular as web-based alternatives to traditional in-house implemented software models. Andrew Warland reflects on the evolution of this exciting category, and explores the skepticism of some major software players.

On 28 October 2008 Microsoft announced – some might say finally – that it would offer its set of Office applications online in direct competition to Google Apps and the (possibly) lesser known Zoho.  As with Google Apps, Microsoft is likely to offer differing pricing models, from ‘free’ but ad-supported, to subscription-based memberships.

Given the size of its desktop market, Microsoft’s entry into this space heralds a significant milestone in software acquisition models over the past 15 years – the almost ubiquitous Office suite will now be available (perhaps with somewhat less functionality) as a hosted service in the cloud instead of as an implemented application.

The decision by Microsoft to offer its products online could be seen as a defensive strategy to lessen the impact of its user base taking up not only ‘free’ downloadable alternatives such as Open Office, but also using hosted applications such as Google Apps and Zoho – products that offer web-savvy users greater flexibility of use and collaboration capability.

Microsoft’s entry into the online Office market appears to be consistent with an overall trend away from software that is installed on computers, to online subscription based models offered as ‘software as a service’, or SaaS. But is it?

None of the three companies (Microsoft, Google, and Zoho) markets its product as a SaaS-type offering – Microsoft uses the term Software with Services, with an eye to its massive legacy customer installed base and the need to retain those users and provide some kind of upgrade path.  Google and Zoho, without the legacy base, are on the other hand straight cloud computing offerings.

This is a little curious, given that companies such as salesforce.com and SpringCM (IDM, September 2008) – both very clearly in the SaaS space – also offer subscription-based online access to a range of office productivity applications.  What differentiates them is their origins.

SaaS as a concept can trace its origins to Application Service Providers (ASP) who were, more often than not, third party providers offering enterprise software packages to external clients either via a browser or thick client.

Offloading the onerous task of maintaining enterprise software was the main attraction of ASP-based applications, but the model met with overall skepticism and in the late 1990s, many ASP-based companies failed in the broad dot.com implosion.

The vision of hosted applications has been reborn in the SaaS revolution with ‘newer, more focused and lightweight solutions’ accessed primarily via a browser, accessible via a subscription (or sometimes free with limited options).  Almost by coincidence, this model neatly fits the paradigm of the interactive web, sometimes referred to as Web 2.0.

Some say nothing is new under the sun. In a recent interview, Harry Debes, CEO of Lawson Software, claimed SaaS was no more than the latest iteration of the on-demand phenomenon that started with service bureaux, hit puberty in the late 1990s with ASPs, and has now ‘matured’ into SaaS – on its way to the holy grail of ‘cloud computing’.

The Application category of the SaaS Showplace site offers links to SaaS applications across the entire software spectrum, from Accounting/Financial to Workforce/Field Service Management.  Office productivity software – including document, content, knowledge and records management applications – can be accessed on a subscription basis via a wide range of SaaS providers.

There are over 100 applications alone listed in the Document Management (DM) space, 31 in the Knowledge Management space, and 60 in the Content Management space.  Some SaaS providers, such as SpringCM and salesforce.com, can be found across multiple categories.

Curiously, however, neither Google Apps nor Zoho (nor DocBanq, an Australian product) is listed although they are to all intents and purposes SaaS-style offerings.  On the other hand, ASP-style services such as DocumentMall (under Ricoh Corporation in the Document Management category), a Documentum based offering is listed, but the Alfresco-based Livecycle from Adobe is not listed.

This suggests there is a degree of confusion or overlap between the concepts of ASP, SaaS and cloud computing, reflecting in many respects the origins of products – products born out of ASP concepts have for the most part become SaaS, while products developed specifically for the net seem to have bypassed SaaS and are now in the cloud.

Regardless of the difference, all commercial SaaS- or cloud-based offerings are subscription based; many of the more cloud-based services (eg Google Apps, Zoho) use viral marketing techniques by offering free (but ad-sponsored) access to individual end users.

The viability of the SaaS model is challenged by some of the bigger software houses (despite the entry of Microsoft into the market).  Harry Debes believes the ability to easily subscribe and unsubscribe to SaaS applications undermines its viability as a commercial offering.  He contrasted it to traditional software which he said was like cocaine – ‘(once) you’re hooked … its too difficult and expensive to switch providers’.

Debes also suggested that his view was shared by Oracle’s CEO Larry Ellison. Neither apparently dismisses the concept of SaaS, just the viability of the commercial model, suggesting that it would take too long to make a profit.  Ellison’s belief about the viability of SaaS was straightforward – ‘… very interesting, but so far no one has figured out how to make any money at it.’  Microsoft seems to disagree.

From an organisational point of view, SaaS brings real challenges in terms of access, security, privacy, risk and even increased cost (from increased bandwidth use).

The ability to access services and documents stored with a SaaS provider 24/7/365 is a major issue; Gmail went down again as recently as mid October 2008 leaving some end users without access to their emails for up to 24 hours.

Although many end-users may not care particularly where their information is stored, as long as it can be found and retrieved, there is a strong and not unreasonable expectation of being able to access it and get it back when it is needed. SaaS providers, accordingly, must be capable of providing a stable and guaranteed service.

For massive web-hosted repositories such as Flickr and even GoogleApps, this may not be a major issue.  But if your primary document store is hosted somewhere in another country with a lesser known SaaS provider, what real expectation can you have about guaranteed access and retrieval?

The security and privacy of documents stored with a SaaS provider is another critical factor.  What controls over access and privacy – and protection against third party law enforcement agencies requiring access – can reasonably be expected?

Traditional software vendors in the document, content, knowledge and records management spaces offer an alternative option – offering their clients all the Web 2.0 type functionality they require via a browser, but behind the enterprise firewall, thereby (they say) reducing or eliminating security, access and privacy risks associated with using SaaS providers.

Indeed, the concept of Enterprise Content Management (ECM) looks a lot like Web 2.0 style management of the broader ‘content’ (not just documents) that organisations create and manage, utilising Web 2.0 ways of creating, storing, tagging, and sharing – reducing all the risks associated with external services and allowing records managers to sleep a little better at night.

As long as user have access to the net and can access external services, there will continue to be risks.  As the hacking of US Vice Presidential candidate Sarah Palin’s Yahoo email account demonstrated, people at all levels will make use of online services (including nefariously) – whether it be via social networking applications, alternative email accounts, or file/document sharing and publishing applications.  Organisations may – potentially – be found vicariously liable if their employees use such applications.

Size limits on individual organisational email accounts and ubiquitous access to the internet means that end-users will continue to look for, find and make use of alternative, often free, net-based and size-unlimited ways to create, store, and share information.

Kevin Kelly, writing in Wired magazine in August 2005 predicted that by 2015 desktop operating systems (and presumably the applications on the desktop) will be largely irrelevant and everything will be accessible via the Web.  Perhaps, in another 7 years, all vendors will have headed down the SaaS path in a ‘Web 5.0’ iteration of the web in which organisational, firewall-based boundaries are less relevant than the need for better organisational ownership and control of information assets.

For individuals who have experienced or who have grown up with access to Web 2.0 style applications, SaaS-based applications possibly make more sense than the traditional model of installing applications on their desktops.  For this new generation of workers, often highly mobile, SaaS may be the new, different endpoint.

19 January, 2009

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