Amy Wohl's Opinions on SaaS

SaaS can Make Things Greener

Recently I read a post by Chris Thomson (he's from another world -- he writes about medical software) which is a clever and interesting comparison of how you can decrease your carbon foot print by simply moving a multi-user application to a SaaS vendor running on a well-managed infrastructure. 

The savings are all in the economies of scale, with multiple users sharing a well architected and well managed infrastructure.

I can't comment on his numbers (but you can if you have the bandwidth and knowledge to run your own calculations), but the savings on power alone seem impressive, plus you're likely to save on support (and you have to house and equip that support staff) and to replace desktop PC's less frequently (as your function moves to the cloud and the desktop is merely a house for a browser).

Everywhere I go these days, I get the "green question.  It makes SaaS and the Cloud look a lot more interesting.

October 02, 2009 | Permalink | Comments (0)

Cloudosophy

NEW:  British consultant and publisher Charles Brett has a new free form of his journal, called INSIGHT-SPECTRA.  I am pleased to tell you that I have an article, Cloudosophy, in the first issue.

Although it's a bit long for a blog post, I have included it here.  You may recognize some of the comments and charts from earlier blogs. 

You can get a free subscription to INSIGHT-SPECTRA by going to their site and filling out the form at the bottom of the page.

www.insight-spectra.com  .  

Brett’s former publication, SPECTRUM MIDDLEWARE was a well-respected journal and I was honored to occasionally write for it.  I’m hoping to continue that tradition in INSIGHT-SPECTRA.

CLOUDOSOPHY

To talk about Cloud Computing, it might help to first define it.  The difficulty is there is a vivid debate occurring about just that subject.

The notion of a cloud (as a technical concept) first appeared in communications.  Every diagram of networks, particularly multiple networks, was topped with a “cloud.”  The idea was that the cloud was beyond specific definition, but that it included everything that the network might need, and changed over time as technology and applications evolved. 

It was natural for the biggest and most pervasive network, the Internet, to come to be thought of as a cloud.

Cloud Computing takes the idea of processing-at-a-distance (not a new idea at all) and translates it to the world of the Internet.  Cloud Computing has its precedents in time shared computing, when in order to connect any remote user to the computing environment, expensive, secure physical connections had to be created.  In the Cloud Computing round, we substitute the Internet (with or without secure connectivity) for those specific physical connections.  This changes the equation enormously and makes access to the function of the Cloud ubiquitous. 

In the beginning it was easy.  We had some clouds.  They offered access to compute power and storage at a fee, usually per user per hour.  All the clouds were public, in the sense that anyone with money (or more realistically, a credit card) and an Internet connection could use Cloud Computing.  But the term Cloud Computing quickly stretched to include not just the processing offering, but other services, as well as applications (previously referred to as Software as a Service or SaaS) that the clouds enable.

Initially, I diagrammed this Cloud environment as a layer cake, adding first management and later an application integration layer (as yet largely unrealized).

Integration of Applications

SaaS Software

Management

Utility Computing  (Infrastructure)

 

But after a number of discussions with Michael Salsburg, a technical executive and architect at Unisys, I redesigned the “layer cake,” to more accurately represent the relationships between the various parts of the Cloud.  In this diagram, Management moves from the layer cake and becomes a vertical layer affecting all of the other parts.

                                                               

   Management

Integration of Applications

SaaS Software

<------------------------------------------Management

Utility Computing  (Infrastructure)

 

Personally, I felt it was crisper to refer to the infrastructure as the cloud and the applications as SaaS, or cloud-based software, or whatever.  But it’s clear that this argument is lost.  All of the things in the diagram above, singly and in combination, are not being referred to as “cloud” or “cloud computing.”

But nothing appealing remains static and unchanged and Cloud Computing quickly grew in multiple dimensions.

1.       Early Cloud Computing vendors like Amazon and Google added additional functions (often for additional fees) such as storage and development software.

2.       Additional vendors entered the marketplace, such as Rackspace and OpSource, each with its own focus, based on its previous experiences, customer demand, and strengths.

3.       Large customers who were interested in the idea of Cloud Computing, but unwilling to place their information in a shared environment, wondered if “private clouds” were possible. 

It is this interest in attracting enterprise business and providing additional security and privacy that has caused much of the controversy over the boundaries and definition of Cloud Computing.

Many Cloud Computing providers will now provide a “private” cloud for a customer, usually a large enterprise.  Until recently, this meant building a new physical data center around a cloud architecture (virtualized servers, flexibility in scaling up and down, and the ability to support (and connect) users in many geographies.   But it was entirely private and “owned” by the customer.  Ownership, of course, is a flexible concept itself.  IBM, for example, will build infrastructure, including private clouds, for customers and charge for them on a lease or lease-to-own basis as well as selling the new facility to the customer.  

Although access to this private cloud would normally be via a VPN over the Internet, the cloud was invisible and unavailable to anyone other than its owner and his invitees.  Scalability was limited to the resources of the private cloud and the customer was making an investment in capital infrastructure (or at least a commitment to it). 

Recently, several vendors (Amazon and OpSource, for example) have started offering “virtual private clouds” (or “private virtual clouds”).  In this case, the customer contracts with his cloud vendor to create a private cloud within the vendor’s larger public cloud.  Subject to contract terms, the customer can choose to scale his private cloud up and down, enjoying the capital infrastructure investments and larger resources of the vendor, rather than being limited to his individual organizational initiative.  From within the public cloud that enables his private virtual cloud, the customer could choose to interoperate with other clouds (or other web-based applications).

4.3

And there’s the controversy:  Is a private cloud a cloud at all?  Some claim that since a cloud, by definition,  offers the ability to buy compute power (and other capabilities and services) on demand, without the need to buy the infrastructure, a private cloud is by definition not a cloud at all.  These same debaters usually argue that a private virtual cloud is a cloud because it is simply a temporary (although temporary could be as long as the customer likes) piece of a public cloud, subject to scaling up and down, as any proper cloud computing offering is intended to do.

It’s this kind of debate that convinces me that Cloud Computing is still pretty immature.  Not that it doesn’t work; it does.  In fact, lots of customers are happily computing away in the cloud, for purposes as diverse as additional compute power, development and test environments of any required configuration, access to software more immediately and with fewer internal resource requirements than traditional, in-house implemented software, and the ability to create shared environments, outside the organizational firewall, where all kinds of workers (employees, contractors, suppliers, customers, and others) can collaborate.

Rather, we are all still testing the boundaries of exactly what we’d like Cloud Computing to be.  Vendors want to take advantage of a hot new marketing term; customers bring their normal expectations to a new technology:  they expect it to solve every problem.  Cloud Computing is no different than other technologies.  It can offer extraordinary and growing capabilities that will make it attractive to most business customers for some things.  But no technology will ever solve every problem and it is when the users recognize the boundaries of a new technology and routinely use it for its strengths that a technology begins to mature and be genuinely useful.

September 23, 2009 | Permalink | Comments (0)

Worries about the Death of IT (in the Cloud) are Just Hype

Whenever we get an important new technology some are quick to rush to thinking it will replace everything that went before it.  That is rarely if ever true.  In a smart article about IT and the cloud, Joe McKendrick refers to the ever ebullient mainframe as a good example of how sticky existing technologies can be.

IBM is selling more mainframes today (albeit smaller ones) than ever.  In addition to their traditional role as the engine of enterprise IT, mainframes are also becoming important for supporting specialized, dedicated applications.  They are also increasingly important in the emerging economies, where developing government and business activities often look to mainframes to move onto the world stage and compete.

Against that knowledge, the idea that Cloud Computing will push IT into some unimportant and much smaller corner seems unlikely.  What we should look for is smart IT departments using SaaS and Cloud Computing as a new option to:

  • Support geographically dispersed users and applications.
  • Allow for application patterns where baseline usage is low, but occasional usage is much higher, without the need to invest in capital structure and staff for peak periods.
  • Try out new applications at lower risk.
  • Move applications with little or no competitive advantage to a less expensive environment and use freed-up resources to better advantage.
  • Consider the cloud architecture for the data center itself (private clouds) where the organization's need for data control or the support of existing proprietary applications makes that attractive.

Cloud computing won't be the whole thing and it won't put IT out of business.  It will give them new ways to choose how to best spend their organization's dollars.

August 18, 2009 | Permalink | Comments (0)

Evaluating the Role of SaaS Solutions and Traditional SW Vendors

I came across an interesting article on Forbes.com that takes the viewpoint of advising traditional (non-Saas) software vendors how to beat the SaaS vendors, especially at the enterprise IT level.

I think I'd find it a curious mix of fact and fiction -- or, perhaps, out-of-date information.

It allows how SaaS is cheaper to implement and much easier to sell because you can see it up and running and then proceed to buy some and use it fairly quickly -- in anything from a few minutes (mainly consumer applications, I'd add) to a few weeks (enterprise applications which require customizing or configuring rules and/or integrating organizational data). 

The author notes that traditional software vendors would do well to get their applications into an web-accessible demo so they could avoid the sales liability of not being able to easily show their application.  He then suggests they could get around the problem of being difficult to configure (he's talking about those very long and expensive consulting assignments that go with purchasing lots of traditional software) by having lots of vertical partners create narrowly defined vertical versions of the software.  Each potential customer would see just the vertical version that applies to him and implementation would mean deploying a virtual copy to his IT shop or a co-hosted located.  (No word as to how the customer would create future changes -- easy and under his control in the SaaS world, generally time to call the consultants back for most traditional SW.)

He thinks that there are SaaS applications in only a few enterprise categories (he should look at my briefing invitation list, with hundreds of SaaS companies in dozens of categories) and that those are feature-poor.  I'd like to introduce him to a company like Workday, with its complete HR solution (and lots of high-mid-market and large enterprise customers) or to the large enterprises who use Salesforce.com, employing its partners (or their own consultants or it department) to add any features or customization that they might require.

Besides, what is keeping the SaaS market from going after vertical solutions?  In fact, what we are expecting to see is a sky full of vertical clouds that include all of the various bits and pieces of software for a particular vertical, hopefully with some data integration capability, and including whatever they need in the way of regulation, taxation, and industry expertise.  Much easier to update for everyone in that sector at once, rather than painfully, one at a time.

Of course, there will always be a need for traditional software.  Enterprise customers will be very slow to get rid of anything that works and as Dan Woods points out in the Forbes article, SaaS software is really intended for new users, not as replacement software for existing implementations of traditional software.  But time marches on, SaaS gets better in both its coverage and its depth, and issues like security and availability are being addressed.  If a public cloud is not the answer, we suspect that many enterprises will, in the end, use a blend of traditional and SaaS software implemented on a collection of public and private clouds.

August 05, 2009 | Permalink | Comments (0)

Too Much Information; Not Enough Time

My good friend and colleague Jonathan Spira of Basex has been focusing recently on the topic of Information Overload, which we all seem to deal with every day.  He observes that by 2012, the typical knowledge worker will be drowning in a sea of e-mail communications, text and instant messages, various forms of content, tweets, RSS feeds, and more. Today knowledge workers lose on average 25% of the workday to Information Overload.

He has declared August 12 as Information Overload Awareness Day, a workplace observance that will help knowledge workers focus on what they can do to lessen the impact of Information Overload and find out how they can contribute less to the problem.

The Information Overload Awareness Day Inaugural Event is a half-day, online event bringing together senior executives and thought leaders from around the globe.  Come as our guest via the Web on August 12 to learn what you can do both for yourself and your organization to help decrease the impact of Information Overload.  Use the code AmyGuest for your guest ticket.

In addition to the keynote from John Seely Brown, co-chairman, the Deloitte Center for Edge Innovation and former chief scientist, Xerox, speakers will include:

  • Noted authors Maggie Jackson ( “Distracted”) and Mike Song (“The Hamster Revolution”)
  • Nathan Zeldes, President of the Information Overload Research Group (IORG)
  • Anne-Katrin Neyer, School of Business and Economics, University of Erlangen-Nürnberg
  • A CIO from the U.S. Air Force
  • Paul Silverman, Integra
  • Christina Randle, The Effective Edge
  • Jonathan Spira, chief analyst at Basex
  • Executives from a variety of companies including Dow Jones and Morgan Stanley.
  • A panel of Visionary Vendors with tools that help lower Information Overload including Matt Brezina, co-founder, Xobni, Deva Hazarika, CEO, ClearContext, Julie White, director of product management, Microsoft, and Tomer Shalit, CEO, Nordic River.

I have already registered and I’m sure we’ll find this a worthwhile event together – and a good opportunity to blog.

Amy D. Wohl                                                                                                                            Wohl Associates

August 03, 2009 | Permalink | Comments (0)

Chrome: Consider how you use computing now

Before we have all the expected rants pro and anti Google's Chrome OS, perhaps we should first ask the question, "How do we compute, now and soon?"

For those of us who spend much or most (let's bet honest here) of our time on the web, a new interface and a new way to write applications and interact with the web might be a powerful enabler to users and developers alike.  But for those who mainly interact with desk-top applications or data on company systems, Chrome may be nothing but an interesting but largely irrelevant idea.

The question, of course, is how many of each of us are there and what does the trend line look like?  Greatly influencing this, of course, is the surge of cloud computing and the rush to put as many applications as possible into the cloud.  Like all reactions to new technologies, this rush will cool down after a bit and we will sort out which kinds of applications work best on-line and which continue to work best in a desk top or company server mode. 

Of course, if we include consumers in these calculations (including ourselves in our consumer mode), the off-line usage soars.  It's hard to sit in your home office looking something up on your home computer when all the action is in the family room around the big TV screen.  Already, I walk around my home (an eight-room condo the size of a fairly large house) with a netbook and have more netbooks and laptops strategically stashed, all connected with a wireless network.  I'm getting ready to give them a little server to share for shared data like address books, to do lists, and lists of music sites.

Many users are developing that "good enough" mentality (with regard to selecting cloud-based products over richer-featured and better supported desktop products) and if Chrome offers them features that are hard to replicate in land-based computers, that may be enough to push things in a cloud-based direction, for many users.

But remember that everyone will not go rushing off to the cloud for every application.  Certainly not now and perhaps not ever.

July 08, 2009 | Permalink | Comments (0)

The Seriousness of SaaS in the Enterprise

I just came across a great column by Phil Wainewright about how SAP's executives seem to be stepping on each others toes, commenting on their SaaS products and their opinions on the value of SaaS (and Salesforce, of course).  To be fair, you have to read yourself through the thread and find the Talkback from SAP exec Vishal Sikka and Phil's remarks about that comment.

I'd like to make some remarks of my own.

SAP is remarkably late to the SaaS market and has chosen a unique path which I don't think will work:  they want to keep their customers continuing to invest in very expensive SAP ERP applications while buying bits of SaaS applications for small outliers, on SAP's schedule.  For some SAP customers who are not at all ready to move (and that could be for excellent reasons and for a very long time), that could seem fine, assuming that they don't notice that competitors aren't busy building excellent and cheaper SAP-compatible applications for them.  With no need to protect SAP's revenues, these competitors will, of course, include software categories and features which SAP will choose to label as "not suitable for SaaS."

Many of SAP's defenders (or Salesforce.com's attackers; there is some overlap), insist that SaaS is not suitable for enterprise users.  Apparently they are unaware of the fact that hundreds of enterprises are using SaaS right now and intend to use more of it in the future. 

It is unlikely that any particular way of doing computing will every be the ONLY way of doing things.  We still use mainframe computers because they turn out to be the best way to do some large-scale tasks or to run software that is too expensive or too complex to rewrite.  Some of today's enterprise software is likely to be around for a very long time.

But to the extent that it makes sense, companies, and not just SMBs, are looking at the SaaS market as a way of less expensively, more quickly, and with greater flexibility offering computing and applications to their users.  It is a Pandora's Box that once opened will not be closed.

June 22, 2009 | Permalink | Comments (0)

Pricing SaaS Products

As the array of SaaS products broadens and more traditional software ISVs (who will continue to offer existing products) enter the market, pricintg SaaS products continues to be a puzzle.

There is a tension between the right price from a marketing perspective, one that will attract the optimum number of users, and the right price from a profitability perspective.

  • The right marketing price for SaaS products is often thought, at least initially, to be "free."  This is done artificially through extended free betas, free trials, and free "basic" versions of the SaaS offering, all intended to remove price as a barrier to initial usage.  In every case, the ISV is hoping that as many users as possible (in some cases all users) will move on to a paid version.  Conversion rates vary, depending on the product, the type of customer, and the competition, from less than 1% to about 25%.  For a few business products they are higher.
  • The right price from a profitability perspective is a calculated number, taking into account the cost of operations, including ongoing user support, further development, and marketing.  It is likely to be less than the price of a traditional software product (which makes for hard decisions for existing ISVs in rationalizing their new SaaS prices with their existing products). 

Of course, SaaS products aren't priced in a void.  They must be priced in an existing marketplace and compete with existing and potential products.  First entrants have the privilege of establishing the price point if they have a compelling product and it is sufficiently differentiated that products in other SaaS markets have not already set a pricing ceiling (or floor).

Often (too often) we see great products that have few SaaS competitors pricing their products way too low because they don't understand the value of their product to their customers.  If their is no SaaS competitor and your traditional SW competitor is charging $100,000, $10,000 is not a great price, it's a dumb price.  The customer would be happy to pay $25,000 or $35,000 for a well-featured and supported SaaS product.  Discussions with analysts and potential customers, testing for the appropriate price point in advance of product launch, can substantially affect what's available for the product price (and how soon the company might reach break-even).

On June 25th, I'll be speaking at a Webinar on Profitability:  SaaS Versus On-Premise Solutions, presented by Aspire Systems, an Indian firm that works with ISVs.  Please consider joining me.  Here's some more information.

SaaS is being increasingly adopted and is even considered a savior model in this economy due to the zero upfront CAPEX for buyers. Still the question remains if SaaS is a profitable model for solution providers? Regardless of the longer sales cycles, is the on-premise solution providing faster break-even?

Some of the topics being discussed are:

Cost factors – developmental, operational and marketing costs
Revenue factors – sales cycle, pricing models, etc.
Benefits/drawbacks of both the business models
Will a hybrid pricing/delivery model provide better benefits?

  Panelists:

Amy Wohl of Wohl Associates

Alex Ginger, Director of Active Operations Management International, a SaaS provider

at SaaS: Computing in the Cloud”. It is both an overview of the SaaS market and a series of recommendations for ISVs, platform vendors, and customers who want to participate in it. The centerpiece of the book is 22 interviews Amy conducted with these market participants, illustrating the state of the SaaS market and its direction.

   

Alex Ginger
Product Development Director, Active Operations Management

Registration is FREE!

Space is limited
Reserve your Webinar seat

June 25 11 am ET:

Register

June 16, 2009 | Permalink | Comments (2)

Head in the Clouds

 

In case you're wondering what I'm up to, I'm reading everything I can find about clouds and interviewing lots of companies (vendors and a few users) about their cloud offerings and their plans.

The hype level is beyond amazing.  I know that there is a point in any successful technology where it is used to label everything, because it's so good at attracting positive attention, but I think we're close to reaching the saturation level here.  I hope so.  If everything is a cloud, then it gets very hard to see anything!

The confusion level is high.  Everyone who is looking at clouds as a buyer, a seller, or a commentator (press, analyst, consultant...you name it) has their own definitions.  I have a rule here.  If you want to communicate with somone about clouds on a serious level, exchange definitions first.  Otherwise, you may just be talking past each other.

In my research (I feel like a graduate student on a quest) I have found a lot of great stuff and some real trash.  I'd like to point you to some interesting stuff while I continue my research project.  I'm nearing the end of this phase and I'm going to tell you what I think soon, but I can't resist passing on a few goodies:

There is no agreement on what a private cloud is.  It might be a new architecture for a data center, it might be a new way of architecting part of a large enterprise's data center when certain workloads are present, and it might be  privately owned public cloud.  I'll talk about all of those in my second cloud computing article (the first is on IBM's cloud computing portfolio), but in the meantime, you might enjoy an interesting glimpse into one problem in determining whether an enterprise should consider a private cloud:  what kind of workloads that private cloud would process.  Try this article from Kenneth Oestreich at The Fountainhead on questions nobody's asking re cloud applications.

Or you could read this article from Treb Ryan at OpSource (he's definitely an interested party since he sells platforms to ISVs that could be considered public clouds) about why a private cloud isn't really a cloud.   I can see where he's coming from, but I just spent an hour on the phone with a CIO who's building his own cloud (from a thousand servers and a lot of open source software) and he can make a very polished argument for why he's got the benefits of a cloud.  I think the jury's out on this one and a lot depends on (as Ken Oestreich suspects) what you're going to run on that cloud.

So back to the books -- actually to another hundred Internet posts.  I'll have more than hints for you by next week.  

May 27, 2009 | Permalink | Comments (6)

McKinsey got it wrong: Cloud Computing is for Enterprises

This week I spent several days at the Uptime Institute's Symposium 2009, a conference where facilities management meets IT.  The focus for this year's conference was on Green.  I spoke several times, moderatig a panel on outsourcing versus cloud computing, and giving a mini-keynote on SaaS and Cloud Computing.

At that conference, McKinsey announced a report on Cloud computing, claiming that the economics only made sense for small and medium sized companies but not for enterprises with their own data centers.  The analysis then compared the cost of using Amazon's service with the cost of a typical data center.  McKinsey also assunmed that the firm would move all of its computing to the cloud -- we don't know of any organizations that plan to do that.

As you might guess lots of conversation and controvery ensued.

I guess I'd say they don't understand.  Cloud computing may not be cheaper if all you're looking at is a comparison of hardware and an assumption of people costs.  The value of cloud computing lies elsewhere:

  • In the flexibility of being able to gain immediate access to additional computing (or to shrink your system when you don't need it).
  • In the difference in Time to Market for new business opportunities.
  • In the additional value (not included in the McKinsey study) provided in clouds that offer to manage the hardware (via systems software and other offerings) or to provide applications (SaaS). There is a brilliant explication of this by Balakrishna Narasimhan which I recommend.

Many large companies are already taking advantage of SaaS -- Workday, for example, has clients for its HR and Financials with more than 20,000 employees.  Public clouds can be ideal places for large companies to use specific applications or obtain additional capacity.  Private clouds (which may not be clouds at all, in the sense that the organization may own the hardware and software rather than temporarily rent its use) are intended primarily for large enterprises.  I am certain that schemes which will make these private clouds into capital-free propositions (if not available on a month-to-month basis) is available to any customer who requires it. 

I expect clouds to be popular under any circumstances.  Given our current financial probems, I expect them to appeal to a broader audience, especially to large enterprises. 

April 17, 2009 | Permalink | Comments (3)

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Recent Posts

  • SaaS can Make Things Greener
  • Cloudosophy
  • Worries about the Death of IT (in the Cloud) are Just Hype
  • Evaluating the Role of SaaS Solutions and Traditional SW Vendors
  • Too Much Information; Not Enough Time
  • Chrome: Consider how you use computing now
  • The Seriousness of SaaS in the Enterprise
  • Pricing SaaS Products
  • Head in the Clouds
  • McKinsey got it wrong: Cloud Computing is for Enterprises
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