SaaS and SOA

A lot of information is available on the relevance of SaaS and SOA. Wikipedia quotes SOA as "In computing, the term service-oriented architecture (SOA [pronounced "sō-uh" or "es-ō-ā"]) expresses a perspective of software architecture that defines the use of loosely coupled software services to support the requirements of the business processes and software users."

The services in SOA are not tied with a single consumer application and is built for a generic usage. This introduces a lot of complexity to the service, the consumption of these services can be in the most un-intended way and the scale of usage is almost un-predictable during the development time. Traditionally enterprise software has been built for a benchmarked number of users and their scale out attributes at a service level are never taken care seriously. When these Service-oriented applications are put in a SOA infrastructure there could be serious performance problem for most of the services and also the infrastructure where these services are deployed could either be over-sized or under-sized.

Consider Saas, the applications are designed for un-predictable load and service orientation is the heart of their architecture. The core SLA for the services on the web is performance and availability. SaaS applications are built from the ground-up to ensure these SLA's. In SaaS, the customers are not going to be concerned about Scalability of the application, as it is primarily the concern of the service provider. This better aligns with the need of an SOA enabled enterprise, where the scale of usage is unpredictable and volatile.

Once enterprises starts adopting SOA extensively, they might find that the services offered in the cloud aligning better with their objectives than the on-premise services.

Office 2.0 - Are we on the right track

Today a lot of Web office products are proliferating the market. The benefits they claim are
1. Free Software
2. Easy collaboration
3. Easy access to content as they are always online
4. Easy to publish and so on...

The core question i have is why should the authoring environment be on-demand. Today we have MS-Office which has been under innovation path for more than a decade now and is highly matured and also few other open source alternatives are available. Features like Collaboration, Online publishing and document storage should be provided as service and the authoring system should still be in the desktop (Like Windows Live Writer). Look at the computing power and storage we have right now in the desktop, i think there should be some tools that run on the desktop to justify this and the first choice would be Office. Even mobile devices today have huge storage and processing power.

Now if the problem is price of the software, look for an alternate pricing for desktop office suites, build subscription based pricing (Norton antivirus has this model today, for its desktop anti-virus). The other option is to consider open source office products that run on desktop. I think open source in this space is very matured today to be put for commercial use.

The only place where weboffice tools in its current form (hosted authoring environment) might find a fit is when office capabilities (say XL) are required to be integrated in hosted enterprise applications. This requirement could be solved by a re-usable Ajax component, which could be embedded with in these hosted enterprise applications.

Office is a productivity tool requiring sophisticated features to transform data, integrate various document types, write VBA scripts and so on. Let's not deprive the users the power of office by taking everything to the web.

Please let me know what you feel.

Benefiting from Customer Association

One of the core benefits for SaaS vendors is the long term association they have with the customer. The value provided by SaaS vendors are same throughout this association, where as in traditional on-premise software the value once software is delivered and implemented gets reduced to mere support.

Now through the continuous association that's possible now, SaaS players should continuously identify ways of delivering enhanced value to their customers. For example consider an offshore services company today - they start their association with their customers say through testing or maintenance of some application, then slowly extend to other parts of customer's IT landscape and try to get as much of applications outsourced and ultimately the value delivered increases over the period of association.

SaaS also is considered to be a form of outsourcing and the vendors have opportunity to serve the customer with more value as they go along.

Consider a HRMS application provider, he can always sell outsourced BPO services related to HR to his existing customers. This not only provides additional revenue opportunity for the service provider, but also enhances relationship with the customer by impacting him across multiple touch-points and could be a positive way to retain your customers.

Open Source applications

People have been writing a lot about the open source of late and there has been a wide spread adoption of some of the opensource tools and operating systems world wide.

The way people consume these open source software suggests that they adopt open source only because the software comes for free. No one actually edits the code and tinkers with it. Now, such software only eliminates the upfront license cost and do not reduce the TCO, there has been many reports available which proves that open source is not completely free. There are still maintenance cost and infrastructure cost that are incurred in open source.

To me, open source will be successful in the platform, tools layer, but not in applications. Even though there are few successes, they are highly fragmented and still not as powerful as a Linux or a JBoss or an Apache wave. SaaS based applications are much more beneficial in reducing the TCO and also removing the headache of managing the applications. We need to wait and watch for companies like SugarCRM, which is an opensource and an on-demand vendor.

SaaS enablement for Business Services companies

There are a lot of SaaS enablement service offerings from various enablers today. which are primarily targeted towards ISV's. One of the major focus area to me could be business services companies. Companies who provide business services on non-core but critical functions of enterprises could well be targeted for SaaS. Lets assume a transportation / logistics company, who provide business services in the area of logistics could be a potential candidate to sell SaaS, some of the examples like ADP acquiring employease is a clear indication towards this trend. Its time enablers think beyond ISV's and target Business services market, and create something interesting for them.

Technorati tags: SaaS, Software as a Service, Business Services

SaaS Pricing - A Web 2.0 Approach

Pricing in the SaaS world still reflects more like an on-premise version. SaaS applications are still sold as Standard, Professional and Enterprise version at different price.

Lets look at what email as a service providers do, take for an instance yahoo, it provides basic email services free of cost to the users, now for most of us who use yahoo for our personal emails , the basic feature set is more than sufficient. Yahoo generates revenue for this basic service through their ad program.

Now, for people who don't want to be disturbed by the ads and who want premium service levels, higher storage, POP access, it charges such customers. Now is there a lesson here for , SaaS providers? of course yes !

SaaS applications can be adopted by individuals to make their work more effective, on other other end of the spectrum it is adopted by enterprise to automate a specific business function, now why should we charge in a similar way to both, the individual might not require the SLA's like an enterprise, they might not access the services through webservices, they don't have any huge integration requirements and of course will not have problem if you serve them ads, so give them the service free and charge the enterprise, differentiate using the service levels and feature.

Technorati tags: SaaS, Software as a Service, Web 2.0, Pricing

Strengthening social fabric - Key to Web 2.0 success

Web 2.0 is considered to be a open platform where the customers or users are never locked in. But with new monetizing opportunities, no Web 2.0 companies would like to loose their user base. Attractive and unique services, will provide only initial success and help to attract new customers. Once you get these customers it is very important to tie him into and spin a strong web around him, so that he wont leave.
Web 2.0 is about bring people together, knitting them in multiple ways and strengthening the relationship. Consider yahoo as an example, see how it brings people together, through multiple channels - email, chat, photo sharing, groups and so on. Even if a new better email application arrives, Yahoo customers will not be willing to move to the email system as yahoo has enabled multiple channels of connect for its users and they are already using them and have created a strong binding with the people who matter to them. Moving to a new provider will be a major disruption for these users.
Technorati tags: Web 2.0, Social Fabric

Service Delivery platforms - The CRM for SaaS

One of the core requirement for SaaS companies is to have a strong service delivery platform. These platforms are the self service platform where customers can provision the service, perform basic user management, monitor their usage, get their bills and so on.

To me it looks like CRM for SaaS. Most of the CRM implementations today are moving towards self service. It makes most of economy sense to move to a self-service as the number of customers increases. For SaaS as cost is a very important factor and to have persons attending to individual customers is going to only increase the cost, hence it makes sense to create a self-service portal for customers.

In fact, the service delivery platform like JamCracker today talks less on the self-service for customer support and training, that should be the focus going forward in the service delivery infrastructure. And since SaaS and Web 2.0 has a good linkage, community driven support / training, where users help users should be the way forward.

I think it will not be a bad idea to take some of the self-service CRM product and try it out for Service Delivery.

Technorati tags: SaaS, Software as a Service, Web 2.0, JamCracker, CRM, Self-Service

On-Premise to On-Demand

In the recent past, we find some of the traditional software vendors moving to on-demand based offering. One of the major growth drivers for these companies is their existing on-premise customers. Companies like SAP, which has a huge 30+Billion $ revenue today, might make it attractive for its existing on-premise customer to move on-demand -- in fact, its hybrid model where the same software can run both on on-demand and on-premise make it very attractive and easy to do this.

But, there is a catch, what will happen to custom applications or extensions these existing customers have built around these software, unless SAP or other major vendors are able to provide a platform and a migration path for these applications to make them also co-exist in their on-demand system, they will not be successful in migrating these customers to their on-demand eco system.

I would be very-much interested to see how majors like SAP provide a migration path for their existing on-premise customers.

Technorati tags: SaaS, Software as a Service, SAP

Overcoming some of the challenges to move to a SaaS model - for ISV's

Some time back Padmajaya has posted a long comment in my post, due to my engrossment on other activities, I was not able to respond immediately. This post will cover some thoughts and also open up new areas for future discussion

Padmajaya:Typical blockers that come to my mind when I think of going for SaaS are the limitation towards customizations and integration with data contained within the organization. Do you have any suggestions on how this can be taken forward?

My thoughts: With regards to customization, it is a myth that SaaS application do not support customization. They don't support customization in the traditional Way of allowing people to modify ASP / JSP pages, they allow what is called as meta-data based customization, this might not be as flexible as the traditional model, but should be sufficient for most of the customization needs. Today multiple vendors provide different depth of customization capability, some stop with the UI, some have data model customization and a few like salesforce through app exchange is enabling you to customize the entire process flow.

Integration with Data inside the organization -- We see some SOA solutions like the one from BridgeWerx, to address such requirement - Integrating the data / application across the firewall. But this is definitely an area which requires more attention today.

Padmajaya: ISV's wishing to enter this space must find a way to acquire significant networking skill either directly or through partnering with hosting vendors. What is the confidence or comfort level with which this can be achieved for an ISV?

My thoughts: OK, if I understand your question correctly, you are asking about managing the infrastructure for hosting and delivery. Today few ISV's like SFDC have acquired this capability, but i am sure through hard way. We see a lot of hosting providers in the market offering such services focused on SaaS ISV's. IBM, Opsource are some of the few companies which are into this business. I feel that it is better to outsource operations and hosting and ISV can focus on innovation and making their product better.

Padmajaya: To what extent is the disaster recovery support given to each customer? How will the pricing model be considered in those cases?

My thoughts: Customers own the data, but it is providers responsibility to ensure that the data is safe and protected. This is a basic requirement for SaaS and should be a part of the SLA agreement. This cannot be priced separately as it is a part of the basic package.

Padmajaya: How is the security model been shared between the internal and on-demand applications? To what extent is the exposure of the secure data and/or security levels advisable or safe to go about?

My thoughts: SaaS companies do not expose their data directly, they operate like a blackbox when it comes to data. But they provide ability for people to extract data from the application and use it for integration purposes. Informatica has come out with a product which will help people to integrate data from hosted application with the on-premise one. By not exposing the data directly, the providers have ensured that data is safe. I didn't understand your second part of the question, post it back as a comment and i will respond.

Padmajaya: Also it will be good if you have any suggestions on what are the easy steps for a ISV's of various levels (small-medium-large, products with lot of dependencies on other third party applications etc) to move to this on-demand mode.

My thoughts: There are multiple maturity models in which people can deliver the software as a service. It is not mandatory that the application should be multi-tenant, if we look at SAP, they advocate the concept of Isolated tenancy. But for the best optimization of your cost structure and hence your price, it is recommended you adopt Multi-tenant model. The only basic requirement i see is that the software should be accessible through the web -- but companies like Softricity through their application virtualization environment has shown us that even client server applications can be streamed into your desktop for usage, looks like SaaS. So, the answer to your questions is that there are multiple ways in which software can be delivered as a service through the web.

Do you want to provide a differential experience by adopting Multi-tenancy, Service orientated or just host a SoSaaS like how Phil Wainewright calls them is left to the discretion of the ISV

Technorati tags: SaaS, Software as a Service, SaaS Challenges

Making the web ready for Enterprise users

We find that the consumer web is highly matured and we find a lot of consumer focused applications being hosted and created in the web every day, examples being Google, myspace, youtube and so on. On the contrary, enterprise web is still appears to be a long term vision and here is why

1. Today's web 2.0 applications are generally point solutions addressing a specific business or consumer need. Business needs solutions that are an aggregation of such point services. Today there is no standard platform available in the web to provide such mash-up services and no major service providers or vendors who specialize in building mash-ups based applications. Even assuming something like this happens, enterprises would end up partnering with multiple service providers and managing the portfolio of the providers will be a big challenge.

2. Also, enterprise software needs capabilities to integrate and extend itself. Today there are no standard popular platforms that would help enterprise to integrate on-demand software with their existing on-premise applications.

Today we see some encouraging trends in both these spaces, for instance

• Informatica has a on-demand data integration platform designed for on-demand applications - of course application provider should provide support for this
• SQS - Simple Queue Service from Amazon provides a reliable queue service in the cloud, which can be used for Asynchronous integration requirements
• BridgeWerx has an SOA solution to integrate on-demand applications and on-premise application on a single SOA platform.
• Jamcracker is trying to create a role for Aggregators through its JSDN. But still, integrated pricing, SLA's is still a dream.
• Today we don't have SaaS applications in all domains, currently we see major adoptions only in domains like CRM, Spend Management, HR, Collaboration. We should start building applications in other areas covering the entire spectrum of Business users.

Once we have some major players providing integration platforms and aggregation platform, the web (2.0) will become better equipped to meet the needs of enterprise.

Technorati tags: JSDN, BridgeWerx, SQS, Informatica, Web 2.0

Amazon Utility Computing Service EC2

Amazon recently announced the availability of its Utility computing service EC2 (Elastic Compute Cloud). Using this service users can provision computing power from Amazon on a usage based pricing.

Currently you can provision this service in the measures of server instances, where one instance is equal to 1.7Ghz Xeon CPU, 1.75GB of RAM, 160GB of local disk(10 cents per instance hour - approximately $72 per month), and 250Mb/s of network bandwidth. Users can provision additional storage and bandwidth based on the requirement (20 cents per GB of bandwidth and 15 cents per GB of storage). You can scale your instance power on-demand by making just a few webservices calls from your application. So the infrastructure is scalable on-demand and is also highly available.

With this service, the world is wide open now for innovators in the Web 2.0 space. There is no need for entrepreneurs to incur any capital expenditure and can start building and offering new services at a highly predictable monthly cost.

Also, there are some new business opportunities that are available around this, the current architecture of EC2 doesn't have enterprise class capabilities like support for clustering, Grid and so on, in near future we can see some solutions built either by Amazon or other vendors. Also, there could be some new type of service providers who could provide pre-built images of some enterprise applications with associated support and management services. An example of this could be - A Hosted Application management provider adopting an open source enterprise application like Sugar CRM, host the image in EC2 and providing it on a subscription based model to end customers - A cool integration between SaaS and Open source. There is a huge long-tail opportunity here.

The service is still in limited Beta and we still don't know when Amazon will launch the service officially. Even though there has been similar services available today from vendors like Sun, this service differentiates itself through its simple to use webservices based approach and also the ability to pay separately for additional storage and bandwidth needs.

Technorati tags: SaaS, Software as a Service, Amazon's EC2, Open Source, Web 2.0

Increasing customer stickiness

In my blog on SaaS challenges, i had mentioned that one of the key challenges that ISVs face today is "Customer Retention". Lets look at some of the possible ways to retain customers

1. Provide some on-premise features like backup of critical data
2. Provide capabilities for the customers to integrate their application / data with your hosted product. Today we are seeing on-demand integration products from BridgeWerx and Informatica which would help you to do this.
3. Usability is a key aspect, customer should find it very intuitive to use your service. Google bosts of a simple user interface as one of the reason why it is able to retain and attract customers
4. Expose all your features also through well documented web-services
5. Provide confidence to the customer about the quality of your service by providing rich SLA's
6. Instill confidence in him that he will be able to leave you at any point of time by providing a transition path as a part of contract
7. Provide a platform for him to extend your features
8. Make your application truly multitenant and ensure that the application has high responsiveness in the order of milli-seconds
9. Make the application easily customizable through meta-data.
10. Last but not the least, price it attractively for the customer, be more innovative than the user/month pricing model

There is still a lot more to this list.

Technorati tags: SaaS, Software as a Service

A Critical view on SFDC acquisition of Kieden

In my post The Power of App Exchange I had covered about the positive aspects of the acquisition of Kieden by Salesforce. On a second thought, i think that Salesforce as a platform provider should not have done this. As a platform provider people expect Salesforce to be neutral with all its partners. Assuming there is one more competing application (to Kieden) hosted on Salesforce.com, by this acquisition salesforce will almost kill that product. Appexchange was created for partners to build complimentary applications to Salesforce's CRM application (and now extended to ISV's through their OEM edition), partners have spent time and effort in innovating such complimentary services. Assuming salesforce builds/acquires some of these services into its application natively, the partners will be forced to sell their services against SFDC's services, which will be impossible. I think its time that Marc Benioff recognizes the potential of the platform and eco system he has built and not try to destroy it.

Technorati tags: Salesforce.com, SFDC, Kieden, Marc Benioff, AppExchange

Mashup between Business Services and SaaS

Business Services and SaaS are complimentary services. Business Services could be the next logical step for a SaaS company once the revenue opportunity plateaus.

The recent intended acquisition of Employee Ease (A SaaS provider for HR apps) by ADP (A business services company in HR space)is a significant move in this area. There is a good opportunity for increasing revenue from existing customers by providing complimentary services.

Its time that offshore BPO's in India also look in similar lines by extending their outsourced BPO services with SaaS capabilities, using which they can provide better value to the customers and hence increase their revenue potential and also will help them to productize their service offerings.

Technorati tags: Employee ease, ADP, offshore BPO

The power of App Exchange

Salesforce announced that they are acquiring Kieden, company which has a product to measure the effectiveness of  search engine marketing (Google). The software is hosted on App Exchange and the company is just 9 months old with around 45 customers. This acquisition might be the begining of a new trend where salesforce could acquire few of its appexchange partners to extend the feature of SFDC's CRM application. This is a tremendous motivations for smaller web 2.0 companies to create powerful mashups in App exchange platform and become acquisition targets for Salesforce.

Technorati tags: Salesforce.com, SFDC, Kieden, Search engine Marketing

SaaS Challenges

In the previous post, I had written about some of the benefits of SaaS. This post I will cover some of the challenges (as on date) associated with this model.

Challenges to ISV's

Revenue model: Revenue for a SaaS application is based on subscription or pay-as-you-go. By adopting to such a pricing model, It will take longer time for companies to break even than a on-premise software where couple of big deals will help them break even. Convincing the investors for a delayed but a sustained cash flow is a challenge (some good success stories like salesforce.com has helped to remove this inhibition).

Building the right Architecture: Building a service oriented, single instance multi-tenant application is a key to be successful. Unless the application is efficient for multi-tenant delivery, it cannot scale up and the optimization points will be limited. This will have an impact on the cost and subsequently in the price of the application.

Customer Retention: There is no lock-in for the customer in this model. Whenever the customer wants to use an alternate service provider, he can do it very easily, there is no/less switching cost. It is very important to keep the customer happy by introducing new services, increased usability, application performance and availability.

Sales channels: Still there is no clear definition on how VARs, SI's will have a role to play in this model. The sales channel is still not well defined and not perfected for better output.

Challenges to Customers

Security: One of the major concern for enterprise customer is Security. IT organizations still prefer to have control over most of their critical data. A few service providers are allowing customers to take on-premise backup of their critical data. This might be the way to go forward for critical business applications.

Loosely defined SLAs: Not many of the major SaaS provider have concrete SLA's . Also, when new applications are built by aggregating multiple services (from multiple providers), it will become difficult to have a single unified SLA across these service. Service providers delivering such composite applications are also limited as of now.

Re-aligning the IT organizations: Traditionally IT organizations have been actively involved in any software buying decisions. Now in the new model, people think that IT department is no longer required in the purchasing decisions, which might not be a right thing to do, as still they own substantial amount of software run in-house and there is a lot of integration needs between on-demand and on-premise software. A new definition of IT organizations role needs to be created.

Integration with Legacy application: Companies have already been used to the benefits of data integration and SOA. There are very few infrastructure tools available today to integrate on-demand solution and on-premise solution. Of-late we see a few solutions being created to address this space like Informatica on-demand for data integration and BridgeWerx Business Integrator for integrating on-demand and on-premise applications. Service providers should start supporting such tools in the future to increase adoption rates

The challenges doesn't end here, but the post does. If you feel that I have missed a few things, please add them in your comments.

Technorati Tags: SaaS, Software as a Service, Salesforce, SaaS Challenges, BridgeWerx, Informatica

Benefits of SaaS

This post covers what I promised before - benefits and challenges in SaaS. Let’s start with good things first and look at the benefits of this model.

Benefits to ISVs

1. Revenue is stable and is not driven by new releases
2. Since the services and products are marketed and sold via internet (search engine based marketing, aggregators like JSDN), the entry cost for ISV’s is less (except for the infrastructure to deliver the service, where the ISV’s has options of partnering with specialist and pay them also in a subscription / usage based model). Allows entrants to compete with biggies.
3. Its easy to get your customer – customers will be willing to try and adapt your services at a faster rate than the traditional software as their entry cost is low.
4. Better knowledge of the customer - Vendor gets immediate and elaborate feedback on the way his application is used by the customer. Such information helps the vendors to understand and provide what the customer is looking for proactively.
5. No need to maintain multiple version of the product on multiple environments
6. Distribution of upgrades is not painful
7. Options for new revenue streams around infrastructure, complimentary software and other service offerings especially BPO

Benefits to Customers

1. Pricing is based on subscription / value based (My colleague Sagar is writing a blog on Software Marketing. He has posted an interesting article on software pricing, if you are interested to read more click here). Hence the customer need not pay any upfront license cost and rather align his cost with his annual budgets.
2. Less impact in IT: As there are no deployment and implementation needs, there is less impact in the IT infrastructure and support. .
3. Quick and Reliable implementation
4. Rollout the solution before buying – all services provide an extensive trial period where in the organization can rollout a solution and test them in real-life scenario before buying
5. No lock-in - Customers have the option of breaking the relationship and moving to a different vendor. Since there is no upfront cost and the cost is primarily subscription based, if they find a better service or low cost they can always move
6. No need to pay for bugs in the application – traditionally the customers after paying for the software, also pays for the bugs in the software in terms of maintenance and support fees. In the new model the cost of hosting, maintenance and licensing are not separated, customer only pays a fixed subscription fees.
7. This new model has created a level playing field, in which the software tools which were traditionally available only to big players (reason being huge License cost, lack of IT support and infrastructure) is now available for SMB’s too

I will stop here for this post. We will look at challenges later. In the mean time if you feel that we can cover some specific topics in SaaS, do let me know.

Technorati Tags: SaaS, Software as a Service, JSDN, Benefits of SaaS

SIIA to Define SaaS

SIIA (Software & Information Industry Association) has launched SaaS executive council to define Software as a Service market space. The objective is to cover 4 key areas of Channel, Legal & Contractual, ISV, Marketing and communications

The output from the council would help the market understand the realities and opportunities presented by the “Software as a Service” model.

One of the key areas of focus is in the area of legal and contractual, there will be a huge expectation from this committee as there is a big gap today in terms of SLA’s, especially for free services. There needs to be a strong SLA for these Ad supported services as some of them are deployed in business functions as well.

Considering services from the likes of Google and probably Microsoft will be offered free, supported by Ads, there needs to be a strong SLA’s governing such offerings and in the end customer’s interest should be protected.

The group consists some of the pioneers and strong players n this industry like Salesforce, Opsource, Webex. Let’s wish them good luck!


Technorati Tags: SaaS, Software as a Service, SIIA, SaaS Executive Council

Welcome to the world of SaaS

SaaS -- Software as a service is a new buzzword in the IT industry. Many enterprise companies are using the new software delivery model one way or the other. This post will give a brief overview of what SaaS is all about.

Let’s begin our journey to explore SaaS

An often used example of a SaaS application is Hotmail -- an email service.

Let’s look at the definition of SaaS

From Wikipedia
"Software as a Service (SaaS) is a model of software delivery where the software company provides maintenance, daily technical operation, and support for the software provided to their client. SaaS is a model of software delivery rather than a market segment; software can be delivered using this method to any market segment including home consumers, small business, medium and large business." A good definition, which captures the key characteristics of a SaaS application 1. Delivered over internet
2. Installed and Managed centrally and not at the customer's site
3. Suitable for both SMB’s and large business 4. The other key characteristic for SaaS applications is that they are built to be delivered in a one to many model rather than a one-one model.

Let’s look at the evolution of SaaS

Traditional on-premise applications were installed and managed internally by the customers. This involved huge IT investments and managing a big IT team. In this model it was generally felt that the IT infrastructure was not completely utilized and they were not getting expected ROI from their investments. Also, Investing and managing a big IT infrastructure was a big challenge for SMB’s.

On-premise application solved one concern – the software infrastructure required to run a business function, but introduced new concerns on procuring and managing IT infrastructure. The customer who only required the software has to now invest on IT and support for the software – big overhead for anyone to use the software.

When some CIO looked at this and asked, why I should have a huge IT infrastructure, ASP’s were born, wherein the Service providers take care of hosting and managing the application. This still didn’t solve the CIO’s problem as his costs more or less remained the same, only his concern on managing the IT team and the software application got outsourced. ASP’s operated typically in a one-one model – A dedicated infrastructure and support for each customer, because of which optimization points were less.

CIO’s were still not happy as they didn’t get any major cost saving. This led to a new software delivery model SaaS (Software-as-a-Service), where the applications were delivered over internet, which were consumed in a one-to-many model. Pricing is primarily subscription based or based on the usage. The cost of software and the hosting fees are not differentiated; customers pay only for the software service they use.

Now can you relate to why Hotmail is considered as one of the first SaaS Application?

Let's look at benefits and challenges of this new delivery model in the next post.

Technorati Tags: SaaS, Software as a Service