Conferences Highlight the Emerging SaaS Cloud
One of the things that keeps IT interesting is the same thing that makes it so maddeningchange. Nothing changes as fast as hot technology in the early stages of the adoption curve. And while Software as a Service (SaaS) is actually the latest incarnation of application hosting, and therefore not strictly new, it has become a hot commodity in the past few years.
Open source, multi-tenancy, and service oriented architecture (SOA) have driven new delivery models that enable SaaS-based companies to provide quality applications at very reasonable prices. The outcome is that SaaS revenues overall are growing at an estimated 20% per year.
SaaSCon, one of the first SaaS conferences, has evolved along with the industry. 2008 was only the third year for SaaSCon, and the differences between the 2007 and 2008 illustrate how quickly the industry is evolving. While the rate of change within IT continues to escalate, SaaS is evolving particularly quickly. It has morphed from largely unproven technology to mainstream adoption in three short years.
Key Vendors Absent
One of the big changes in 2008 was vendors that were very prominent in 2007 were nowhere to be found. Three examples are Salesforce.com, Microsoft, and Workday. 2007's show featured keynotes and panel discussions showcasing the stars of the industry, including Jim Steele, president of Worldwide Sales and Distribution for Salesforce, Dave Duffield, CEO and co-founder of WorkDay, and Gianpaolo Carraro, director for SaaS Architecture at Microsoft. At SaaSCon 2008, none of the these vendors were sponsors or supplied featured speakers.
Where were they? Salesforce and Microsoft went to the show around the corner. There were two, count 'em, SaaS conferences on the West Coast within a month. SaaS Summit 2008, presented by OpSource, was conducted February 27-29 in
To be fair, SaaSCon and SaaS Summit each have a different focus. While vendors and end-user IT organizations were represented at both, SaaS Summit appears to be a more traditional vendor conference, with a speaker line-up very much reflecting the vendor constituency. SaaSCon was much more industry and end-user focused, with some excellent case study presentations by SaaS end users. Presentations by executives from Chiquita Brands International and Colorado Capital Bank were particularly intriguing, highlighting the fact that SaaS is being used very creatively in the enterprise space.
What about the defecting vendors? While it is certainly understandable that vendors might not want to exhibit at two west coast shows within virtually the same time frame, the proximity in time and space makes one wonder why there is a need for two relatively small SaaS shows at all. Does it have anything to do with the fact that SaaSCon is now affiliated with ComputerWorld, while the SaaS Summit is sponsored by OpSource?
To many SaaS vendors, OpSource is a partner as well as the home town wonder, one of the biggest and most diversified of the SaaS players. OpSource provides billing, analytics, on-demand hosting and other services to online and SaaS vendors throughout the maturity spectrum. Vendors transitioning to the on-demand world, as well as those engaged in full-fledged SaaS delivery are customers and partners. This reflects the SaaS marketplace itself, which is very much one of partnerships and interdependencies.
While these vendors certainly compete with one another, they are also much more symbiotic than the ISVs of the past, purchasing SaaS components from each other for delivery as part of their own branded services. This interdependency is one likely reason for the diverging paths of the two shows, and for the fact that vendors seem to be gravitating towards the OpSource sponsored conference.
Beyond the SMB
SaaSCon 2008 also drove home the fact that SaaS is not simply an SMB play, but is penetrating the enterprise. The SaaS value proposition is ready-made for small to medium sized businesses (SMBs) that are struggling to deploy and maintain increasingly sophisticated business applications with limited access to skilled technology specialists. SaaS offers comparable IT applications, supported by world-class talent, at a fraction of what it would cost to host them on site. SaaS has moved beyond the SMB, however.
Manjit Singh, VP and CIO for Chiquita, presented a particularly impressive story. His point was that "best of breed" has evolved from being a collection of stand-alone, enterprise vendor products towards becoming integrated platforms combining on site and SaaS solutions. However, both types of applications must be architected for integration.
Once SOA is deployed within an IT organization, SOA services can be leveraged as integration points for both on premise and cloud based services. This approach has enabled Chiquita to assemble best of breed applications, while leveraging SaaS where it makes sense. At the same time, they have made a conscious choice to keep key internal applicationsfinancials is onein-house. Chiquita is delivering non-core services very cost effectively; freeing up personnel and funding for critical, business differentiating applications.
Gaining and Losing
While Salesforce was not in evidence at SaaSCon, Ariel Kelman, the company's senior director of Platform Product Marketing, did present at the SaaS Summit. RightNow Technologies, a Salesforce competitor in the CRM space, was part of the IBM Partner Pavilion at SaaSCon. Salesforce recently posted 2008 earnings growth of approximately 50% over 2007 earnings, a blockbuster year by anybody's standards.
In contrast, RightNow may be losing ground. Its 2007 revenues were relatively flat over 2006, and the company posted a net loss of $18.6 million in 2007 compared to a 2006 net loss of $5 million. It is interesting to note that neither company sponsored either show, prompting one to wonder whether SaaS-based CRM is now so main stream that neither feels pressure to mix and mingle with the rest of the industry.
In contrast, Absolute Performance sponsored both showsof particular interest to those of us who cover the Enterprise Management space. Absolute Performance provides robust SaaS-based IT infrastructure and business application management services. On site enterprise management solutions, particularly suite based solutions that cover multiple technologies, are notoriously complex to deploy and maintain. Absolute Performance offers online alternatives that are monitored 24/7, eliminating the need for IT organizations to hire and maintain enterprise management experts for around the clock support coverage. Klir, a competing solution that was extremely visible in 2007, was not represented at this year's show.
Finally, Workday, Dave Duffield's encore to the PeopleSoft enterprise resource planning (ERP) suite, was also curiously absent. Duffield was a featured speaker at the 2007 SaaSCon show, when he indicated that Workday would be competitive to SAP by Q2 2008. If this were the case, it is likely that we would have had an update this year. This in itself makes his absence noteworthy.
The State of
SaaS by its nature is an enabler for flexibility and business agility. Ten years ago, companies deploying CRM or ERP spent months or years implementing and millions in consulting fees. Today, any company connected to the Web can purchase CRM services online. Or they can purchase Geoprise or NetSuite ERP services, and be up and running immediately.
Such services are not as customized or functionally rich as Siebel (Oracle) or SAP but, at the same time, the IT industry has learned that "good enough" has its advantages. SaaS brings agility and simplicity to an industry known for its complexity, and adds a lightweight option that can be mixed and matched as part of a portfolio of service offerings. This is a refreshing change in the enterprise space and will be viewed in the years to come as a change as profound as the move to Web-based systems in the mid-to-late 1990's.
At the same time, the SaaS industry is changing. Even a year ago, SaaS companies were much more clearly defined in terms of organizational borders. One year later, there seems to be much more cross-pollination, particularly across the underlying delivery platforms. The lines of demarcation between SaaS companies are less clearly defined than those of traditional vendors, as SaaS vendors rely on hosting providers for data center services, re-sell their services to other SaaS vendors for re-branding and subsequent re-selling, and turn to online partners for billing, customer onboarding, enterprise management, and/or reporting.
In much the same way as businesses of all sizes are leveraging SaaS as part of a best of breed delivery strategy, SaaS vendors are leveraging each other to deliver their own services as cost-effectively as possible. SaaS is becoming a true cloud instead of a collection of diverse platforms. Like a cloud, it is constantly changing, somewhat chaotic, and amorphous. SaaS offerings are growing exponentially, intertwining, and maturing, and in doing so driving new enterprise application deployment models. In the end, consumers can only benefit from this evolution.
Julie Craig is a senior analyst with Boulder, Colo.-based