Software as a Service (SaaS)

Yup, here is another overload of the term "service", and as can be expected many people get it wrong and think that SaaS=SOA. Which of course it isn’t the case.

SaaS is about taking outsourcing to the next level. Instead of outsourcing the development of system why not outsource IT. SaaS is the new incarnation of Application Service Providers. In the previous round, we had someone who supplied the hardware and each subscribing company would have their own software running on the ASP’s machines. In this round, we are talking about more advances solutions where you have "multi-tenants" -- the same application can serve multiple companies while providing the necessary isolation, security, and customization.

Nicholas Carr with his (in?)famous paper IT Doesn’t Matter is probably one of the fathers of this approach. In this paper, Carr says that IT will not provide competitive edge as it used to for much long and it will become more and more like electricity -- a must, but not a strategic advantage. This is something that is already starting to happen. For instance, I know of a large company in the food industry here in Israel, which has a deal with hardware vendor where they get hardware much stronger than they would ever need and they pay by CPU consumption.

SaaS is taking this situation and extending it to software as well. And we aren’t talking about some distant future either -- it is already here. See for example Salesforce.com.

There are few applications where this can make sense. For instance, how different is your accounts payable from our's or their's? I think that ERP modules are a good candidate for SaaS as you have a very wide common denominator between different installations and they don’t really give you a competitive edge.

This can work pretty well for brick-and-mortar companies whose main business is not IT (to an extent; more on that later), but it won’t fly for companies where the IT is the business. For instance, I don’t see SaaS getting popular among banks or cellular companies.

Another aspect that would probably stay in-house even if SaaS would be popular (in my opinion) is Business Intelligence. I think while you may out source your operational data the trends and indexes you follow to make sure the business is on-track are still too strategic to entrust with someone else

What do you think?

[Editor's Note: For more on SaaS, see Software as a Service by David Dame. Also, take a look at the article in the April 2007 of Dr. Dobb's Journal entitled From SOA to SaaS by David Houlding. David shows how to grow a local SOA into a federated SOA distributed over the web to use and deliver SaaS. It will be posted on www.ddj.com shortly.]

Posted by Arnon Rotem-Gal-Oz at 01:16 AM  Permalink