I recently published a blog post about the benefits of using
subscription-based business models called "What
bike rental and the future of software have in common." Many
industries are going through a shift of revenue streams from traditional
one-time sales to products being provided “as a service” and paid via
subscriptions. In the software industry this is referred to as
Software-as-a-Service or SaaS. However, there is much more to this than just
switching from a perpetual license model to a subscription model.
The “false cloud”
Back in 2010, Salesforce.com CEO Marc Benioff warned
attendees at the Web 2.0 Summit in San Francisco to beware of what they called
‘false clouds.’ Benioff said “Companies hosting private cloud architectures do
not benefit from economies of scale that ‘real’ cloud offers.” Back then,
Salesforce.com's 77,000 customers were running on 3,000 servers spread over
three global data centers. Theoretically, 77,000 companies of varying sizes
would require at least 100,000 servers to independently run their CRM platforms
on-premises or in a hosted solution. This translates to an equivalent output at
only 3 percent of the infrastructure needed because of economies of scale and
more efficient hardware utilization.
Many software companies are touting that they can deliver
their software in the SaaS delivery model. However, what they are offering is
often not a modern multi-tenant cloud solution where all customers are running
the same software using shared resources and receiving software updates continuously
without costly upgrade projects. In addition, these are not true SaaS offerings,
where business users can configure functionality that would otherwise require
expensive and time-consuming development using conventional single tenant
software. These ‘false cloud’ solutions are often marketed as a ‘Private SaaS’
or a SIP (Secure Isolation Platform), but, in reality, are often just another
way of selling an on-premise software package as a hosted solution.
SaaS is much more than cost savings
The biggest drawback with the false cloud is not that the
customers are missing out on the economies of scale by not sharing resources, but
that they will not have a speedy deployment, a future-proof and configurable
solution, and the business agility that comes with a modern SaaS platform. 75% of
enterprise software decisionmakers surveyed by Forrester rated ‘business
agility’ as the top benefit of a SaaS platform, while another 72% rated ‘speed
of deployment’ as a key benefit. Saving money, getting better uptime, and higher
security are, of course, still relevant arguments for SaaS, but being agile and
fast is of even greater importance. This is especially true for software that
supports the rapidly changing processes in sales and marketing that can really reap
the benefits of the SaaS model.
Software-as-a-Service is not just your software running on
someone else's server. It is much bigger than that and should be an important
factor when you choose your software vendors going forward.
