Jana Technology Services Blog

October 31, 2006

SAAS: Forget the hype it’s here to stay

Filed under: Blogroll,SAAS,Web 2.0 Apps — janats @ 3:56 pm

The idea of Software as a Service (SAAS) is not new. It fomerly reared its head under the banner of ASP amongst other names and acronyms. So why is SAAS more significant and proving more alluring ? We would say there are at least three reasons:

1. Viability and the comfort factor: The outsourced service model has matured, and has a good record of success – Salesforce.com, Google, Netsuite, RightNow etc. Analysts an d VC’s are comfortable that these companies are going to be around in the future, and the Analysts are right behind the model.

2. The financial arguments for SAAS are conclusive. Using SAAS companies can amortise the cost of their software or infrastructure provider and turn it off or on based on demand. The model also allows them to average into things and to try out models that fiscally they may not be able to do in house. Companies can also change providers if the quality of service and cost are poor which puts the control in a companies hands rather than the software vendors hands.

3. The third is the change of the web itself. There had been very little change in browser technology since Microsoft released Internet Explorer. This meant that online application vendors had to work very hard to get online applications working because it was very complicated making an interactive application work within the browser.

Current SAAS providers such as SalesForce and Google are planning to build their own ecosystem of applications, hosted on their sites. SalesForce is already pushing ahead with AppExchange 2.0. Currently applications that can be built on AppExchange, a way for developers to build their own applications on top of Salesforce.com infrastructure, are still no match for applications built on top of Oracle or MS SQL. AppExchange 2.0 closes the gap.

SF have come up with a way to host both the data and the logic and according to Benioff, SalesForce CEO, this will go a long way towards being a fully formed web operating system. To maximise the power of this AppExchange needs more applications and to that end SalesForce is leasing a former Siebel facility in San Mateo, California with plans to turn it into an incubator for apps development. Cubes are to be leased for $20K per year to startups with onsite programmers providing help and support.

Amazon is probably not a company you would instantly associate with SAAS but they are offering an increasing number of Tech Services. Firstly there is S3, which offers digital storage at 15 cents per Gigabyte; EC2, which rents computing capacity to smaller web developers; Mechanical Turk, which pays humans to handle intelligent repetitive tasks, and this is without taking into account the 180K+ developers finding new uses for Amazon Web Services, including its E-Commerce code.

Benioff from SalesForce asks “do we really need to own everything. SAP and Microsoft tell them that they do. We disagree.” With the the economic way that Salesforce has been gathering momentum over the last few years, it seems that a lot of companies and users agree with him.

Here at Jana we have already seen the fruits of transitioning companies to an SAAS model. The transition can be painful and infrastructure has to be setup to embrace new revenue and marketing programmes, such as Affiliate programmes and web channel marketing, but we have already seen some amazing results with the companies that we have worked with.

As a revenue model, SAAS works. You aggregate users and have a predicatable revenue stream. From a user perspective they amortize their payment costs and have control and flexibility. Little wonder that SAAS has fuelled internet sites and development not seen since the late 90’s .com days.

1 Comment »

  1. Good article – SAAS is here to stay

    Comment by Dave Collins — October 31, 2006 @ 6:40 pm | Reply

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