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Software as a service, or SaaS, is a confusing term that means different thingsto different people. To the consumer, it may mean the ability to buy anddownload desktop software using the Internet, or to pay an annual fee tovendors like McAfee or Symantec for keeping desktop virus definitions up todate via the Internet. At the other extreme, for a business organization, itmay mean purchasing Internet-based application services from a third-partyvendor.
Broadly speaking, SaaS can be broken down into three maintypes of service:
On-demand software purchasing
On-demand IT service-oriented architecture (SOA)
On-demand application services
Some industry analysts describe the on-demand applicationservices model as SaaS 2.0, because it extends the capabilities of earlier SaaSinitiatives. An on-demand application services vendor may, for example, supporta SOA for providing easier access to the services it offers.
Two key characteristics of SaaS 2.0 are:
- Network and Web-based access to commercial software computing services where the processing is done on a third-party server, rather than at each customers location.
- A tenant-based pricing model for hardware, software, administration and consulting services.
Services for printing photographs, providing searchcapabilities or checking e-mail for spam and viruses are examples of SaaS 2.0for the consumer. These services may be paid for directly by the consumer, orindirectly through advertising revenue (as is the case with Google, forexample).
For commercial organizations, SaaS 2.0 could involve theoffloading of front-office and back-office business processing to athird-party. Salesforce.com is a good example of a very successful SaaSprovider in this category.
A survey (SaaS 2.0: Software-as-a-Service as Next-GenBusiness Platform, Saugatuck Technology research report SSR-239, April 2006) from Saugatuck Technologyindicates that 12 percent of U.S. companies have at least one major SaaS 2.0application in use, with an additional 13 percent currently designing, prototyping or implementing their first SaaS application. Another 14 percent are planning to doso later in 2006 or in 2007. Saugatuck expects continued strong provider growth over the next 18 months, especially among application providers such asEmployease, NetSuite, PerfectCommerce, Right Now Technologies andSalesforce.com. The Saugatuck survey also indicates that small and medium-sizedbusinesses (SMBs) are a key driving force in SaaS adoption. SMBs are embracingSaaS at twice the rate of large enterprises. (A summary of this research can befound on http://www.sandhill.com/opinion/editorial.php?id)
TheBusiness Case for Saas
At firstsight, SaaS 2.0 appears to be another version of the application serviceprovider (ASP) model that failed miserably after the dot-com bust. There are,however, some important differences between the two models. The first is thatthe ASP model focused primarily on giving an organization the ability to movecertain application processing workloads to a third-party managed server.Unlike SaaS, ASPs were not necessarily concerned about providing sharedservices to multiple tenants. Also, most ASPs did not have a significant amountof application and business domain knowledge about the applications they wererunning. SaaS providers, on the other hand, usually have a large amount ofdomain expertise.
Another difference between the ASP and SaaS approaches is that most ASP-supported applications were monolithic client-server programs with simple HTML Web interfaces. Todays modern SaaS solutions, however, are designed for the Web environment, which improves usability and manageability.
One reason why the SaaS 2.0 model is finding more traction than the ASAP approach is because ASP vendors rushed their offerings to market before performance, security, customization and integration issues were solved, and before many IT organizations were ready to adopt the ASP model. Today, many of these problems have been solved. Both IT and business users are better equipped to take advantage of SaaS. IT experience with Web-based and services-oriented technologies is improving, and business needs such as compliance legislation are providing the momentum for companies to adopt an SaaS approach.
How Will
SaaS 2.0 Affect BI?
Business intelligence (BI) vendors are beginning to recognize the importance of SaaS, and the need for BI capabilities in the SaaS environment. Several BI vendors, for example, support the Salesforce.com AppExchange program, which allows customers to develop applications for use with the Salesforce.com CRM service. SalesForce.com also provides interfaces for moving data into and out of the CRM environment. These interfaces can be used to capture Salesforce.com data for an organizations enterprise data warehouse. Informatica has a close working relationship with Salesforce.com for providing data integration services in this area.
Another direction of the business intelligence industry is for vendors to offer their own SaaS offerings. Business Objects recently announced Crystalreports.com, which enables customers to post reports to the site for viewing. Automated e-mail alerts are generated by the service to inform interested parties when new reports are available. The Business Objects service is aimed at companies that need to distribute reports to third-parties, but who dont have the IT resources to develop the infrastructure for managing and securing report distribution. This approach provides a more secure and more efficient alternative to using e-mails containing Adobe PDF report files, for example.
SAS also recently joined the rush to join the SaaS movement with the release of several on-demand business intelligence services. These include access to its complete BI platform, along with supplier relationship management, marketing automation, Veridiem marketing relationship management and anti-money laundering.
Several new business intelligence vendors specializing specifically in SaaS have appeared in the marketplace. Oco Inc., for example, offers its Oco Majik service for producing product, sales and customer analytics. Another example is Host Analytics that provides a Web-based service for business performance management in budgeting, planning, forecasting and financial consolidation.
In summary, there is a clear market direction toward the use of SaaS for providing on-demand application services. This is especially true in the SMB marketplace. This direction is encouraging BI vendors to join the SaaS movement by either supplementing application service vendor offerings, or by producing their own SaaS BI solutions. Regardless, as companies move toward the use of SaaS, they must carefully evaluate the impact of this on the overall enterprise business intelligence system.
About the Author:
Colin is the Founder of BI Research. He is well known for his in-depth knowledge of leading-edge business intelligence and business integration technologies, and how they can be used to build a smart and agile business. With more than 35 years of IT experience, he has consulted for dozens of companies throughout the world and is a frequent speaker at leading IT events. He is also conference chair for DCI's Portal, Collaboration and Content Management conference. Colin has written numerous articles on business intelligence and enterprise business integration. Colin has an expert channel and blog on the B-Eye-Network and can be reached at cwhite@bi-research.com
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