Is the browser the new operating system? It is by no means a new
question, but it is certainly one that has gained in credibility in
recent years. That is down to an abundance of internet bandwidth
and a bewildering range of enterprise software applications made
available over the internet to end-user organisations by
software
as a service (SaaS) providers.
The argument in favour of SaaS goes something like this: if
employees are accessing software applications over the internet
from remote locations where they are managed and maintained by
third-party specialists, then in-house IT teams are relieved of the
time and cost burdens traditionally associated with keeping
software up and running on their own premises - along with the
infrastructure that underpins them.
"We have been told, or brainwashed, or hypnotised - you pick the
word which is right for you - to go down the infrastructure route,"
said Marc Benioff, CEO of SaaS market leader
Salesforce.com at the
company's recent European user conference in London. "Those days
are over. The world has changed," he said.
Given that his audience was largely made up of representatives
from companies who have already made some commitment to SaaS, that
message was bound to play well.
But bearing in mind the relative novelty of SaaS - in any mature
form, at least - it is likely that a substantial proportion of
those conference attendees continue to devote at least some of
their time to keeping in-house operating systems and hardware up
and running in order to support areas of their businesses that have
not migrated to the SaaS model. In short, the death of
infrastructure is less imminent than SaaS suppliers would have
prospective customers believe.
Nevertheless, in the face of fears about the global economic
climate, SaaS may look like a convincing proposition to those
companies that have still to test the model. Going down this path
eliminates the large upfront costs of new software deployment -
particularly in terms of OS licences and hardware expenditure - and
provides the opportunity to maintain applications without having to
necessarily increase IT headcount.
However, the SaaS market is unlikely be immune to closer
scrutiny of IT budgets, say many industy watchers. For example, at
Forrester Research, analyst Andrew Bartels says that SaaS is "not
necessarily a fitting remedy during a recession".
Although SaaS suppliers relentlessly tout the cost savings their
offerings can provide, it would cost businesses a lot more to rip
and replace legacy assets running on in-house operating systems and
hardware with SaaS products, Bartels says. However, he does concede
that investing in SaaS might offer lower upfront costs for a new
technology, where IT budgets allow for it.
Longer-range forecasts of the market for SaaS are more
optimistic. In a recent poll conducted by business communications
provider Colt Telecom, 88% of UK IT directors expect to increase
their use of SaaS by 2009. Analyst Gartner, meanwhile, predicts the
worldwide market for SaaS to grow from £3.2bn in 2006 to £9.7bn in
2011, when a quarter of all new software bought will be delivered
as a service.
Such figures suggest that sales of operating system licences and
new server hardware are bound to be impacted as companies
increasingly look to "the cloud" to deliver key elements of their
IT infrastructure.
Already, there's plenty of evidence to suggest that the trend
towards SaaS is impacting procurement behaviour in IT departments.
At hotel chain Malmaison and
Hotel du Vin, for example, rapid growth means that the IT
director, Mark Jelley, is under immense pressure to get new IT
infrastructure up and running whenever the company announces plans
to open new premises.
Requests are arriving on his desk thick and fast. In 2007, the
company opened four new hotels within a 14-week period. This year,
expansion plans will continue at a similarly break-neck pace. "What
I need, ideally, is a 'hotel in a box' IT system," Jelley
jokes.
SaaS provides the closest viable alternative to that ideal, he
says. "We use the SaaS model for many of our key applications:
staff appraisal, property management and stock control, for
example," he says. "If you can get a good SaaS partner, they are
doing all the hard work on your behalf when it comes to keeping
infrastructure such as hardware and operating systems up and
running," he says.
That said, there are still areas of the business that the
company is not prepared to place in the hands of a third party. An
example is the company's financial accounting system. "To my mind,
that is too dangerous. It is an area that we want to keep close and
that means keeping it in-house," says Jelley. But as and when other
new applications are needed by the company, he says, he will
certainly consider the SaaS model. "It makes absolute sense to me
to do so."
Meanwhile, at Rococo Chocolates, a London-based manufacturer of
luxury chocolates, finance controller Gerry Kerins is only too
happy to delegate responsibility for managing the company's
accounting systems to a SaaS provider - in this case, NetSuite.
For many years, he struggled to manage the company's accounts
using software from provider Sage based on a single PC in his
office. "Outside my office, the queues of people wanting access to
business-critical data were often longer than the huge queues for
our chocolates during the Easter rush," he says. "But the only
products offering the sophistication we required seemed to be
server-based, in-house systems, until we considered SaaS," he
says.
Having signed up for NetSuite, Rococo Chocolates has
circumnavigated the need to buy a server, operating system and a
new accounting package, he says - as well as the need to bring in
specialist IT help to manage and maintain them. "Why would I want
to be tinkering with IT equipment or paying someone else to come to
our offices and do it for us? SaaS gives us access to skills that
would otherwise be way beyond our reach," he says.
And another major worry has been alleviated at Rococo - the
back-up of vital data on a regular basis. "With our PC-based
system, backing up data was down to me. Now it is in the hands of
the professionals at NetSuite, who I am confident do a far more
reliable job," says Kerins. "I am probably happier with the
situation now because I do not have to worry. If I go on holiday,
the data is still there, being well looked after in the US and
available to our staff, whether I am there or not," he says.
Xhead: Punching above weight
For both Jelley and Kerins, SaaS is a way to outsource mundane
infrastructure maintenance in order to focus on addressing the
strategic needs of their business users.
It may also enable them to compete against much larger rivals in
their respective industries. Although small but fast-growing
companies often have IT requirements that are just as sophisticated
as larger rivals, say analysts, they have no desire to match the
huge investments in IT infrastructure typically associated with the
operations of high-end companies.
The viability of applications and systems capabilities delivered
over high-bandwidth internet connections, however, enables them to
go after the same business outcome that might be expected from a
high-end SAP or Oracle implementation.
By running these applications over the web - without the
maintenance, the installation, the licensing issues, the scaling
issues of ramping up and down user numbers - SMBs can get to that
outcome without the upfront costs. In short, they can punch above
their weight.
That shift in thinking is also taking hold at much larger firms.
Large enterprise adoption of SaaS has increased by a third over the
past year, according to a recent survey by analyst firm Forrester
Research, which calculated that SaaS adoption in large enterprises
now stands at 16%, up a third on the previous year's 12%.
SaaS providers are working hard to sustain the momentum and
broaden the model's appeal to reach a wider audience. Their
thinking seems to be that the very same infrastructure that
supports their own applications and delivers them to users is
well-equipped to do the same for other applications too. As a
result, some are opening up their infrastructures to independent
software suppliers to build applications that are more tailored
than their own offerings, but that also complement them.
This model - in which developers are given access to a complete
hosted infrastructure for the building, testing and deployment of
custom applications - is increasingly referred to as "platform as a
service" or PaaS. Salesforce.com has its force.com platform and
Netsuite recently unveiled the Netsuite Business Operating System
or NS-BOS to compete in this space. Smaller rivals such as Bungee
Technology and Coghead, meanwhile, are extending PaaS capabilities
to software developers working in internal IT departments, too.
Elsewhere in the industry, giants such as Google, Microsoft,
IBM, Oracle and SAP are all scrambling to build and deploy
application delivery platforms in order to deliver more of their
software to users over the internet without the need for end-users
to host operating systems and related infrastructure
internally.
This all points to a fundamental shift in the way that
organisations view internal IT requirements, says respected IT
market analyst Nicholas Carr in his latest book, The Big
Switch.
"Thanks to all the fibre-optic cable laid by communications
companies during the dot-com boom, internet bandwidth has become
not only abundant but also abundantly cheap. It does not matter
whether the server running your program is in the datacentre down
the hall or in somebody else's datacentre on the other side of the
world - all the machines are now connected and shared," he says.
"What companies used to have no choice but to supply themselves,
they can now purchase as a service for a simple fee."