THINK IT Services

I’m sorry to see that the new year and today’s severe economy crisis haven’t rid the technology industry of old, outmoded thinking.

One of the most recent exmples is a blog post by ComputerWorld’s Mark Everett Hall entitled, “How SaaS Hurts a Fragile IT Economy”, in which Hall suggests that Software-as-a-Service solutions represent a threat to both IT professionals and the technology industry because SaaS commoditizes traditional, on-premise IT systems and software applications.

Of course, what Hall fails to recognize is that customers are migrating to SaaS, as well as a broadening array of cloud computing services, because legacy systems and applications failed to fulfill their promises or justify their costs. And, in today’s economic environment and rapidly changing marketplace, few companies can continue to accept the exorbinant costs, complexities and risks associated with legacy apps and systems.

In contrast, SaaS and cloud computing are proving to not only be more cost-effective but also delivering superior functional capabilities which are better geared toward meeting the changing economic, competitive, workplace and ecological (think green) requirements of today’s world.

I’m finding that enlightened IT executives and staff are quickly discovering that SaaS/cloud computing isn’t the enemy and a threat to their jobs, but a welcome relief to the day-to-day challenges they’ve faced deploying and managing needlessly complex legacy systems and software.

Because SaaS solutions and cloud computing services are proving to fulfill the business requirements of their end-users at a more economical price, the IT department can finally focus on more important corporate priorities and initiatives rather than constantly responding to the daily firefights of keeping their systems and software up and running.

It is for these reasons that THINKstrategies’ most recent survey, conducted in conjunction with Cutter Consortium, found that SaaS adoption is not only accelerating but achieving unprecedented customer satisfaction, renewal and referral levels.

Hopefully, Hall and other trade press reporters who are prone to view every new trend with skepticism will learn about the positive realities of SaaS and cloud computing in 2009.

I’m committed to promoting the IT and business benefits of SaaS. That’s why THINKstrategies’ launched the Best of SaaS Showplace Awards program earlier this week. Click here to read more.

THINKstrategies launched a new awards program today aimed at showing how Software-as-a-Service (SaaS), cloud computing and other on-demand services are helping organizations of all sizes across every industry grapple with the operational challenges created by today’s unprecedented economic crisis.

The new Best of SaaS Showplace (BoSS) Awards are aimed at promoting the tangible benefits which web-based services can deliver.

The awards will be given to SaaS and cloud computing companies listed on the SaaS Showplace which can demonstrate that their on-demand solutions have produced measurable business benefits for specific user organizations. These benefits could be increased sales, lower costs, higher customer satisfaction, faster operations, etc.

Click here for more details regarding the nomination process, criteria for selection, fees and award program benefits.

I’ve been suggesting for a few months that the Software-as-a-Service (SaaS) and ‘cloud computing’ market has been experiencing a ‘gold-rush’ era of accelerated growth. The rapid adoption of SaaS solutions was confirmed by THINKstrategies’ latest survey in conjunction with Cutter Consortium.

Just like in the original gold-rush of the 1800s, today’s ‘cloud-rush’ is not only attracting a proliferation of players, but also an assortment of unsavory characters.

The scandal surrounding IT Factory of Denmark is the most recent example. If you haven’t been keeping track of this one, it is worth reading about. The company’s CEO, Stein Bagger, disappeared before Thanksgiving after financial ‘irregularities’ were discovered at his company and a half billion kroner were found to be missing from the company’s bank accounts. Bagger is presumed to be hiding out in Dubai, and his company has fallen into bankruptcy.

The scandal doesn’t only affect the company’s employees, customers, partners and creditors. It also is a black-eye for the tech industry. As TechCrunch reports, just this September the Danish version of Computerworld named IT Factory “Denmark’s Best IT Company 2008″.

Another scandal involving a SaaS company unfolded in October. In this case, Entellium’s CEO and CFO were arrested for keeping two sets of books to disceive the company’s board of directors and investors. The company is facing bankruptcy and its assets are likely to be sold to another vendor.

Once again, the impact of this scandal extends beyond the company’s employees, customers, partners and investors. Entellium won numerous industry awards for the quality and innovative nature of its SaaS solutions from a variety of industry associations and publications before the company’s executives were discovered to be cooking the books.

While these might be isolated cases, they are a clear indication that the SaaS/cloud computing market has grown to the stage in which it is likely to be a target for more of this type of deceitful behavior.

For instance, I’ve even discovered a new online directory which is structured curiously like my SaaS Showplace and includes almost an identical list of companies which is attempting to exploit the SaaS/cloud computing market.

These ethical threats to the SaaS and cloud computing movements could undercut the success which the on-demand services marketplace experienced over the past year, and could combine with the uncertain economy to derail the momentum many SaaS/cloud computing companies were anticipating in 2009.

All of us who have worked hard for years building the SaaS/cloud computing market will have to work even harder now to combat these threats and safeguard the integrity of the on-demand services industry from these opportunistic, scurrilous characters.

Today’s deepening economic crisis is testing the mettle of IT/business decision-makers, IT solution providers and technology investors alike.

IT and business decision-makers in nearly every industry must make cuts to their capital and operating budgets in order to offset rapid declines in business and tightening credit markets. In many cases, this is forcing them to fundamentally reevaluate the way that they acquire and utilize technology and business applications, and leading them to seriously consider various on-demand service alternatives such as Software-as-a-Service (SaaS), cloud computing, and managed services.

I have recently suggested in commentaries in Datamation and the Business Technology Roundtable that any IT/business decision-maker who isn’t seriously considering these on-demand alternatives is doing their organization a disservice and could be jeopardizing their jobs.

THINKstrategies’ latest customer survey in conjunction with Cutter Consortium clearly shows that organizations of all sizes are adopting SaaS solutions to reap the economic and functional benefits of these on-demand services.

However, many of my clients are also reporting that they are putting a hold on all spending until they get a clearer picture of the state of the economy in 2009. In addition, many are also issuing requests for information (RFIs) to their current suppliers, including SaaS companies they are already using, to obtain additional financial data that can help them determine which vendors are most likely to survive a worsening economy. This is the first step of a broader initiative being undertaken by many of these companies to weed out those suppliers who may fail in the coming months.

Proving their long-term financial viability will become a key challenge for many SaaS, cloud computing and managed service providers (MSPs). Compounding this problem is the growing anxieties within the venture capital (VC) community which is facing severe pressures from their limited partners (LPs)–financial institutions, universities and others–who have been seriously impacted by the economic meltdown. With many of these LPs threatening to renege on their original commitments, the VCs are carefully scrutinizing and setting higher standards for their current and prospective portfolio companies alike.

As a consequence, many of the SaaS, cloud computing and managed service companies who were hoping to capitalize on the current crisis by increasing their sales and marketing efforts to promote their business benefits in a down economy are being forced to go slow or even cut back their spending instead. Many of these on-demand service companies are also facing longer sales cycles as customers delay their purchase decisions and demand more information about the providers’ operations and financial status as a part of their due diligence process.

Given that THINKstrategies’ SaaS Showplace already has over 900 companies from around the world offering over 4500 SaaS solutions organized into 80 Application, Industry and Enabling Technology categories and there may be twice that many companies actually offering on-demand services, an industry shakeout is inevitable and likely to happen sooner than expected.

These trends were the focal point of the recent Software Business and SIIA On-Demand conferences I participated in over the past few weeks. While Salesforce.com’s Dreamforce user conference was a celebration of the accelerating capabilities of cloud computing and SaaS, the Software Business and SIIA On-Demand conferences where more somber industry events were concerns about today’s economic environment were the center of attention.

I think the reality is somewhere between the euphoria and despair these two events. The measurable benefits and growing number of customer success stories that on-demand service providers can boast give them a clear long-term advantage over traditional, on-premise software and systems. However, these companies will face stiffer challenges from incumbent players and conservative decision-makers.

An indication of the competitive challenges facing SaaS and cloud computing vendors was provided by Anthony Lye, the Senior Vice President of Oracle’s customer relationship management (CRM) division, at the SIIA On-Demand conference. Lye spent about 30 minutes of what was supposed to be a “Point/Counter-Point” keynote session challenging the fundamental benefits of on-demand solutions and questioning the long-term viability of the on-demand services model, despite the fact that he is responsible for running Oracle’s on-demand CRM solution which has experienced significant growth over the past year.

Lye’s tough-minded presentation was an example of the same kind of subtefuge which his boss, Larry Ellison, the Chairman/CEO of Oracle, has been conducting for the past year with his own statements aimed at discrediting the on-demand services market despite the fact that Oracle is one of the largest suppliers of databases and middleware for SaaS and cloud computing vendors. (Click here to read THINKstrategies’ profile of Oracle’s SaaS enablement platform strategies and solutions.)

On-demand service providers will have to do a better job than Zach Nelson, the CEO of NetSuite, did at the SIIA conference. Nelson was supposed to offer a SaaS industry response to Lye’s incumbent software vendor (iSV) arguments, but he chose to side with Lye instead and distance NetSuite from the rest of the SaaS community. Rather than dispute any of Lye’s contentions and misrepresentations of the SaaS model, Nelson decided to take only 15 minutes of his portion of the keynote session “debate” to promote NetSuite’s integrated software and new focus on the service industry based on its acquisition of OpenAir.

Anyone who wasn’t aware that NetSuite offers SaaS solutions would have thought it was a traditional software vendor based on Nelson’s presentation. It was a disappointing performance which will do little to endear NetSuite to the rest of the SaaS industry. Instead, it only reinforced the impression that NetSuite and Oracle have a mutual understanding about how they will complement rather than compete with one another.

So, the on-demand services movement will continue to be led by Salesforce.com, Google, Amazon, Facebook and other innovators. It will also be led by bold, new leaders. Although Marc Benioff of Salesforce.com is the figurehead of the movement and Treb Ryan of OpSource is another important evangelist. Josh James of Omniture has emerged as an important spokesperson as well. James delivered a captivating presentation at the SIIA On-Demand conference which elaborated on a similar talk which gave at OpSource’s SaaS Summit last February regarding the key management metric for measuring SaaS sales effectiveness–the ‘magic number’.

It will take bold ideas and actions to succeed in the on-demand services market going forward. The winning on-demand service companies will be those who can convey a compelling message regarding the fundamental business benefits of their SaaS, cloud computing and managed service solutions, and deliver these tangible results in a cost-effective manner.

Like the well known line from Charles Dickens’ book “Tale of Two Cities” goes, these will be the best of times and the worst of times for the on-demand services movement.

The recent debate about the viability and value of cloud computing has generated at least one outstanding analysis from a friend at AT&T, that’s right AT&T!

Joe Weinman is the VP of Strategic Solutions Sales at AT&T Global Business Services. He published a terrific blog entry last week on GigaOM which was also distributed by BusinessWeek entitled, “The 10 Laws on Cloudonomics”.

I met Joe at a utility computing conference in NYC in 2004 where we both listened to a series of CIOs discuss how they were transforming their IT operations to achieve their business objectives.

What was facinating about their presentations was that they were not talking about hardware-based utility computing models that many vendors at the time, such as IBM and HP, were pushing. Instead, the CIOs from a number of major corporations and public agencies talked about how they were deploying Software-as-a-Service (SaaS).

It was this event which propelled THINKstrategies to focus its energies on the SaaS market, along with the related area of managed services, and to create our two online directories–the SaaS and Managed Services Showplaces.

Joe’s commentary is timely because a series of Amazon and Google platform outages have raised a new round of questions about the costs and benefits of cloud computing, today’s term for the old idea of utility computing.

It is also relevant because there are still plenty of IT and business decision-makers who are trying to determine when it makes sense to adopt on-demand, SaaS solutions rather than continue to contend with traditional, on-premise software applications. This was the topic of my presentation yesterday at Serena Software’s TAG user conference.

The pivotal question for IT and business decision-makers considering SaaS and the growing array of cloud computing alternatives is the risk and return tradeoffs.

At what point do the benefits of quicker time to market, lower total cost of ownership and greater return on investment clearly outweigh the potential costs of service disruptions, loss of proprietary data, or limited customization capabilities?

Helping customers perform these cost-benefit analyses and SaaS/cloud computing vendors communicate the value of their on-demand solutions has become a 24/7 campaign for me.

THINKstrategies is pleased to announce the launch of its new “Market Leaders” webcast series which showcases companies who are delivering innovative, on-demand solutions to meet the rapidly changing needs of large-scale enterprises, as well as small- and mid-size businesses (SMBs).

Our webcasts differ from the traditional, structured webinar format by combining the candid, unscripted, conversational qualities of podcasts with the visual benefits of online presentations.
As the producer and host of the Market Leaders webcast series, my goal is to provide a more interesting and engaging discussion with senior executives of companies who are in the forefront of the on-demand market. The webcasts will be pre-recorded, archived and 20-30 minutes in length so you can view them whenever fits your busy schedule.

In our first webcast, we examine how the rapid growth of the on-demand market has created new operating challenges for entrepreneurs and established software vendors who must implement more robust systems to manage and track customer transactions from procurement to provisioning in a highly dynamic environment.

In this webcast, I talk with Steve Booth, VP of Business Development at Aria Systems, about how he sees this transaction management issue evolving, and the Monetization Maturity Model which Aria has developed to respond to this important challenge. Click here to view this webcast.

I hope you find this webcast valuable and welcome your feedback regarding our approach to this new series. You can also click here to read THINKstrategies’ whitepaper about the transaction management challenges and opportunities in the on-demand services market.

Please contact me if you’re interested in learning more about Aria Systems, THINKstrategies or this webcast series.

One of the benefits of being in the middle of the Software-as-a-Service (SaaS) market is getting exposed to a variety of interesting resources and research projects.

For instance, at last week’s Software 2008 conference in Las Vegas I was able to attend the kickoff presentation by Abhijit Dubey of McKinsey & Company which summarized the firm’s latest SaaS research regarding the evolution of on-demand platforms. Dubey and McKinsey have produced a series of research reports which have verified THINKstrategies’ SaaS survey studies regarding the accelerated adoption of SaaS. Even more importantly, their research clearly shows the total cost of ownership (TCO) and return on investment (ROI) advantages of SaaS for enterprise customers and on-demand platforms for software vendors.

THINKstrategies’ SaaS Showplace has also attracted plenty of attention as a resource for a variety of other research initiatives. For instance, THINKstrategies is supporting a financial benchmark study of the SaaS industry being conducted by OPEXEngine. OPEXEngine’s benchmarking survey is aimed at B2B software companies with 2007 revenues between $10M-$250 million offering SaaS solutions. Participants in this study will receive a confidential Company Performance Report and a detailed Industry Report that will cover key financial performance metrics. Click here for more information. Tell them THINKstrategies and Jeff Kaplan referred you.

THINKstrategies is also happy to support the research efforts of Professor Stéphane Gagnon of the Department of Sciences Administratives at the Université du Québec en Outaouais in Gatineau, Québec, Canada. The purpose of his study is to identify factors explaining the relative success of software components commercialized as XML Web Services, a sub-category of the SaaS market. This survey contains 11 questions with 60 data items. All the survey participants’ responses will remain confidential, and all data gathered will be published strictly in aggregate formats. The survey questions are available at http://www.gagnontech.com/saas.

And kudos to Peter Laird, an Architect at BEA/Oracle, who converted the contents of THINKstrategies’ SaaS Showplace into a terrific visual map of the rapidly changing industry landscape. I highly encourage you to visit his blog and give him feedback regarding his visualization of the SaaS marketplace.

Contact me if you’re conducting or have found interesting research or analysis of the SaaS (or managed services ) market.

Last Friday’s government report indicating a dip in employment levels sent a scare through Wall Street and raised the spector of recession on the campaign trail in New Hampshire.

The irony is that more than half of 112 IT executives recently surveyed by the Society of Information Managers cited the ability to attract and retain IT personnel as their No. 1 concern for 2008. As I indicated in my previous blog, these concerns are among the ten reasons why I think on-demand services will soar in 2008.

Nonetheless, I’ve also received a growing number of resumes from IT/telecom professionals seeking positions in the on-demand market. Some want to get into this rapidly growing market. Others are looking for new jobs because their previous companies failed or have been restructured to better position themselves to capitalize on the on-demand services movement.

In response to these trends, THINKstrategies has added new Job Boards to its Managed Services and Software-as-a-Service (SaaS) Showplace directories. These free services are aimed at helping growing on-demand companies find qualified candidates and assisting individuals seeking new job opportunities.

Read more…