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.

The most recent issue of Forbes magazine has a scathing article questioning the financial returns being generated by venture capital (VCs) firms.

This article will encourage many institutional investors who serve as the VCs’ limited partners (LPs) to look elsewhere for places to invest their monies.

A broad-based abandonment of the VC community by these LPs will make it doubly difficult for entrepreneurs to find funding in 2009.

Many VCs will be forced to put a moratorium on new investments, others will refrain from making additional investments in current portfolio companies, and some will shut their doors entirely.

Combine the poor track record of many VCs with the downright mismanagement of individual and institutional investments by hedge funds and private equity firms who funneled monies into Madoff’s ponzi scheme, as well as the virtual shutdown of the IPO market, and the prospects don’t look good for funding opportunities in 2009 for privately held companies.

This could significantly slow the growth of the Software-as-a-Service (SaaS), cloud computing and broader on-demand services market.

SaaS, cloud computing and on-demand services companies with strong prospects will still find funding. For instance, Aria Systems (a THINKstrategies client) recently won a new round of funding from Venrock.

However, weaker companies will have a hard time surviving in this more challenging economic climate.

I’ve just returned from my last business trip of the year. This time I was in Washington, DC, hosting the Software-as-a-Service (SaaS), cloud computing and managed services track of NetworkWorld’s IT Roadmap event.

The keynote speaker at the event was Bechtel Corporation’s CIO, Geir Ramleth, who gave a fascinating talk about how his IT team is transforming the way Bechtel leverages technology and business applications by modeling their operations on YouTube, Google, Amazon.com and Salesforce.com, rather than traditional enterprise organizations.

Ramleth has recognized that these on-demand service providers are delivering high-value solutions in an amazingly low cost fashion, making them the envy of CIOs at many of the greatest companies in the world.

Although Ramleth’s team has decided that today’s commercially available SaaS and cloud computing solutions don’t meet their corporate requirements, they still felt the operating model of today’s on-demand service providers is worth imitating.

Ramleth’s presentation echoed many of the ideas which THINKstrategies has been advocating for the past seven years. His team recognized the ease of use and operating efficiencies of consumer-oriented web-services and SaaS vendors, and decided to benchmark their internal operations based on these successful models. As a result, they have not only increased end-user productivity, but dramatically reduced their operating costs.

Click here to read more about Bechtel’s transformation process.

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.

THINKstrategies’ fourth annual Software-as-a-Service (SaaS) customer survey, in conjunction with Cutter Consortium, revealed that 63% of the responding organizations are using a SaaS solution, almost double the 32% who were using SaaS solutions in 2007!

Over the past four years, THINKstrategies and Cutter have been charting the growth of the SaaS market with a series of yearly customer surveys. Our surveys were the first to find widespread interest and substantial adoption of SaaS in 2005.

In 2006, we began to see businesses of all sizes adopting SaaS solutions specifically designed to meet their vertical market needs, as well as their horizontal application requirements.

In 2007, we found customers were beginning to examine the platform capabilities of SaaS vendors as they sought to identify those vendors that could serve as strategic sources for their SaaS requirements. We also found growing acceptance of SaaS solutions by IT professionals who were beginning to adopt SaaS solutions to help them better manage their IT operations.

This year, our vanguard research has uncovered a new round of important market trends that have implications for IT and business decision makers, SaaS providers and independent software vendors (ISVs), channel companies, integrators, and investors. In addition, our survey found customer satisfaction has risen to a whopping 97% of responders!

Click here to obtain the first of a series of three Executive Update reports based on our latest SaaS survey results. Contact me if you’d like to discuss the implications of our findings on your company, or to learn more about our services aimed at helping companies capitalize on SaaS to achieve their business objectives.

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.

I received an email message from a frustrated Software-as-a-Service (SaaS) company executive yesterday asking if I could publish a commentary clarifying the difference between cloud computing and SaaS.

His plea was prompted by a trade publication article which basically referred to cloud computing and SaaS as one and the same.

Anyone who has been intimately involved in the evolution of the SaaS or cloud computing worlds has a right to be frustrated by the blurring of the lines between the two concepts.

In my case, I view cloud computing as a broad array of web-based services aimed at allowing users to obtain a wide range of functional capabilities on a ‘pay-as-you-go’ basis that previously required tremendous hardware/software investments and professional skills to acquire. Cloud computing is the realization of the earlier ideals of utility computing without the technical complexities or complicated deployment worries. With this precept in mind, I see SaaS as a subset or segment of the cloud computing market.

Unfortunately, opportunistic vendors, as well as uneducated journalists and overly simplistic industry analysts, are using the terms interchangeably to serve their own purposes.

While this might infuriate industry purists, the good news is that both ideas are gaining greater mainstream attention and acceptance as a result of escalating coverage in nearly every IT industry trade publication and even more importantly among the major business pubs like the Wall Street Journal, Forbes, Fortune and BusinessWeek, along with the NY Times.

I think this positive development far outweighs the potential confusion that could arise about the nuances between the two concepts. However, know it is incumbent on every cloud computing and SaaS vendor to clearly explain their offerings so they don’t mislead potential customers.

The surge in demand for cloud computing and SaaS is partially due to macro-market factors, such as the recessionary economic climate and escalating pressures to fundamentally change traditional business practices. But, growing interest in cloud computing and SaaS is also the result of the success and satisfaction of the early adopters who are not only renewing and expanding their use of these web-based services, but recommending them to others, according to THINKstrategies’ research and consulting experience.

The ‘gold rush’ stage we are entering in the cloud computing and SaaS movement will attract plenty of self-serving vendors, overnight experts and tabloid press who will attempt to exploit this exciting market opportunity. They will pose a new threat by offering inferior services, bad advice and distorted stories about the market realities.

For those of us who have been in the vanguard of the movement and worked hard to build a viable new industry, we won’t defeat these forces by arguing over terminology. Instead, we will win long-term success by properly educating our customers and successfully satisfying their needs.

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.

Anyone who follows this blog or the broader on-demand services market is well-aware of the disruptive impact Software-as-a-Service (SaaS) is having on the software industry. Now, software and systems vendors are offering SaaS solutions that could have an equally profound affect on the way organizations acquire and manage technology, as well as transform the way vendors and channel companies sell and support technology.

While the managed services has grown steadily, many channel companies have experienced limited success migrating to a managed services model. As I’ve stated in previous blog entries and my other writings, part of the problem is that executives within established channel companies don’t fully understand what it takes to transform their businesses. But, another barrier to success has been the lack of cost-effective tools.

Until recently, many channel companies were unable to successfully transition to a managed services model because it required considerable investment in IT management tools and skills. Few of these companies could afford the upfront license fee for traditional management software packages, especially given the incremental revenue streams that come with managed service agreements. They often lacked the requisite skills to implement and maintain these management platforms.

Today’s SaaS-based management solutions can be acquired on a pay-as-you-go basis, and are easier to deploy and administer, making them perfectly suited to help channel companies transform themselves into viable managed service providers (MSPs).

These attributes led Dell to acquire SilverBack Technologies and Everdream, which now serve as the cornerstones of its new SaaS-empowered managed service offerings aimed at channel companies.

Cisco’s acquisition of WebEx was also partially driven by its SaaS-empowered remote management capabilities, as well as its collaboration applications. Cisco is now aggressively promoting a Managed Services 3.0 initiative aimed at helping channel companies and service providers more effectively develop and deliver managed services. (You can hear my views about Cisco’s initiative on a recent Lippis Report podcast.)

The most recent example of this phenomena is EMC’s new SaaS initiative, announced yesterday, that kicks off with MozyEnterprise™ powered by EMC Fortress™, an online backup service for desktops, laptops and remote Windows servers based on the service delivery capabilities it acquired from Berkeley Data Systems.

Not all systems and software vendors are buying their way into the SaaS-empowered managed service enablement business.

Symantec unveiled an internally developed SaaS platform nearly a year ago. While the Beta program that was a part of its initial SaaS launch generated mixed reviews, Symantec is committed to delivering a full-suite of SaaS solutions for its channel partners that will span its traditional management capabilities. The company’s channel partners will be able to leverage these SaaS offerings to build or enhance their their managed service capabilities.

This trend demonstrates that managed services and SaaS is gaining widespread acceptance at both the end-user and vendor levels. Approximately 40% of the companies surveyed by THINKstrategies and Business Communications Review a year ago were already utilizing a managed service. Over a third of the respondents to THINKstrategies’ most recent user survey in conjunction with Cutter Consortium are currently using a SaaS solution and another 37% are considering SaaS.

While many SaaS startups are trying to establish channel relationships to expand their market penetration, many established systems and software vendors are acquiring SaaS companies or adopting SaaS strategies to help channel companies migrate to a managed services model.