THINK IT Services

Last week’s travels took me from Boston to Washington, DC, for NetworkWorld’s latest stop of the IT Roadmap and then on to San Jose, CA , for the SIIA’s OnDemand conference.

In DC, I had the privilege of presenting in the Convention Center’s main ballroom THINKstrategies’ perspectives regarding cloud computing, Software-as-a-Service (SaaS) and managed services.

A year ago, less than 50 people attended my breakout session on this topic as these new services were just beginning to hit the radar-screens of government agencies as they anticipated the arrival of the newly elected Obama administration.

Last week, the number of attendees in my session was over twice the previous year’s total, the latest milestone in a steady rise which I’ve seen throughout 2009 of both public sector and commercial interest in on-demand alternatives to on-premise systems and software.

In the case of these government-oriented attendees, it is clear that the new administration’s push toward cloud computing is having a significant impact on their IT management policies and sourcing strategies. However, they are still uncertain about the true meaning of cloud computing and business implications of these services.

They are also very concerned about the security and reliability of cloud computing alternatives. These concerns were made very clear in a private luncheon session which I moderated during the NetworkWorld conference. Nonetheless, the representatives of government agencies and private contractors serving the government who attended the session recognized that the cloud computing movement is real and they must respond to it.

I had the privilege of sharing the mainstage on the DC Convention Center with Mladen Vouk, North Carolina State’s Information Technology Department Head, Professor and AVP. Mladen gave an excellent presentation regarding the university’s successful deployment of an internal cloud computing service.

Although his presentation clearly demonstrated the functional and economic benefits of cloud computing, the concerns of many of the attendees still represent an ongoing challenge facing on-demand providers, many of whom attended the SIIA’s OnDemand conference in San Jose last week.

The event was an important gathering of corporate executives of leading on-demand companies, as well as representatives of established firms trying to transition to SaaS and cloud computing models, along with a varity of entrepreneurs and investors.

The consensus of the crowd is that corporate acceptance of SaaS is rising, but confusion about cloud computing lingers. They also were frustrated by the current economic climate which is driving greater interest in on-demand alternatives, but also slowing the procurement process.

While the SIIA conference didn’t produce any revelations, it did confirm that the industry is likely to experience greater growth and turbulence in 2010.

HP unveiled a new Cloud Assure program this week, in conjunction with SaaScon, which responds to the growing concerns among enterprise decision-makers about the availability, security and performance of today’s rapidly evolving cloud computing services.

I think HP’s announcement is timely because enterprise IT/business decision-makers are interested in taking advantage of the burgeoning cloud computing opportunities, but apprehensive re: the reliability, accessibility and security (RAS) of these services. As a result, they’re looking for cloud computing services which give them a greater level of manageability, visibility and control.

HP is betting that it can capitalize on its the web monitoring services and skills it acquired in its Mercury Interactive deal, and its corporate brand equity as a network/system management (NSM) vendor to establish a strong position in the cloud computing management market.

HP’s biggest obstacle to success is that it isn’t considered a leading cloud computing vendor and doesn’t have a lot of obvious experience in this market. In fact, HP isn’t even seen as a player in the Software-as-a-Service (SaaS) and managed services markets which are often viewed as stepping stones to cloud computing.

Instead, HP is seen by many as a legacy software and services company who has made a big bet on the past ideas of traditional IT outsourcing with its acquisition of EDS rather than offering a comprehensive portfolio of services and solutions aimed at the new world of web-based services.

For instance, the Cloud Assure offering only utilizes the Mercury Interactive capabilities and doesn’t include its broader OpenView capabilities. Part of the problem is that HP is still trying to breakdown its internal silos to permit a more comprehensive set of solutions and services to emerge.

Until then, the company can be expected to announce a series of ‘point’ programs aimed at addressing various aspects of the cloud computing elephant.

The good news is that the growing involvement of established players, like HP, in the cloud computing market will give conservative enterprise decision-makers greater confidence that it is Ok to consider cloud computing alternatives.

The question is whether HP’s efforts to assert itself in the cloud computing management arena poses a threat to the rapid innovations which are being driven by others in the market, just like the potential threat posed by IBM’s Open Cloud standards initiative.

Among my predictions for 2009, was that the new Obama administration would push legislation and take other initiatives to promote Software-as-a-Service (SaaS) and cloud computing as part of its overhaul of the government and economic stimulus efforts.

Sure enough, Obama’s new CIO–Vivek Kundra–made it clear yesterday that he is a big proponent of SaaS and cloud computing. Here’s what he said to the Wall Street Journal,

“I’m a big believer in disruptive technology. If I went to the coffee shop, I would have more computing power than the police department. Consumers had better technology than the government did. I’m all about the cloud computing notion. I look at my lifestyle, and I want access to information wherever I am. I am killing projects that don’t investigate software as a service first.”

Support for SaaS and cloud computing isn’t only coming from the top of the governmental pyramid. Some of the country’s school systems and universities are also making a concerted effort to move to the cloud.

I’ve seen this first hand through the experiences of my three boys who are using Google Apps at the college, high school and middle school levels as a result of ad hoc prompting by a new generation of young teachers who are bringing SaaS tools into the classroom unilaterally to improve their teaching ability.

This ad hoc adoption of SaaS in the classroom is being encouraged by Google with a concerted sales and marketing effort which mirrors the successful campaign which Apple aimed at the classroom a decade ago that has produced a new generation of workers to the business world who prefer Macs instead of PCs.

Abilene Christian University is an example of how the ad hoc adoption process, combined with Google’s new sales and marketing efforts, are succeeding in pushing institutions to migrate to SaaS. I had the privilege of moderating a session regarding SaaS, cloud computing and managed services for NetworkWorld’s IT Roadmap in Dallas where the university’s networking manager, Arthur Brandt, talked about their migration to Google Apps. He also revealed that their move was a part of a larger, nationwide migration of a couple dozen Christian universities. Click here to read more.

A SaaS vendor focused on the education sector, SchoolDude.com, recently conducted its 2nd annual survey of IT professionals working in K-12 education. The survey generated some interesting data about SaaS adoption patterns in the public education sector

• 47%  of the respondents are using at least one SaaS application
• Ease of deployment (72%) and less technical support required (65%)  were the greatest motivators
• Data security is the biggest challenge (72%), interestingly this is up from 40% in last year’s survey

You can obtain an executive summary or register to get the full report and hear a webcast about the findings.

The bottomline: A new generation of SaaS/cloud computing adherents are quickly emerging from our schools. And, the Obama administration is going to become a key proponent of the SaaS/cloud computing movement.

Savvis, Inc. has been named the first managed services winner of the Best of SaaS Showplace (BoSS) Awards program, which is aimed at promoting the measurable business benefits being delivered by today’s Software-as-a-Service (SaaS) solutions.

The BoSS Awards program was announced in January 2009 by THINKstrategies to bring attention to SaaS and cloud computing companies which are producing tangible business benefits for specific user organizations, including increased sales, lower costs, higher customer satisfaction, faster operations, and greater profitability.

Savvis is an outsourcing provider of managed computing and network infrastructure for IT applications. A case example of the business benefits of Savvis’ services is Wall Street Systems, a provider of treasury, trading and settlement software, which decided in 2006 to make a strategic shift in direction and move from a standard licensing model to the new SaaS delivery model.

Click here to learn more about Savvis’ award-winning SaaS services. Read more about the BoSS Awards here.

I recently published a column in E-Commerce Times discussing the growing interest and adoption of Software-as-a-Service (SaaS) tools among IT professionals seeking to better manage their increasingly complex IT environments.

Two announcements during the past week illustrate the growing convergence of the SaaS and managed services industries as well, a trend which I’ve been talking about for the past two years.

The first of these announcements came from ManageEngine which unveiled a free beta of its new SaaS-based network, systems and security management software capabilities.

ManageEngine is a quiet giant in the IT management industry with over 37,000 companies utilizing its traditional software solutions. It is also a subsidiary of India-based, AdventNet, Inc., which also owns Zoho, the increasingly popular SaaS office productivity solution provider.

While ManageEngine’s new OpManager On-Demand offerings do not currently include the Zoho tools, they capitalize on the same service delivery infrastructure and SaaS industry experience.

Although ManageEngine’s OpManager On-Demand is designed to serve IT managers within user organizations, the company is also packaging, pricing and positioning its SaaS suite to support Managed Service Providers (MSPs).

Girish Mathrubootham, ManageEngine’s VP,  is quoted in the company’s press release as saying, “We are seeing a paradigm shift in the way IT is being managed today as enterprises demand affordability and value immediately.”

This echos the feedback THINKstrategies and Cutter Consortium gathered from IT managers in 2007 in our survey research which found growing adoption of SaaS-based IT management tools.

NTRglobal and N-able Technologies also announced a joint partnership this week in which N-able will add NTRglobal’s SaaS-based remote support capabilities into N-able’s portfolio of managed service solutions.

Economic and environmental forces have dramatically increased the level of demand for remote management capabilities like those offered by NTRglobal.

While there is a growing array of players in the remote management arena, Derik Belair — N-able’s Vice President of Business Development — told me the company selected NTRglobal because of its proven functionality, global reach, channel support capabilities and long-term financial viability.

Both of these announcements are the latest indication that MSPs, as well as IT managers within organizations of all sizes, are seeking SaaS-based tools to more effectively and economically fulfill their IT management responsibilities.

Happy New Year!

Let me be the first to offer predictions for the on-demand services market on this first day of 2009. These predictions are based on THINKstrategies’ latest survey research and ongoing consulting work with IT/business decision-makers, IT solution providers and various technology investors.

I recognize that plenty of predictions have been made already, but hope mine offer a different perspective on the future direction of the on-demand services market.

Contact me if you’d like to discuss or debate any of these predictions.

1. On-Demand Services Move From Why To How - Now that SaaS has achieved widespread market penetration and the idea of cloud computing has become popularized in the business as well as trade press, the discussion will shift in 2009 from why organizations should adopt SaaS/cloud computing services to how to do it effectively. This shift will also encompass the best ways to adopt managed services to optimize IT operations. IT/business decision-makers will seek help evaluating the functionality and financial viability of the various vendors; better understanding the integration and security requirements; monitoring vendor performance and service level compliance; and measuring the economic impact and business benefits of these services.
2. New Hybrid Models - The technological evolution of on-demand services will enable SaaS and cloud computing vendors to offer customers the choice between on-premise and off-site hosted versions of their solutions without compromising the operational and financial efficiencies of the multi-tenant architecture that underlies these services. SaaS/cloud computing vendors will be able to ‘shrink-wrap’ their solutions into appliances or ‘applets’ which can be deployed behind the customer’s firewall and synchronized with the vendor’s primary service delivery infrastructure.
3. Short-Term Slowdown, Long-Term Growth - Although SaaS proved to be recession proof for most of 2008 as I predicted, SaaS vendors have not been able to avoid the speed-bump caused by the deepening economic crisis. IT/business decision-makers in organizations have been instructed to put a hold on all procurements until the economic uncertainty subsides. They are especially hesitant to make acquire solutions from new vendors who they believe won’t survive the current crisis. However, when the dust settles, organizations of all sizes will adopt SaaS and cloud computing services because the business case for these web-based alternatives is too strong and compelling. Click here to see my video recording on this topic.
4. VC/PE Retrenchment - The credit crunch and devastation of the financial markets has had a tremendous impact on the venture capital (VC) and private equity (PE) sectors. With limited IPO exit opportunities available and their limited partners (LPs) either unable to fulfill their funding commitments or demanding better returns from their investments, the VCs and PE firms are setting higher standards for performance from prospective and portfolio companies, and holding back on additional investments. Many VCs and PE firms may even shut their doors, leaving fewer funding sources available for SaaS/cloud computing companies.
5. Industry Shakeout and Consolidation – The past year may have been the peek of the ‘cloud-rush’ that produced a proliferation of SaaS and cloud computing players. The new year will see a shakeout of many of these players and consolidation of the market. IT/business decision-makers in user organizations of all sizes will shift their procurement strategies from best-of-breed vendors to strategic suppliers who they believe have a better chance of surviving today’s economic crisis. This will make it hard for niche vendors to compete against more prominent players with broader portfolios and stronger brands.
6. Acquisitions/Alliances – With the valuation of SaaS/cloud computing companies going down, the buying power of incumbent software vendors (iSVs) will rise. Companies like Microsoft, Oracle and SAP will acquire a series of SaaS/cloud computing players to accelerate their migration to the on-demand services world. Hardware vendors such as Dell, HP and IBM, as well as offshore companies like Infosys, Tata and Wipro will also make acquisitions to enhance their systems and automate their services respectively. With traditional funding sources drying up, many SaaS/cloud computing companies will seek corporate alliances which can provide alternative financing options and strengthen their positions in the market.
7. Focus On The Channel - The changing economic climate and rising costs of sales will drive a growing number of SaaS/cloud computing companies to seek new channels to market. At the same time, a growing number of traditional systems integrators, value-added resellers, hosting companies and other service providers will seek to add SaaS/cloud computing capabilities to their corporate portfolios. In some cases, this will blur the line of demarcation between SaaS/cloud computing and managed services companies.
8. The Google Generation Becomes Mainstream - The Google affect on the market will expand from eCommerce to the enterprise. Google Apps will gain acceptance in businesses of all sizes as a result of broader adoption among individuals, better support services aimed at corporate users, and broader alliances with companies like Salesforce.com. An indication of this trend can be found in primary schools and universities where use of Google Apps is expanding from individuals to the entire institutions in a systematic fashion. Just as Apple succeeded in building a new generation of users via schools and universities, Google is taking the same path to permeate the market.
9. Software/Business/Information/Managed Services Convergence - The line of demarcation is not only fading between software services, such as SaaS and cloud computing, and managed services, but also with business and information services. Business services companies, such as ADP and AmEx, are adding software services, such as Centive’s sales compensation management and Concur’s expense management capabilities their service portfolios, respectively. Thomson Reuters has teamed with Salesforce.com to deliver its information services via Salesforce.com’s SaaS solutions. It has also recently acquired Paisley—a governance, risk and compliance SaaS vendor—to broaden its capabilities. Meanwhile, managed service providers (MSPs), such as mindSHIFT, are adding a layer of SaaS solutions to their IT management capabilities.
10. Obama Economic Policies Promote the Web - President-elect, Barak Obama, has made it clear that he views the Internet as an important incubator of new business opportunities and jobs, and as a mechanism for better government services and more effective education programs, as well as a clean-tech alternative that can reduce people’s carbon-footprint. The Obama administration has promised to create a program, much like the Work Projects Administration (WPA) during the New Deal, which will fund public initiatives that encourage the growth and broader adoption of web-based services. This program will increase the visibility and viability of on-demand services.