Benefits of multi-tenancy

The benefits of the multi-tenancy model have been extensively discussed elsewhere, so I am simply going to summarize what I've learned.

Here's a summary of multi-tenancy selling points (for customers):

• pain-free upgrades
  
• take advantage of economies of scale
  
• relatively straightforward integration with other software
  

Here's a summary of benefits of multi-tenancy to the firm:

• scales easily and cheaply when provisioning new customers
  
• same infrastructure used over all tenants = higher cost-effectiveness
  
• single code base for all users - less code to maintain, implying lower cost
  
• reduced development requirements dues to ability to leverage tools and platforms, implying faster time to market
  

Implications of multi-tenancy for service suppliers

I had a very interesting conversation yesterday with keychain logic's Ken Boasso (another East Bay local), which has gotten me thinking about some of the bigger-picture issues relating to SaaS.

I've chosen to do some thinking especially about what multi-tenancy architecture means for a SaaS business, beyond the selling points for customers and obvious first-order benefits for the firm itself (first-order benefits are well-documented; here's a brief summary from this blog).

One second-order benefit that is getting attention right now is the new-found ability of the service provider to aggregate and anonymize customer data (credit where credit is due - this is discussed here. Sometimes referred to as "A/A", the possibilities are of course enormous in terms of creating new forms of value, with resulting additional revenue models.

A couple of good sample ideas were presented here; namely:

* provide benchmarking metrics and data for market research and competitive analysis
* "interoperability" benefits

By that second one, I mean that companies will be able to take advantage of the ease of interconnecting with other software, particularly other multi-tenant software. For example, companies will be able to create improvements in supply chain visibility, move data back and forth between two different user accounts, sharing transactional data to speed up invoicing, etc.

So far, mostly I've just (hopefully) added some clarity to the discussion around these ideas.

I'll be thinking more about all of this in the coming days and weeks, and producing some more original thoughts at that point.

The Case Against Cloud Computing

If you haven't yet read Bernard Golden's 5-part series entitled The Case Against Cloud Computing, I highly, highly recommend it!

According to Golden, the five key impediments are:
* Current enterprise apps can't be migrated conveniently
* Risk: Legal, regulatory, and business
* Difficulty of managing cloud applications
* Lack of SLA
* Lack of cost advantage for cloud computing

He spends quite a bit of time discussing why many of these arguments are moot or incorrect. Ultimately, this is a very positive series discussing why Golden believes that Cloud computing (and, therefore, SaaS as well in my opinion) will emerge as the dominant model in IT services.

Part 1
Part 2
Part 3
Part 4
Part 5
Conclusion

Freemium & The Evolution From a Web App To a Web Platform

Here's a really good article from the New York Times: Freemium & The Evolution From a Web App To a Web Platform. This is right on target. A discussion of how the network effect is a kingmaker.

Oracle approach vs. Google approach - centrality of multi-tenancy

Saw this blog post yesterday - good if short piece discussing an aspect of multi-tenancy: Is a SaaS infrastructure just one big operating system? - Ron Arden Also: read Phil Wainewright's original article, which sparked Ron Arden's comments.

SaaS vs. Web 2.0

In my readings and in discussions with industry folks this week, "SaaS vs. Web 2.0" has definitely been a common theme. What is the difference between them; where does one end and the other begin? I'm going to attempt to address these questions below.

The term "SaaS" comes with the connotation that it is "for enterprise." Talking to developers and business managers at consumer-oriented web companies, it's clear that they think SaaS has little or nothing to do with them.  They seem to think of their code base as the back end of a cool and useful web site, rather than a web-native application.  The site features dynamic content, social media aspects, etc. and therefore it is Web 2.0.

Based on a discussion with one experienced consumer web developer, I get the impression that many of these companies are solidly in the "grow your own" camp. They strongly prefer to write apps themselves, purchasing readily available and inexpensive elements only when it makes sense. Ask them about CRM, Business Intelligence, etc. and they say their company wrote their own because it wasn't that hard, and, more importantly, they want to work within the confines of their chosen architecture rather than force-fitting someone else's pre-fab modules by writing lots of adaptors. After all, their core competency is developing sophisticated and scalable web apps.

In contrast, there's a clear pattern that companies associating themselves with SaaS are enterprise software companies. That makes sense, because using the term "SaaS" is sending an important message to the customer - if you chose our software, you'll reap the benefits of easy deployment, easy upgrades, zero up-front cost, etc. Consumers mostly don't care about that message, so Web 2.0 companies don't talk about it. Enterprise software companies need to talk about how the technology they are employing creates those benefits for the customer, so they do.

However, it appears that the two camps (consumer and enterprise) are using a lot of the same underlying technologies. Both use Agile-style development methodologies, and both use the same general set of development platforms and languages.

The central premise of Pure SaaS is that the applications are web-native - a fact that is taken for granted by consumer companies. So, in a way the consumer companies realy are SaaS companies, they just don't think of it that way. 

On the other hand, enterprise companies are presenting their customers wth dynamic web pages featuring collaborative elements, mashups, and  user-centered design - that all sounds suspiciously like Web 2.0 to me!

One person I spoke to said he thought the functionality and feature sets were the same for consumer and enterprise; it is just the business model that is different!

Here's a good article from info world on this topic. (I found the article thanks to Holger Eggerichs)

I'd love to hear your thoughts on all of this...

Strategic HRM

In my MBA course of study, a required class covered the strategic aspects of Human Resources Management. This course was extremely compelling to me; I came away believing that HR can and should be a proactive, essential, and core part of any organization.

The course argues that HRM practices ultimately determine much of a company's ultimate success or failure. Hiring practices, employee reviews, ratings and compensation schemes, and other elements of HRM have the power to shape the behavior of individual employees as well as the firm's culture. Successful companies retain the best employees and facilitate their professional growth, leading to high productivity.  

For those who accept this argument, it quickly becomes clear that it is a very large and complex undertaking to manage all of these things well.  An entirely new category of enterprise software is emerging to manage this complexity and make it easier to keep strategic perspective.

The two key firms in this new SHRM segment are Taleo, based in Dublin, CA and SuccessFactors, on the other side of the Bay in Burlingame. I'll write more about these two companies in my next entry.

In the meantime, here's something of interest:

press release: SuccessFactors Wins Deployment at Siemens AG With 420,000 Users

commentary by: Xactly's Christopher Cabrera

Welcome

I'm the Chair of the newly created SIG sponsored by eBIG, the East Bay Innovation Group (www.ebig.org) focusing on SaaS. I've created this blog to record my thoughts and perhaps share some of the research I am doing regarding Software as a Service and SaaS companies.

I make a distinction between SaaS as a delivery model and what I am calling "Pure Saas." From Wikipedia:

[Pure] SaaS applications differ from other applications delivered over the Internet in that SaaS solutions were developed specifically to leverage web technologies such as the browser, thereby making them web-native.

In other words, SaaS, in its purest form, is not merely a delivery model. SaaS represents a fundamental shift in how software will be written from now on.

Venture Capital money for software is all going to SaaS. SAP is working hard to release a SaaS offering for SMB (SAP Business ByDesign - article). Oracle is dramatically ramping up it's SaaS efforts (article). The trend is clear.

Hello World!