Summary: Questions asked of the Enterprise SaaS Working Group

Ryan Nichols

Great kickoff today of the Enterprise SaaS Working Group, sponsored by Conformity. With Scott Bils (Conformity), Peter Coffee (Salesforce.com), Tom Fisher (SuccessFactors), Steve Coplan (451 Group), Doug Harr (Ingres), Scott Carruth (Initiate), and Michael Amend (Dell) as panelists, of course we ran out of time long before we were able to explore all of the questions asked of the panel.

So we thought we'd continue the conversation here-- below is Appirio's take on the issues raised in today's webinar (if you missed it, feel free to watch here). Looking forward to your feedback!

What will it take for SaaS and cloud apps to become ‘mainstream’ in the enterprise?

We think about enterprise adoption of the cloud in 3 layers–-Software, platform, and infrastructure as a service. SaaS apps are already “mainstream” in many enterprises, as are pilots of custom applications built on cloud platforms like Force.com, and burst and test / development on cloud infrastructure like Amazon. That’s the first column in this diagram:

Now, one common pattern of adoption we see is enterprises who do a point SaaS implementation, and see it come in on time and under budget, with off the charts usage. This causes the CIO to ask “what else can I do with this platform?” This results in the migration of more and more custom applications– that’s a big part of the activity we see today. That’s the second column.

Where is this heading? Well, our perspective is that over the next 5 years you’ll see even the largest enterprises running the majority of their IT infrastructure in the cloud. That’s how we run our business at Appirio– no servers– and we want to help other companies do the same thing. We call it cloudsourcing– where cloud computing meets outsourcing.

What’s holding that back? We highlight 3 things that are missing. The first is a strategy and roadmap– a business-case-driven answer to “what do I do next”. The second are solutions to connect and extend cloud platforms– making the cloud easier to consume. Third is a new type of partner for enterprise IT. Traditional partners have too much to lose in the transition, and their core skill set is irrelevant: it doesn’t matter how good you are at managing or working with a server farm anymore.

PaaS vs SaaS: What will be the preferred model in the future for how cloud apps will be delivered/consumed in the enterprise?

PaaS is as disruptive to standalone SaaS as SaaS has been to traditional on-premise software. For example, Appirio has built a solution for professional service firms on Force.com that is winning customers from PSA vendors that have been building out their own SaaS stack for 10 years. It's not that we’re smarter– its just that 100% of our R&D is targeted to the specific needs of our customers. Force.com’s R&D team is doing the mobility, the reporting, the analytics, etc. Read more at "Now that's a big PaaS market"

SaaS industry evolution: Do you anticipate long term cloud vendor consolidation or the realization of the ‘best of breed’ vision for business apps?

As an integrator in the space, we see a proliferation of packaged and custom applications built on only a handful of cloud platforms. It's hard work to build out a standalone SaaS stack We think you’re going to see less and less of that in the marketplace. Read more at "NetSuite Buys Quickarrow"

Private / hybrid clouds: Are they part of the long term answer in the enterprise, or just indicative of an early market? Would the model benefit SaaS or legacy on-prem vendors?

Private cloud is just a data center with a fancy name. Of course anyone with a data center should be thinking about optimization, virtualization, etc. But NOT at the expense of thinking about the public cloud. The real question is how you can get out of the business of running a data center. Read more at "Rise and Fall of the Private Cloud"

SaaS TCO in the enterprise: Is it compelling enough to justify ‘rip and replace’ of existing on-prem apps?

Yes, rip and replace can absolutely make sense, but not without a business reason to switch. The TCO benefits are necessary but not sufficient. One thing to keep in mind is that the savings are significant, but “chunky”– for example, you can’t shut down a server until everything has been moved off. You need to have a roadmap to actually capture these savings. Read more at "Cloud Computing Savings: Real or Imaginary?"

Enterprise security / control requirements: Are cloud vendors doing enough? Will enterprises be willing to meet vendors ‘halfway’?

Enterprises sometime ask things of their cloud vendors that they’d never ask of their on-premise vendors. You’d never get a hard-drive manufacturer to compensate you for the deals you lost if the drive crashed… but we’ve heard CIO’s ask exactly that of Amazon S3. Read more at "Cloud Insurance?"

Application penetration: Are there any application areas that SaaS will not be able to penetrate? If not, why haven’t they penetrated yet?

We run our own business 100% in the cloud– we're a serverless enterprise. We’re only 150 people, but could we do the same thing at 10X our size ? Absolutely– we’re talking to customers about helping them make exactly that switch. Could we do so at 100X or 1000X our size, or if we were in an industry with factories and warehouses to manage? Probably not yet, but it's not a technology problem, it's a market maturity problem. Read more at "Cloudsourcing: Where Cloud Computing meets Outsourcing."

Are SaaS/cloud vendor outages overblown, or are they symptomatic of problems that may be barriers to enterprise adoption?

Totally overblown, but that’s a good thing in the long run. Anyone who’s worked at a big company using exchange knows how often email is unavailable for one reason or another, sometimes scheduled, sometimes not. But nobody notices or even measures the impact. When gmail is unavailable, on the other hand, it’ a big deal, it makes headlines, and Google fixes it. That's part of the reason why SaaS solutions will become better and better suited to enterprise adoption over time.

Are high-transaction-volume applications appropriate for the cloud? If so, can you please provide some examples that have transitioned to the cloud successfully?

The cloud is absolutely ready for high-transaction-volume applications, if architected carefully. Here are some examples:

• We've helped Japan Post manage 150M customer relationships using Salesforce.com
• We've helped a public agency in Japan using Force.com and Google AppEngine together to send a hundred million workflow-generated emails a day
• We've helped Starbucks Pledge 5 use Force.com Sites to match a half million volunteer opportunities on Obama's inauguration day
• We’ve helped a 5000 person consulting team crunch their timecards in realtime to forecast revenue and utilization by region, practice and group

Summary

Of course, there were too many great comments throughout the session to summarize here-- definitely worth watching the full replay here. But we wanted to close with a paraphrase from Peter Coffee in today's webinar:

There are 2 words that are holding back the adoption of cloud computing in the enterprise: "CAN'T" and "OR." The first is an assumption that something can't be done on the cloud, the second is an assumption that you need to choose between cloud solutions and on-premise solutions. Both are false.

Enterprise SaaS Working Group: The cloud is ready for your enterprise, is your enterprise ready for the cloud?

Ryan Nichols

We're honored to be participating in this week's kickoff of the Enteprise SaaS Working Group, sponsored by Conformity. We'll be joined by CIOs, enterprise architects, analysts, and VP's of cloud computing from Dell, Initiate, Salesforce.com, the 451 Group, SuccessFactors, and Ingres.

The topic on the table is "what will it take for SaaS/cloud apps to become mainstream in the enterprise?" with deep dives on meaty topics like SaaS vs. Paas, SaaS suites vs. best-of-breed, and SaaS TCO, Security, and Management.

We're at a great stage in the industry's evolution that we're finally able to have a detailed, industry-level conversation on these topics without being overshadowed by the FUD-factor of "is SaaS enterprise-ready." The question is no longer "if", but "how." That's exactly what we're going to dig into in Wednesday's webinar.

More broadly, I think Simon Wardley at Canonical gets it right when he asserts that the question is no longer "is the cloud ready for the enterprise," but rather "is the enterprise ready for the cloud?"

That's certainly what we've seen in our work accelerating enterprise adoption of cloud computing-- making the most of cloud computing requires a fundamental changes in how companies interact with their internal staff, their partners, and their technology vendors. Our customer, Author Solutions, found that cloud computing enabled an entirely new, "long tail" business model. Another customer, Starbucks, found that cloud computing allowed them to digitally extend the 1:1 barista experience to millions of customers online. In both cases, the technology was the easy part.

My hope for the Enterprise SaaS Working Group is that we spend as much time talking about the changes required of the enterprise to make the most of cloud computing as we do talking about the changes required in the technology itself.

But first things first-- looking forward to a fantastic first webinar on Wednesday! If you're interested in learning more, register here....

Cloudsourcing: Where Cloud Computing Meets Outsourcing

Ryan Nichols

Here at Appirio, we spend our days helping enterprises accelerate their adoption of the cloud. We've done over 150 projects for enterprises looking for help getting started with cloud computing, implementing a packaged SaaS solution, or developing custom applications on the cloud. Today, as we announce some key executive changes, we wanted to share our vision for where all this is heading.

We love helping CIO's "think big" about cloud computing. What's the roadmap to move more and more of your IT infrastructure to the cloud? How do you manage this transition? What types of benefits should you expect? How do you manage the risks? When will you be able to run your business 100% on the cloud?

CIOs don't want to undertake this journey alone, but struggle to find a partner to help them answer these questions and make the transition to cloud computing. Their traditional partners have too much to lose to move from the status quo, and have expertise in all the wrong areas-- it doesn't matter anymore how good they are at managing a server farm.

Appirio wants to help. We're increasing our focus on what we call "cloudsourcing": where cloud computing meets IT outsourcing.

Its the natural combination of two trends that have dominated how enterprises utilize information technology over the last 2 decades. The first is a shift in how IT is architected-- from mainframe to client server to cloud-based technology. The second is a shift in how IT is sourced and delivered--from a purely in-house function to a function increasingly delivered by specialized vendors.

Both reflect the natural economies of scale in information technology. Organizations shouldn't be in the business of managing their own data centers any more than they should be in the business of managing their own power plants. And they probably don't need to have too many expert electricians on staff either-- leave that to the experts. Focusing your resources on your organization's core competencies results in both better service and lower costs.

Are you spending >5% of your revenue on information technology that doesn't support your business objectives? Appirio wants to cut that 30-50% by moving your entire IT infrastructure to the cloud, shoulder the risk, and share in the savings. And in the process, we'll support your business's growth through the world-class innovation coming from the clouds of Salesforce, Amazon, and Google.

We'll offer:

• Migration of on-premise application portfolios and infrastructure to cloud-based, multi-tenant infrastructures, platforms and applications.
• Managed services to transition and manage support in this cloud environment including support, cloud operations, portfolio management, application development, testing maintenance and continuous improvement.
• A cohesive business and technical interface to the cloud that abstracts away the complexity of managing multiple SaaS applications and cloud platforms.

Why are we so confident in the cloudsourcing approach? Because this is how we've run our own business from the beginning--as a serverless enterprise. We grew our business 400% last year, spent less than 2% of our revenue on IT, and have no capital tied up in IT infrastructure. We've experienced the benefits of running our entire business in the cloud, and work with customers every day who are taking steps in that same direction.

Interested in learning more? Click here to download our whitepaper on the topic. Want to participate in research we're conducting to further quantify the benefits of this approach? We've selected an industry we think is ripe for cloudsourcing, and are doing deep dives into the IT cost structure of professional services firms with 500-5000 employees. We're actively seeking candidates to participate, click here and tell us you're interested.

It's exciting to be able to focus our organization on making cloudsourcing a reality...much more on this topic on the weeks ahead!

Cloud Insurance?

By Ryan Nichols

We’re seeing an interesting trend in our conversations with IT professionals about cloud computing. It’s becoming clear that many are really looking for 2 distinct things when they evaluate cloud technology. The first is the solution itself—secure, reliable access to all the features and functionality advertised. The second is something like an insurance policy to protect them if anything goes wrong. The problem is that when IT professionals can't get that type of insurance policy for their cloud solution, they worry that the solution itself isn't secure or reliable. This isn't the case, of course, and we wanted to spend some time exploring this topic of what you might call "Cloud Insurance."

Traditionally, of course, technology hasn’t come with any sort of insurance policy. When you buy a hard drive, there’s no insurance policy to cover the real business cost of losing data. You may get your money back (or at least a new hard drive) if the one you buy is defective, but no one is going to write you a check to compensate you for the productivity or data lost.

How do companies handle this risk with their technology? They take reasonable precautions to prevent the loss (e.g., encrypting data, making backups) and then do what is referred to as “self insurance.” They suck it up and get on with business.

Should we expect something different when storage is offered to us as a service in the cloud vs. as a physical product? Well, it might feel that way. I might feel as though I have less control over my data in the cloud because I can’t physically wrap my arms around it (although of course I have no idea what’s really going on behind the case of my hard drive either). It might feel as though I need assurances against this additional risk. And indeed we’ve heard CIO’s ask cloud providers whether their product includes an insurance policy—protection from what could go wrong.

But of course, cloud technology doesn’t come with an insurance policy, any more than on-premise technology does.

It’s important to realize that this doesn’t mean cloud technology lacks security or reliability. Salesforce, Amazon, and Google spend millions of dollars on security and reliability every year, and employ some of the best minds out there on these topics. Their business absolutely depends on delivering a service that exceeds the expectations of the most demanding enterprises in this regard. There is growing consensus that your data is probably safer in a leading cloud platform than it is in most on-premise data centers.

Cloud providers simply aren’t in the insurance business, any more than on-premise technology vendors are. And insurance isn’t always cheap. There is real risk associated with storing valuable information—something always can go wrong and there’s no way any technology provider would be able to offer an affordable solution if an insurance policy were always bundled in for free.

Of course, self-insurance isn’t cheap either, even when you are using on-premise technology. You just don’t really know the cost because you don’t really know the risk. Front-page headlines about companies losing their customers' credit cards almost always blame a misplaced or stolen laptop or rogue employee—not a problematic technology vendor.

Cloud technology makes it at least a little easier to identify the risk because you’re working with public, audited platforms. If you tell me the value of what you’re going to put in the cloud, how you’re going to build your solution, and the platforms you’ll use as infrastructure, it should be possible to give you a quote for what you might call “cloud insurance.”

Would the emergence of cloud insurance providers accelerate the adoption of cloud computing? Or will CIOs adopt “self-insurance,” as they have for on-premise technology? Only time will tell.

But one point is clear: You can’t get an insurance policy from a hard drive vendor. The fact that you can’t get an insurance policy from your cloud vendor doesn’t make that solution any less suitable for the enterprise.