SaaS, Clouds & Web Services

Converging Technologies Enable Powerful New

Enterprise Applications

November 2008
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Software as a Service (SaaS)
SaaS: Terminology
• Multi-tenancy: many customers can securely co-exist on
one infrastructure.
• Application Service Provider (ASP): a vendor puts
whatever programs you want up on a server at their site
but may not have any multi-tenant capability.
• Software as a Service (SaaS): a software distribution
model in which multi-tenant applications are hosted by a
vendor or service provider and made available to customers
over a network, typically the Internet. A business model as
much as a technology.
• “Hosted”: a vague term that could mean ASP or SaaS.
• “On-Demand”: Software that may or may not be
remotely hosted and multi-tenant but is rented instead of
bought.
Latest Hosting Evolution
• Yesterday’s (visionary)
Internet Service
Providers (ISPs)
morphed into managed
services and collocation
providers.
• Now enter the giants:
Amazon, Google,
Microsoft. Perfected
internally – these
companies are now
productizing their
infrastructures.
Credit: Forrester Research
Why now? (versus then…)
• Explosion in bandwidth and high speed
connectivity.
• Dramatic increases in reliability of
connectivity.
• Internet security model maturation.
• Rich Internet Application (RIA)
technologies: AJAX, Adobe Flex
• Evidence of productivity benefits of
collaboration.
• “IT Doesn't Matter”
Nicholas Carr – Harvard Business Review – May 2003
SaaS Benefits

• Money Savings:
– Lower IT costs.
• When you subscribe to a SaaS application, you avoid the overhead associated with
implementing conventional software.

– Economies of scale
• Subscription costs for SaaS applications reflect the economies of scale achieved by
“multi-tenancy.”

– Pay as you go
• When you subscribe to a SaaS application, you pay a monthly or annual subscription fee.

• Time Savings:
– Avoiding lengthy implementation means deployment time tends to be much shorter with a
SaaS application than a traditional one.

TRUMBA “Five Benefits of Software as a Service” February 10, 2007

SaaS Benefits (Continued)
• Focus technology budgets on competitive
advantage rather than infrastructure
– When you subscribe to a web-hosted application, you
free your organization from supporting high-cost, time-
consuming IT functions, including:
• Purchasing and supporting the server infrastructure necessary to install and maintain the
software in-house.
• Providing the equipment redundancy and housing necessary to ensure security,
reliability, and scalability.
• Maintaining a labor-intensive patch and upgrade process.

• Gain immediate access to the latest

innovations
– As soon as a new or improved feature appears in the
application, you can begin using it.

TRUMBA “Five Benefits of Software as a Service” February 10, 2007

SaaS Benefits (Continued)

• There is “a convergence of interest between

customer and vendor that’s more intimate than
that expressed in the world of conventional on-
premises applications.”
• SaaS vendors constantly monitor how their
customers are using the application.
• Customers easily benchmark themselves
against their peers.
• Matt’s 6th: Onus is on the vendor!
– Mess up availability, usability, customer
service, security: customer is gone.

TRUMBA “Five Benefits of Software as a Service” February 10, 2007

SaaS Drawbacks
• Hard to integrate with local packaged
applications.
• Hard to customize to the same level as
sophisticated packaged applications offer.
• Potential subscribers have many concerns
around security. A few:
– Protecting data in transport between the
service provider(s) and service consumer.
– Storage of corporate data outside the
company.
– Identity and access management.
Cloud Computing
Cloud: Terminology
• Utility Computing: the packaging of computing resources,
such as computation and storage, as a metered service
similar to a physical public utility (such as electricity, water,
natural gas, or telephone network).
• Grid Computing: broad umbrella term in distributed
computing. Usage here – collection of networked
“commodity” computing hardware. Definition causing most
cloud confusion is “the creation of a ‘virtual supercomputer’
by using a network of geographically dispersed computers.”
• Cloud Computing: In many ways, simply a buzzword
used to repackage grid computing and utility computing.
• Platform as a Service
Why now? (versus then…)

“The prices of
computation begin
at around $500 per
MCPS for manual
computations and
decline to around
$6x10–11 per MCPS
by 2006 (all in
2006 prices), which
is a decline of a
factor of seven
Two Centuries of Productivity Growth in Computing
trillion.”
WILLIAM D. NORDHAUS
Journal of Economic History, March 2007
Why now? (versus then…) cont
• As computing power
increased while cost
declined:
– Computation housed
centrally in large multi- “Prices for the 9370, which
user mainframes I.B.M. first shipped last
summer, range from $68,000
– Multi-user minicomputers, to $900,000.”

dumb terminals The New York Times

March 29, 1988
– Single-user personal
computers
– Minicomputers lose role in
favor of, essentially,
increasingly powerful,
networked personal
computers
– Grids/clouds of commodity
hardwar emerge
Cloud Benefits

• Location of infrastructure in areas with lower

costs of space and electricity.
• Sharing of peak-load capacity among a large pool
of users, improving overall utilization.
• Separation of infrastructure maintenance duties
from domain-specific application development.
• Economies of scale associated with acquisition,
management and maintenance of infrastructure.
• Separation of application code from physical
resources.
Cloud Drawbacks

• Specific clouds have specific

drawbacks (technology set, flexibilty)
• Few offered SLAs (rapidly changing)
• All limit flexibility relative to
purchasing and managing internal
infrastructure
Learn by Example: AWS
• Amazon Elastic Compute Cloud (EC2)
– Features:
• Elastic - Increase or decrease capacity within minutes by
dynamically commissioning one, hundreds or even thousands of
server instances simultaneously.
• Completely Controlled
• Flexible, reliable, failure resistant, secure
• Full SLA
– Pricing:
• $0.10/Hour - Small Instance (Default - 1.7 GB of memory, 1 EC2
Compute Unit, 160 GB of instance storage, 32-bit platform)
• And – you only pay for it when it is running..
Web Services
Web Services: Terminology
• W3C defines a “web service” as “a software system designed to
support interoperable Machine to Machine interaction over a
network.”
• Also, “web services” are commonly the Internet/externally facing
component of a service oriented architecture (SOA).
• SOA is the practice of sequestering core business functions into
independent services that don’t change frequently. These services
are glorified functions that are called by one or more presentation
programs. The presentation programs are volatile bits of software
that present data to, and accept data from, various users.
Web Services: Examples

Address Information APIs Maps API

Delivery Information APIs Payroll API
Docs API
Rate Calculators APIs
Shipping Labels APIs
Carrier Pickup™ APIs

PanOptic-X OnDemand
Forecasts vary, but are significant

• “…by 2011, 25% of

new business
software will be
delivered as SaaS.”
Gartner

• Deutsche Bank
projects that the
SaaS market will
be $30 billion by
2013. Deutsche Bank:
“Software-as-a-Service:
Credit: IDC, SaaS Market Opportunity
Opening Eyes in ’07;
Half the Market in ’13,”
This won’t affect my company…
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