1. Large organisations like the SaaS model and would like all their applications (inside and pulled through the firewall) to all have SaaS characteristics;

2. Internally deployed SaaS based applications (managed behind the firewall) would tend to be attractive to larger organisations that have their own ICT infrastructure and be less appealing to mid size and small organisations, and;

3. Hosted information services (via the Internet/Cloud) would be attractive to smaller organisations as they can then get access to the type of functionality that only large organisations can purchase and support via dedicated ICT resources – this has the potential to revolutionize how small organisations use information systems to operate their business.

The real issue is actually building the types of applications that are Internet ready, real time and can exploit the capabilities of new hardware 64 bit, multi thread, parallel processing, etc). The author simply says (understates the challenge) that what is involved is a complete rewrite to a browser based application that is multi tenanted (and also person centric so that each person has their own unique view into the system).

This is not as simple as it first appears as the real impediment to the emergence of Web based multi tenanted applications is the way we actually currently build software applications. This requires a shift in the way we ‘manufacture’ software applications from one that is high labour intensive to one based on a ‘factory’ approach that eliminates all downstream development cost (eliminates all programming effort). This can be done today and would represent the next big industrial shift and as unlike manufacturing the software industry is still really a cottage industry.

The implications for such a change would be quite profound – if the means to adapt applications rapidly are internalised within organisations – large corporations and government for instance, then the IPR created can be owned by these entities rather than a software vendor. Organisations like SAP, Oracle, etc, have a business model that has a high barrier to entry as trying to replicate (not that you would want to) what they have would cost hundreds of millions. However, if you change the software development model their cost and technology barriers would be eliminated and they would see revenues and customers evaporate unless they adopted the same approach.

The emerging SaaS model coupled with innovations in application development is a profound threat to the current generation of application vendors and the costly ICT support model that supports their applications.

Great insight. It’s hard to believe that you wrote this at least 8 months ago.

The only thought that I would share is that many analysts don’t point out the huge benefit of products such as MS CRM and Acumatica (ERP) that allow deployment in a SaaS model OR in a traditional “buy the license” and run on-premise model. 

Sometimes firms need to change and it is nice for a user to be able to go back and forth between running on premise (your own cloud with these two products-MS CRM and Acumatica) and “in the cloud”.

Please visit my blog entry on 1/1/2011 to see a VAR’s perspective in the dilemma you eloquently describe with SaaS. http://jackboyer.blogspot.com/

The video I told you about is on this site if you are interested.  It’s only  6 minutes long.  http://erpcloudnews.com/2010/10/cloud-erp-debate-by-boyer-and-associates/

Jack Boyer
http://www.boyerassoc.com

Jack Boyer, CPA (inactive), MCP
President
Boyer & Associates
3525 Plymouth Blvd, Suite 207
Minneapolis, MN  55447
Direct: (763) 412-4307
Fax:      (763) 412-4301
jboyer@boyerassoc.com

From an engineering project standpoint, new SaaS companies will need to prove themselves financially stable over an extended period in order to reassure clients whose projects span 5-10 years. If a startup ‘disappears’ in the middle of a project, your assets and your workflows/metadata could go with it.

I also believe by the way, that far more businesses, also major corporations, will shift faster from “on premise” and traditional licensing to “rent” models and deploy their business solutions in the Cloud. Data, in my opinion, can be stored and handled with much greater security in the Cloud, versus self-hosted “on premise”, where so many things can go wrong and influence the actual “real life” security level. At least that is my experience, also with on-premise ERP.

Excellent summary. The SAP BbyD scenario does bear watching. Despite the appearance of a start-up inside the large co, the main revenue streams still get the management attention. The sales teams selling into existing accounts along with those chasing new full blown SAP implementations are VERY expensive. They have extremely high costs tied to very long sales cycles.

I cannot imagine they will be very happy if another part of the company is selling against them in new divisions of existing accounts. Clearly, there is a huge risk of civil war – despite any management edicts to the contrary.

I do not expect BbyD to replace a full blown implementation in the near future, but the direction is clear and the cost case is compelling.

If IBM acquires SAP in the middle of the current uncertainty, then the enterprise app landscape will become very interesting.

I don’t have to like all of it though. I am dissapointed in the move to the single browser to run all my applications. I think there are better solutions with more freedom out there; even ones that don’t make you install and update code on every PC.