SAAS (Software As A Service)– A Trend To Understand And Adopt

SAAS (Software As A Service) – A Trend To Understand And Adopt

Content:
1-The Buzzword
2-Market Trends
3-Design Concepts of SAAS Model
4-Conclusion

The Buzzword:
SAAS – It is nothing but a new software delivery method. In this model, company’s day-to-day business services are delivered to the users over the internet. The concept is easy and very effective: rather than buying and installing applications that support commodity processes like accounting, CRM, payroll and, procurement, companies use “pay-as-you-go” model to access the applications hosted by third party companies. This service delivery model is one-to-many, where an application is shared by multiple companies with their set of functionalities and customization.
A key objective of this model is that the SaaS provider invests in the technology, hardware and ongoing support services, instead of the client, giving the buyer more flexibility to switch providers and reduce the complexity of software maintenance.

Market Trends:
According to IDC, the worldwide market for Software as a Service (SaaS) is healthy and growing stronger every day and the worldwide spending on SaaS will continue to increase. IDC predicts that 10% of the market for enterprise software will adapt to pure SAAS model.
In a recent study by AMR Research, the survey found that:
- 61% of firms will likely support SaaS for one or more of their ERP business processes by year-end 2007
-52% of firms will likely support SaaS for one or more of their Supply Chain Management business processes by year-end 2007
-56% of firms will likely support SaaS for one or more of their CRM business processes by year-end 2007
-49% of firms will likely support SaaS for one or more of their Human Capital Management business processes by year-end 2007

I have so far identified 3 key reasons for businesses to consider and adopt SAAS.
1. Reduce IT Business Cost (TCO)
2. Improve IT Business Operations
3. Create Business Value

Reduce IT Business Cost:
SAAS business model eliminates the cost associated with software license, project implementation, and hardware and post implementation operations. It is simply a subscription per user delivery model

Improve IT Business Operations:
Maintaining an application is more painful than building it. A mission critical application needs 24/7 availability and support staff to manage it. To sum it up, a company needs to have a sophisticated data center with high end backup and recovery capabilities. SAAS eliminates all these burdens from the consuming entities and make the service provider responsible for it.

Create Business Value:
For many companies where IT is not their core business competency, spending large portion of corporate budget on IT and manage a large IT operation takes out their focus from the main business competencies. With SAAS, companies can outsource their commodity processes like accounting, CRM, payroll and , procurement to a third party company and focus more on their core business capabilities.

Design Concepts of SAAS Model:
SAAS is normally a web based application supporting large numbers of end users in multi-client or shared application environment.

End users can access the SAAS based application using internet/web. Service providers host the applications in their infrastructure and stores the user data in either a dedicated database or in a shared database instance. Users connect to application using secured infrastructure. SaaS requires an architecture that can support peak usage demands and process millions and millions of transactions in a secure and reliable environment.
Key implications in SAAS architecture are scalability, configurability, multi-tenant efficiency and data integration.


Scalability:
As SAAS will be accessed by large volume of users simultaneously over the internet, SAAS delivery and consumption architecture must address very high end throughput.


Configurability:
SAAS is an on demand virtual application service delivery model, where the enterprise users will access the application as it is built just for them and catering specific their business need. In simple term SAAS is a self service or configurable application.


Multi-Tenancy:
SAAS delivery model normally supports 3 delivery models
-single tenant with dedicated application instance or
-multi-tenants sharing a single application instance
-multi-tenants sharing dedicated application instances


Data Integration:
Even though companies have SAAS access for commodity processes like accounting, CRM, payroll and, procurement they still have some home grown applications that is custom built for their business processes. Integrating in house application with SAAS systems need thorough understanding of SOA and enterprise integration.




Conclusion:
SAAS is a very emerging technology concept and is the new kid in the block. With pressure rising on CIOs and IT executives to cut down spending on IT operations and improved customer delivery, more and more IT executives are trying to put SAAS in their IT portfolio.

In this time of financial turbulence and economic slowdown, IT executives are facing the following challenges
· Demand for trimming down the IT spending
· Availability of limited infrastructure and human resources to execute
· Misalignment between business strategy and IT strategy
While under tremendous pressure to
· Improve bottom line
· Generate. savings
· Run and optimize IT operations
· Deliver values to the enterprise

“Reducing cost and improving productivity”, looks like to slogan for today’s CIOs. The expectations from the business executive from their IT counter parts are becoming stricter day by day. CIOs are working with their team to

o Optimize their IT portfolio
o Reduce IT OPEX (Operational Expenditure)
o Improve value delivery to end users and customers
o Outsource IT operations
From many sources and through my work experience, I have realized that in many IT organizations, “salaries are the black hole of IT budget and maintenance expenditure are the black hole of IT salaries” and lights on maintenance costs are normally out of control. These monstrous apps which were built in 80s might add up to 80% of your application portfolio and demand majority portion of your IT budget while delivering 20% value to your enterprise.

The question is, how did we even get in to this situation? Applications and solutions were designed and built based on IT’s good faith to support the business, as demands from business and complexity in IT environment grew up, IT folks started building applications after applications to control the situation and to supplement the immediate needs. As the number of applications grew up in the IT portfolio the budget to operate these apps also went sky rocketing thus creating chaotic situation. This scenario is very typical in almost all of the large IT organizations.

CIOs and IT executives are looking for an answer to the above mentioned problem. How do I reduce my operational expenses and generate more value for the whole enterprise rather than just pleasing the IT? Cost cutting across the board is dangerous, what we need is a well structured IT or investment strategy and tools that will deliver more values to companies top and bottom line by creating new efficiencies and increasing revenues while reducing the overall IT spending. One strategic tool to solve this problem is “Application Portfolio Rationalization”

Application Portfolio Rationalization is a structured process to assess the current IT portfolios, identify the value generating and under performing applications and prioritize IT investment.

Application Portfolio Rationalization process typically has 5 steps

1- Portfolio Cataloging
2- Applications Inventory
3- Portfolio Analysis
4- Portfolio Disposition Recommendation

5- Investment Sequencing and Roadmap

Portfolio Cataloging: In majority of IT organizations managers doesn’t know how many applications are there in their department or for that matter in the whole enterprise. Redundant applications within various departments in a large IT organization is very common.
· First step in the rationalization process is to identify the sources and resources to collect information regarding existing applications.

Application Inventory: Once the source and the resources for application related information are identified
· Next step is to create an inventory of application portfolio in a spreadsheet or database to collect and store all the related information that could be used to perform various analyses in the next step. It also helps creating a single business view of the application portfolio across multiple corporate groups.

Portfolio Analysis: Collected raw data will be of no use if it can’t be synthesized to derive meaningful information for executives to decide the next action. According to many consultants cataloging and inventory steps are the most difficult and time consuming tasks in this process. Once the data is collected next step is to analyze the date in various dimensions. Some of the typical analyses include TCO, Cost Benefit, ROI, Technical – Business alignment, Application – Business Process mapping and Risk assessment. There are many other analyses that could be done depending on the situation and objective of the project.

Portfolio Disposition Recommendation: This is where the client gets there value for the money from the consultants. After numerous interviews and analyses of the current state applications data, applications or IT portfolios are ranked on various attributes. These attributes are basically divided in to 3 categories

Technical suitability: How well the applications or IT portfolios fit in the current technical environment of the enterprise.
Business alignment: Are these applications or IT portfolios aligned with the business objective? Validate if these applications can support enterprise’s business strategy
Cost: How much are we or much have we so far spent on the applications or IT portfolios vs. how much does this application contribute towards achieving the business strategy





Investment Sequencing and Roadmap: Once the recommendations are approved by the CIO or IT executives, next is to plan for the execution. It is advised to thoroughly understand the corporate strategy before planning the roadmap for the execution. Once the roadmap (Schedule) is crafted, look into the IT budget/Investment Plan and allocate budget for different phases of the execution. As the roadmaps are normally planned for a longer duration, it will be helpful to create 90 days -120 days – 1 year stop gap check, to validate if the plan is getting executed as per the plan.

Conclusion: At this time, when every big or small enterprise is facing overwhelming challenges to survive, spending unwanted money in IT organization is the last thing in C level executives mind. More than ever, CIOs are challenged to bring some level of objectivity to the task of selecting which IT applications or processes, to retain, replace, renovate or remove.
In summary, CIOs and Enterprise Architects should focus more time on optimizing IT spending and improve contribution to the whole enterprise by using a strategic tool like IT Portfolio Rationalization.