1. SaaS : Software As A Service
Keynote Speech For SCIT (
Software Development Challenges & Issues Seminar
January 19, 2008
Microsoft is offering the Professional version of Dynamics CRM Online for an introductory price of $39 per user per month. The Professional Plus release is $59 per user per month.
Suhas Kelkar
VP Product Management
Digité (

2. Agenda What is SaaS? Why SaaS? History and current state of SaaS
SaaS Architecture
Good afternoon.
Topic of my presentation is SaaS. We will look at what is SaaS. Many of you may have heard the SaaS buzz word already but it is important to understand exactly the foundations of SaaS.
Then we will look at Why SaaS? What is the business environment that is making SaaS a very common topic these days.
In order to truly understand SaaS we should also understand the history behind it.
Last but not least we will look at the SaaS Architecture. What does it take to become a SaaS application.

3. "Software deployed as a hosted service and accessed over the Internet"
SaaS Elevator Pitch
"Software deployed as a hosted service and accessed over the Internet"
So What is SaaS? Or an elevator pitch for SaaS looks something as follows,
Software deployed as a hosted service and accessed over the internet. That’s it.
It is not about prescribing a specific architecture (Three tiered etc)
It is not about specific technologies or protocols (It does not say you must be using J2EE or .NET or anything like that)
In fact this definition is quite simple and the only thing it specifies is where the application code resides and how it is deployed and accessed!
In fact I would like to make a statement that EVERYONE in this room has already used SaaS in their life! It is a very bold statement, I am saying each one of YOU has been using SaaS. Here are 1000 bucks if you would like to take my challenge!  Anyone?
How many of you have not used one of the following?
All these are SaaS Services. They are all consumer SaaS services. You as a consumer do not install any software on your machines. Your data resides exclusively on service provider’s hardware. You access it over the internet. Etc. etc. etc.

4. Business Services versus Consumer Oriented Services
It is not just Consumer SaaS services that makes up SaaS. There also are Business SaaS services. Salesforce CRM is one of the most popularly known such software. Salesforce benchmarked the use of SaaS in our industry. Salesforce was the first enterprise business application that became successful as a SaaS.
In case of consumer SaaS services, most of them are even free, there was less resistance for putting your data on provider’s hardware. People were hesitant at first to have their s stored on hotmail or google servers. But all in all there was less resistance.
In case of business apps that resistance was very high. Salesforce in it’s initial days had to go through many rough times to convince enterprise that their sales and customer relationships data will be safe even when it is not protected by their own IT department.
What success of Salesforce has done is make this resistance decrease significantly. Enterprise clients are feeling increasingly comfortable to put their data on the web. So naturally since Salesforce’s wide success, many companies are sprouting up which are entirely based on SaaS strategy. The most recent, wildly successful IPO was NetSuite. NetSuite’s lost $242 million over the period of 9 years. But when it went IPO people snapped up the shares and drove the total market cap of NetSuite to 1.5Billion dollars. In the process Larry Ellison has become even richer!!
Even the Goliath of on premise software, SAP has taken the plunge and is advertising SaaS based product line.

5. What is SaaS?
SaaS is a software delivery method that provides access to software and its functions remotely as a Web-based service.
SaaS allows organizations to access business functionality at a cost typically less than paying for licensed applications since SaaS pricing is based on a monthly fee.
Users don’t need to invest as much in hardware, server support, security audits and need fewer in house IT staff

6. Key Advantages for the End User
SaaS Advantages
Key Advantages for the End User
Lower Costs. The user need not pay a single (usually large) licensing fee. He only needs to pay recurring subscription fees.
Smaller Storage and Hardware Requirements. The user need not store software or data stored on his computer
Fewer Personnel. SaaS reduces the need for specially trained IT personnel to handle maintenance, monitoring and software updates.
Key Advantages for the Vendor
Continuous and recurring stream of income
Reduced losses from piracy and unlicensed use of software
Greater valuation for the company!

7. Key characteristics of SaaS?
Network based access and management of commercial software
Central management of commercial software rather than at each customer’s site
One to many application delivery model based on single instance, multi tenant architecture
Centralized updating of software
No more install hassles, downloadable patches and painful upgrades
Upgrades are frequent and completely transparent. Gmail version keeps changing

8. Why SaaS?
In 2005, Gartner estimated SaaS sales were 5% of total business software sales.
In 2011, Gartner predicts that share will grow to 25% (As per Gartner, September 26, 2006)
From IDC Directions Video : SaaS Tipping point in ’07
IBM will create online marketplace on Web Sphere
SAP, Microsoft will accelerate SaaS strategies
Salesforce.com will be acquired
2/3rd of line of business managers favored SaaS delivery model

9. Why SaaS? Target the “long tail”
Targeting the "long tail" of smaller businesses, by reducing the minimum cost at which software can be sold.
On-Premise Software Market
SaaS Opens up New Market
With his article "The Long Tail," in the October 2004 issue of Wired ( writer Chris Anderson popularized the idea of the "long tail" in explaining why online retailers such as Amazon.com are uniquely positioned to fill a huge demand that traditional retailers cannot serve cost-effectively (see Figure 5).
By eliminating much of the upkeep, and using the economics of scale to combine and centralize customers' hardware and services requirements, SaaS vendors can offer solutions at a much lower cost than traditional vendors, not only in monetary terms, but also by greatly reducing the need for customers to add complexity to their IT infrastructure. This gives SaaS exclusive access to an entirely new range of potential customers that have always been inaccessible to traditional solution vendors, because it has never before been cost-effective to serve them (see Figure 7).
Effectively targeting these smaller customers requires another shift in thinking for vendors who are accustomed to a sales process that depends on personal contacts and vendor–customer relationships; most vendors won't be able to provide personal service to a much larger customer base at price points that such a base will support. Selling SaaS is like selling mobile phone ringtones, or downloadable music: it should be possible for a customer to visit your website, subscribe to your service, pay with a credit card, customize the service, and begin using it, all without human intervention on the part of the vendor. This doesn't mean that you have to eliminate the more personal approach for larger customers with more extensive needs. But designing the sales, marketing, provisioning, and customization processes from the ground up to work automatically makes it possible to offer an automated approach as a choice—and has the happy side effect of simplifying the work that your own support personnel must perform in order to accomplish the same tasks on behalf of a customer.

10. Why SaaS? SaaS Showcase Example
daptiv formerly eProject
$45 per user per month, claims to have 100,000 users. Adding 2000 users per month
Grew 128% to $16M revenue in FY06
Positioning themselves as “SalesForce for the PPM market”, via eLounge (online customer collaboration environment)
Gaining market share and winning many deals

11. Agenda What is SaaS? History and current state of SaaS
SaaS Architecture

12. History of SaaS
SaaS as a concept is not fundamentally new! What is new is the timing and success of SaaS!
How We Got Here
Any speculation about the future of software deserves at least a brief glance at the major shifts in its history, including:
The emergence of Web services standards and technologies such as multi-tenant architectures.
The move towards service oriented architecture (SOA) approaches by most major software vendors, making integration with back-end systems easier.
The emergence of the on-demand model, which shifted the software market from an ownership to a “rental” model, freeing businesses from ownership hassle and expense. Salesforce.com is one of the most successful examples of this model, with 35,300 customers and more than 575 applications.

13. ASP suffered with poor performance
ASP Versus SaaS
It is important to understand the difference between ASP and SaaS. It is very common to confuse SaaS with ASP.
ASP applications were traditional client-server applications with HTML façade
ASP suffered with poor performance
Shift in center of gravity : SaaS is about what customer wants, ASP was what the client would offer
ASP concept did not scale!
The reason for moving away from the term ASP or application service provider is that the ASP generation was merely traditional client-server applications with HTML frontends added as an afterthought.
Because the applications were not written as net-native applications, performance was poor and application updates were no better than self managed applications. By comparison, current net-native SaaS applications or independent portions are updated regularly, many daily.
This gradual shift in the terminologies also is a direct reflection of the change in the business requirements demanded by clients. The focus in SaaS is more on what the customer wants rather than what the vendor could give as was the case in an ASP.
Early SaaS approaches were application service providers (ASPs) who ran a turnkey application on behalf of their clients. But ASPs generally did not build the application themselves; rather, they took an off-the-shelf application (such as a messaging platform, an enterprise resource planning tool, or a customer relationship management package) and ran it for customers
SaaS vendors typically use a multi-tenant architecture, meaning that multiple customers are running the same software, but with a virtually separate data. ASPs by comparison, merely deployed one application instance on a server for each customer, just as a customer would deploy internally. This inability to scale this kind of business model may be cited as one of the reasons for the failure of the ASP model. It's reasonable to assume that multi-tenant architecture simplifies application management for the vendor. The multi-tenant model also simplifies the value for all customers since upgrades are instantaneously available across the entire platform. The notion that one customer (tenant) can excessively burden the service is baseless and absent of fact.

14. SaaS and beyond SaaS is just the beginning
Platform As A Service (FORCE.com)
Hardware As A Service (HaaS)
Infrastructure As A Service (IaaS)
“Blue Cloud” by IBM
Simple Storage Service (Amazon S3) enables storage in the cloud,
Elastic Computing Cloud (Amazon EC2) enables "compute" in the cloud.
Google computing services
The original term Hardware as a Service(HaaS) was first coined by the economist Nicholas Carr in RoughType, Mar 2006 [1]. The term HaaS is still in popular usage with IaaS being a later reinvention of the same term with no discernible distinction.
The later term of "infrastructure as a service" or IaaS started to circulate in 2006 with firms such as Savvis [2], BlueLock [3], ZDNet [4].
Amazon, IBM and Google Bet on Utility Computing. After experimenting with its Elastic Compute Cloud (EC2) for the past year, Amazon has found plenty of demand for its computing power on-demand platform from startups, as well as established companies seeking a ‘sandbox’ for their new initiatives. Amazon is now confident it can deliver its computing power in a reliable and cost-effective fashion to a broader market of business users. So, expect more aggressive PR and marketing efforts to promote and sell this powerful utility computing service. IBM Blue Tune: IBM originated the term on-demand and then walked away from the utility computing market seeking new opportunities among the avatars. When Amazon proved that the utility computing concept could become a reality, IBM repackaged its autonomous computing ideas in the form of a new ‘blue cloud’ initiative. Big Blue will push the idea hard in The GooglePlex Makes It Move. Google is tired of sitting on the sidelines while Amazon’s success and IBM’s new ‘blue cloud’ initiative, Google has initiated a PR campaign to promote its ‘cloud’ computing capabilities and strategies. The GooglePlex has long been considered the prototype for a new large-scale computing architecture. Now Google’s incredibly scalable and economical computing engine is getting the attention of business pubs like BusinessWeek, the Wall Street Journal and other mainstream pubs.

15. Agenda What is SaaS? History and current state of SaaS
SaaS Architecture

16. Paradigm Shift
Moving from on-premise software to SaaS requires paradigm shift in following three areas

17. Application Architecture : SaaS Maturity Model
Level 1: Ad Hoc / Custom
Level 2: Configurable
Level 3: Configurable and Multi-tenant efficient
Level 4: Scalable, Configurable, Multi-Tenant-Efficient

18. Application Architecture : SaaS Maturity Model
LEVEL 1 : AD HOC / CUSTOM
Similar to ASP model
Each customer has its own customized version of the hosted application, and runs its own instance of the application on the host's servers
This level offers very few of the benefits of a fully mature SaaS solution

19. Application Architecture : SaaS Maturity Model
LEVEL 2 : CONFIGURABLE
Vendor hosts a separate instance of the application for each tenant
Same code, no need to maintain customized application code bases
Easier to support/maintain since only single instance needs to be updated
More expensive than Level 1 in terms of effort required

20. Application Architecture : SaaS Maturity Model
LEVEL 3 : CONFIGURABLE & MULTI TENANT EFFICIENT
Single instance that serves every customer, with configurable metadata
Authorization and security policies ensure that each customer's data is kept separate from that of other customers
Eliminates the need to provide server space for as many instances as the vendor has customers

21. Application Architecture : SaaS Maturity Model
LEVEL 4 : SCALABLE, CONFIGURABLE & MULTI TENANT EFFICIENT
Vendor hosts multiple customers on a load-balanced farm of identical instances
Scalable because servers can be added to meet demand without re-architecture
Changes or fixes can be rolled out to thousands of tenants

22. Business Model
Shifting the "ownership" of the software from the customer to an provider.
Reallocating responsibility for the technology infrastructure and management—that is, hardware and professional services—from the customer to the provider.
Budget Distribution For SaaS Software
Typical Budget For On-premise Software

23. Business Model
Reducing the cost of providing software services, through specialization and economy of scale.
SaaS Hardware costs get shared by all tenants resulting in economies of scale
a line-of-business SaaS application installed in a load-balanced farm of five servers may be able to support 50 medium-sized customers, meaning that each customer would only be responsible for a tenth of the cost of a server. A similar application installed locally might require each customer to dedicate an entire server to the application—perhaps more than one, if load balancing and high availability are concerns.

24. Operational Structure
SaaS providers not only have to be experts in building software and bringing it to market, they must also become experts in operating and managing it.
Monitoring SaaS applications
For availability
For performance

25. Trust the Platform!

26. Does this look all complicated to you? 
Help is literally just around the corner! :)

27. Summary
SaaS is going to have a major impact on the software industry, because SaaS will change the way people build, sell, buy & use software
As students of SCIT, you are the future of tomorrow’s IT industry. Hence you need to track SaaS very closely as it will have material impact on your future!

28. Thanks! SuhasKelkar@gmail.com

29. Glossary and References