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SaaS, Clouds & Web Services

Converging Technologies Enable Powerful New Enterprise Applications

November 2008


BS Economics Mathematics Finance

MBA MIS Entrepreneurial Mgmt




quantitative analysis

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, timeconsuming 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 onpremises 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 trillion.”

Two Centuries of Productivity Growth in Computing 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 multiuser mainframes – Multi-user minicomputers, dumb terminals – Single-user personal computers – Minicomputers lose role in favor of, essentially, increasingly powerful, networked personal computers – Grids/clouds of commodity hardwar emerge
“Prices for the 9370, which I.B.M. first shipped last summer, range from $68,000 to $900,000.” The New York Times March 29, 1988

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 Delivery Information APIs Rate Calculators APIs Shipping Labels APIs Carrier Pickup™ APIs

Maps API Docs API

Payroll API

PanOptic-X OnDemand

Forecasts vary, but are significant
• “…by 2011, 25% of new business software will be delivered as SaaS.”

Credit: IDC, SaaS Market Opportunity

• Deutsche Bank projects that the SaaS market will be $30 billion by Deutsche Bank: 2013. “Software-as-a-Service:
Opening Eyes in ’07; Half the Market in ’13,”

This won’t affect my company…



Learn by Example: