Forecast: Partly Cloudy and A
       Chance of Applications

                      The Promise and Performance Challenges ...
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Elsewhere, in a nondescript glass-and-steel        and best practices are being sorted out;            combine famil...
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SaaS TCO can be lower if it brings                staff to focus on gaining competitive              and it synchron...
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“You need to understand the browser,” says
Robert Hughes, director of Global Services &
Solution Consulting at Keyno...
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Some SaaS vendors are proactively putting                            build your brand and build customer loyalty,”  ...
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Forecast: Partly Cloudy and A Chance of Applications

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Forecast: Partly Cloudy and A Chance of Applications

  1. 1. Forecast: Partly Cloudy and A Chance of Applications The Promise and Performance Challenges of Software-As-A-Service I t’s a promise that seemed almost too good to be true: Overnight, one of the company’s enterprise-critical applications is updated to the latest version. In the morning, employees — at the home office and field offices across the country — are working along as usual, noticing only some important new features that help them get their jobs done better. Later, at a management meeting, the CMO reports that faster responses to opportunities have bumped their share five points. And the CIO reports that the technology spend is exactly on target, no additional budget needed. Keynote Benchmark
  2. 2. 2 Elsewhere, in a nondescript glass-and-steel and best practices are being sorted out; combine familiar desktop applications with building in northern Virginia, the CEO of a business models are being built and business added functionality from the cloud, such as two-year-old tech startup reports to his team cases made. The difference is that these enhanced collaboration, online file storage and that the overnight upgrade to their core sweeping technological changes keep anywhere-accessibility. enterprise application offering went flawlessly. happening faster and faster. Such hybrid configurations may Monthly subscription revenue is up by high Many point to Salesforce.com as a serve as the gateway to cloud applications for double-digits. Customers are happy. The press success story and example of what’s possible. many companies. But by any route, it is likely veritably glows about their cloud-based Indeed, a Gartner consultant recently put that SaaS is going to become business as usual. application’s wonders. And Google, Microsoft, Salesforce’s share of the total SaaS spend at Even Bill Gates saw it coming while still and a host of VCs and investment bankers are 14.6 percent.iv But without certainty as to the running Microsoft, describing the “services lighting up the phone lines with offers of potential, nor enough track record to know wave” as “the next sea change.”v truckloads of cash. and avoid the pitfalls, how willing will Anshu Agarwal, vice president of enterprises be to trust their critical marketing for Keynote Systems, sees users SAAS AT LAST? applications to cloud-based solutions that themselves as important drivers of SaaS After years of latency, software-as-a-service is ultimately are out of their control? A few adoption. “What I have seen is that, after years moving to center stage, swept along with the stories in the press about outages at Google, of being dependent upon internal business bigger concept of cloud computing. On the Facebook, and Twitter are enough to give any system schemes, users and companies have software side, applications like Salesforce, business decision-maker pause. Even so, the become tired of having to deal with upgrades, Workday and Freshbooks — and yes, SaaS train has apparently left the station. The installations, and internal bottlenecks,” he GoogleApps — have become serious players in question is, at what stop will businesses get on, says. “Software-as-a-service is being driven as enterprises of all sizes. And in the bigger and for how long a ride? much by internal users as it is by software-as- cloud, services like Amazon’s EC2 Elastic a-service companies. It comes down to users Compute Cloud and IBM Smart cloud CLOUDY TERMINOLOGY saying ‘I’m just tired of having to wait for what services — and yes, Google AppEngine — are To the average business person, the whole I need. I can turn this on next week. I don’t changing the way IT departments approach concept can be a little — cloudy. In the most have to wait in a queue, I don’t have to be their missions and their development tasks, general sense, “the cloud” refers to IT denied the kinds of automations I want.’ I enabling greater speed and flexibility than infrastructure and functionality that exists think that’s what’s driving it.” ever before. outside a company’s walls (except in the case of Forrester Research counts “internal clouds,” but that’s another story), PROMISES, PROMISES “ubiquitous deployment of software-as-a- whether it’s for data infrastructure It’s a great idea on paper — replacing big service for packaged applications” as one of its (Infrastructure as a Service), processing power outlays for software and maintenance with flat 15 tech trends for the next three years.i (Platform as a Service), or business monthly fees, fast implementation, never Gartner predicts a 23.8 percent compound applications (SaaS). These things collectively having to worry about upgrades, slashing annual growth rate for SaaS through 2012, make up “the cloud.” hardware expenses — but the SaaS cloud may more than doubling overall market growth of While all aspects of the cloud can have to come closer down to earth for these 11.4 percent.ii And according to a Piper Jaffray and do impact businesses as a whole, as well as promises to be realized. Some of them are report quoted in Information Week, spending individual users, it is software-as-a-service more in reach than others. on the cloud will outstrip the overall software that is the most visible and has the most direct Lower Cost. It’s a reasonable market by a factor of five.iii effect on how people do their jobs every day. conclusion that initial implementation cost We’ve seen this type of technology SaaS either replaces or supplements the can be significant lower with SaaS than with trajectory before and can recognize its course; on-premises or desktop applications that on-premises software. Forrester Research says think back to the Web itself, to early social workers use day-in and day-out, whether it’s SaaS implementation can typically run .5x to networking, to the still-snowballing mobile simple word processing or complex CRM or 1x the first year’s subscription fee, vs. 1x to 5x data market. The dominant SaaS providers are HR functions. In some cases, most notably for traditional software.vi Total cost of still rising to the top; economics, standards Microsoft and its Office suite, hybrid solutions ownership, however, is not so clear-cut. Keynote Benchmark
  3. 3. 3 SaaS TCO can be lower if it brings staff to focus on gaining competitive and it synchronizes and voilà! The mail is corresponding reductions in IT hiring, advantage instead of routine housekeeping there. But I can also use Web mail, right? And hardware purchases, and database and and utility work. it’s a very different experience.” app server licenses.vii The balancing of price “It may not be as rich, it’s not as and performance will ultimately determine THE ELEPHANT IN THE CLOUD: PERFORMANCE responsive. And of course, the performance whether money is saved, or value added for a For all of its tremendous potential, there’s one will vary. I think what’s likely to happen is, comparable investment. One big advantage thing that will make or break the SaaS model there’s going to be some amount of buyer’s SaaS does have is that costs are knowable, both for vendors and users: Performance. remorse. Users are going to feel like and predictable, based on fixed monthly No longer is technology contained within the they gave up a lot of rich features and per-user fees. walls of the enterprise, running on its own functionality. It’s not the same, experiencing Rapid Deployment. Speed of proven network, controlled closely by its own an application through a browser. It’s not implementation is a real advantage for SaaS. IT department. Now, the nerve center of the going to come close.” Companies have no need to gear up with enterprise, the productivity of workers, the The problem with the browser being hardware or devote IT resources to integrity of information assets is controlled by the front-end for SaaS applications is that installation, testing, and rollout. All that is an outside entity, flows through the various users have very clear expectations of a browser done on the vendor side. The trade-off, pipes from a remote data center over the experience, based on their use of the Web. though, is that implementations are fairly Internet into the enterprise’s network and Users go to a site and expect it to load fast — standard, with limited opportunity for ultimately, into a browser. And that presents in two seconds or less. They don’t like to customization. If it fits as is, great. If not, challenges both for performance and wait, and won’t. Google says that for every business processes need to be adjusted to user experience. additional 500ms of delay, the site loses 20 accommodate the software, instead of vice “My browser is not like a dedicated percent of its traffic. With fast broadband and versa. For some, that is a serious trade-off. desktop application,” Agarwal says. “Take for wireless connections everywhere, users expect Seamless Upgrades and Maintenance. example, Outlook. It’s fired up in the morning blazing speed when they fire up their browser. Another checkmark in the plus column for SaaS — instead of the highly disruptive and expensive process of upgrading on-premises software, SaaS upgrades happen on the vendor side, often without any interruption of normal business processes. And with SaaS, upgrades and fixes can happen more frequently. The SaaS vendor team is dedicated to one system that serves many clients — with no string of legacy products to support — and therefore can bring innovation more quickly to client companies with none of the stress and turmoil of traditional upgrades. As an example, in the ERP arena, in the five-year period from 2004 to 2009, SAP rolled out just two product releases, and Oracle and PeopleSoft three each. During the same period, Workday, a SaaS competitor, implemented nine product releases.viii And underlying all these benefits is Once you take an application outside the confines of the enterprise data center, a whole host of the potential for a now-smaller corporate IT factors can have an impact on performance. Keynote Benchmark
  4. 4. 4 “You need to understand the browser,” says Robert Hughes, director of Global Services & Solution Consulting at Keynote. “Browsers are now full-fledged application environments, rendering, executing, initializing, and transacting every day.” Even though there are a whole string of opportunities for performance to degrade between the SaaS data center and the enterprise user, what happens in the browser may have the biggest impact. “Researchers have found that 75 percent of the performance problems with Web applications actually happen in the browser,” Agarwal says. “Not in the data center, not in the database, not in the network or anywhere in the back end, but in the browser. And so the way you architect the user interface with JavaScript and all the other browser technologies is really what is going to impact the performance of the service.” And then there’s the 25 percent of Performance degradation can happen at any point in the circuitous journey a SaaS application opportunities for something to go wrong that and its data take to get to the user’s desktop. That’s why end-to-end, internal and external are not browser-related — CDNs, domain testing are so critical to ensure optimum performance. name servers, routers, load balancers, client-side scripts, browser add-ons, etc. where and when slowdowns occur can help or whether it’s just the way you built the Understanding where along the line keep their partners honest — if the bottleneck application that is now being accessed by your performance is compromised is the key to is with one of their vendors — and also protect customers through their browsers.” delivering applications that will satisfy and and maximize their return on investment. For “Your users are not sitting in a retain users. example, investment in additional servers or data center,” Hughes adds. “Test from the network capacity may not be required, if the Internet, test with a browser, test with what MEASURE YOUR WAY TO SUCCESS problem can be pinpointed to the application- your users use.” If performance is the key to success, browser interaction, a third-party component, measurement is the key to performance. For or at some other point along the path. TURNING INCREDIBLE PROMISE INTO both SaaS vendors and enterprise customers, Performance visibility enables SaaS vendors to CREDIBLE REALITY the combination of active performance invest their resources where they will reap the New technology adoption is always a push-pull monitoring and robust, enforceable service highest return. And to get that kind of dance. Enterprises want the productivity and level agreements is essential for successful, visibility requires stepping outside the walls of competitive advantage, but are understandably profitable operations. the data center. cautious until the risks are understood and SaaS vendors will keep their “You have to understand how it’s performance proven. New technology vendors customers happy with proactive performance experienced as an end user,” Agarwal says. want to get out ahead of their competitors and management and, if written into SLAs as “You have to monitor the true experience, look gain preemptive market share quickly, standard operating procedure, will have a at the transaction and look at where the sometimes before all the kinks are worked out. distinct marketing advantage over those who slowdown is. You have to see whether it’s a For both sides, it boils down to credibility. do not. Additionally, a clear understanding of data center problem, whether it’s the network, Keynote Benchmark
  5. 5. 5 Some SaaS vendors are proactively putting build your brand and build customer loyalty,” A KEY COMPONENT OF THE their performance stake in the ground and says Neeraja Rasmussen, Keynote senior CONNECTED FUTURE backing it up with guarantees. RightNow, a marketing manager for Web Performance, The lines are increasingly blurred between CRM application provider, starts giving money about SaaS vendors. “You can guarantee that what happens on our computers, and our back to clients if up-time drops below 99.9 you can deliver a certain level of service. phones, and our TVs, and what happens in the percent. Intacct, which offers financial Verified third-party data with high levels of cloud. What’s important is getting the tasks management and accounting applications, trust is a definite competitive advantage for done efficiently and effectively. SaaS will no offers a similar guarantee, and publishes their SaaS providers.” Such data is the heart of doubt play a bigger and bigger role in uptime stats right on their Web site. effective, enforceable SLAs. And in a nascent accomplishing that end, though we eventually “Web performance monitoring helps SaaS marketplace, solid SLAs are imperative may stop making that distinction. It will all you to protect your bottom line, but also to for credibility. just be “computing.” FOOTNOTES i. Forrester Blogs, “CIOs: Develop A Technology Watch List,” by Sharyn Leaver, 11/6/09 ii. Gartner, “Market Trends: Software as a Service, Worldwide, 2007-2012,” Sharon A. Mertz and others, 9/12/08 iii. Information Week/Plug Into the Cloud blog, “Piper Jaffray Sees Gold Rush In Cloud Software,” by Charles Babcock, 2/23/10 iv. Gartner webinar, “Ensure Your SaaS, Cloud Investment Will Deliver Results and Save You Money,” 4/2010 v. Trumba, “White Paper: Five Benefits of Software as a Service,” 3/8/07 vi. Forrester Research, “The ROI Of Software-As-A-Service,” by Liz Herbert and Jon Erickson, 7/13/09 vii. Gartner webinar, “Ensure Your SaaS, Cloud Investment Will Deliver Results and Save You Money,” 4/2010 viii. Knowledge Infusion Center of Excellence Research, “The Continuous Innovation Advantage of Software-As-A-Service,” by Jason Corsello, 10/2009 ............................................................................................................................................................................. © 2010 Keynote Systems, Inc. All rights reserved. The trademarks of Keynote Systems, Inc. include Keynote®, DataPulse®, CustomerScope®, Keynote CE Rankings®, Keynote Customer Experience Rankings®, Perspective®, Keynote Red Alert®, Keynote Traffic Perspective®, Keynote WebEffective®, The Internet Performance Authority®, MyKeynote® , SIGOS®, SITE®, keynote™, The Mobile & Internet Performance Authority™ and all related trademarks, trade names, logos, characters, design and trade dress are trademarks or registered trademarks of Keynote Systems, Inc. in the United States and other countries and may not be used without written permission. Keynote Benchmark

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