Software as a service, not infrastructure as a service or platform as a service, is and will be the most innovative and profitable segment of cloud computing.
The other day I came across an old print issue of The Atlantic. Something on the cover caught my eye but I glanced at the table of contents and saw a piece about some kind of meltdown in the cloud. At first I thought I must have missed some big story. Once I started reading, I realized the author, James Fallows, was talking about his wife’s hacked Gmail account.
“This isn’t a cloud story” was the first thought that came to mind. Of course I was wrong.
I think of the cloud from a developer’s and architect’s perspective. What’s the best machine image for the job I have? How many servers should I include in the cluster? Which PaaS (platform as a service) is best for Python?
I quickly realized that I use or have used cloud SaaS (software as a service) for all kinds of things I never think of as cloud applications: email, bookkeeping, payroll processing, backup, calendar, and project management. Cloud applications are what I build, the stuff I use to run a business is, well, something else.
SaaS is and will be the most innovative and profitable segment of cloud computing. Let’s face it, Amazon is effectively the Walmart of cloud computing. They drive down costs and cut their prices but maintain a 10% margin, according to Bloomberg. IaaS (infrastructure as a service) providers will compete on features other than price, like security, I/O performance, and availability, but there are relatively few ways to distinguish yourself in IaaS. It’s a commodity market for many cloud consumers.
PaaS providers have more room to create innovative services but if your goal is to solve problems for developers then you are still limited in how much room you have to innovate. You can improve development tools, auto scaling, code management, etc. You can also compete on price to some degree. Your market will consist of developers and architects who can convince executives in their companies that they should build their own application rather than make use of an existing SaaS offering.
IDC predicts the public cloud market will reach $72.9 billion by 2015 and 75% of that market will go to SaaS. The appeal of SaaS from a business perspective is that it’s the closest thing for a solution to a problem. You could hire a bookkeeper to run your payroll or you could go online, enter data yourself and in minutes pay your employees, file federal and state reports, and get back to your “real” work. There is no need to think about what size server is needed to run the payroll system or worry about how your data files are replicated across data centers. SaaS lets us turn implementation details over to someone else.
SaaS succeeds by adding substantially more value to a business process than IaaS or PaaS. In no time my job, like so many others in IT, will morph into something different than what it is today. It will still succeed by adding substantial value but not at the level of configuring servers and mounting file systems. It will entail integrating SaaS services and designing custom applications on PaaS with an occasional “do it yourself” project with an IaaS. Chances are, I’m not wrong this time.
Dan Sullivan is an author, systems architect, and consultant with over 20 years of IT experience with engagements in systems architecture, enterprise security, advanced analytics and business intelligence. He has worked in a broad range of industries, including financial services, manufacturing, pharmaceuticals, software development, government, retail, gas and oil production, power generation, life sciences, and education. Dan has written 16 books and numerous articles and white papers about topics ranging from data warehousing, Cloud Computing and advanced analytics to security management, collaboration, and text mining.
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