Welcome!

IBM Cloud Authors: Liz McMillan, Kevin Jackson, Pat Romanski, Yeshim Deniz, Carmen Gonzalez

Related Topics: @CloudExpo, @DXWorldExpo, @DevOpsSummit

@CloudExpo: Article

Is SaaS Dead? | @CloudExpo #BigData #IoT #IaaS #SaaS #AI #DevOps #FinTech

The rapid growth of hyperscale IaaS platforms such as AWS is changing the SaaS playing field

Is SaaS Dead? Are We Headed to a World of ASP 2.0 or Dedicated SaaS?

The emergence of hyper-scale Infrastructure as-a-Service (IaaS) platforms such as Amazon Web Services (AWS) is challenging the traditional Software-as-a-Service (SaaS) value proposition. SaaS CEOs, investors and SaaS buyers must carefully evaluate the implications of "all-in" migration to hyperscale IaaS platforms that offer value-added platform services that go beyond simple infrastructure services. This article provides a point of view and insights into changes in the SaaS market, which has three principal drivers 1) technical, 2) business, and 3) security and compliance.

History of SaaS
SaaS solutions were born in 2000 with the promise of web-based delivery of hosted software delivered over the internet. SaaS solutions helped reduce the pain and cost associated with upgrades and maintenance headaches of "shrink-wrapped" software. The SaaS business over the last 15 years has disrupted major software platforms and in many ways helped set the stage for wider enterprise adoption of cloud services.

The early success of SaaS helped change customer behavior. Customers became comfortable with data and software running outside of their firewalls. The concept of management by SLAs was in many ways driven by the initial success of SaaS. In the past few years the trend towards SaaS creation and adoption has exploded with the adoption of hyperscale IaaS platforms by SaaS vendors.

This is the great paradox.

The emergence of public cloud IaaS platforms on the one hand is fueling the explosive growth of SaaS, but at the same time it will kill (or dramatically disrupt) SaaS as it destroys the fundamental value proposition.

Will SaaS Work in the Public Cloud Era?
The explosive and constantly accelerating growth of IaaS platforms such as AWS Elastic Cloud Computing (EC2) is changing the economics of SaaS.

Your Cloud or My Cloud?
The trend is unmistakable - public IaaS has won. Major SaaS providers as well as large enterprises that are major SaaS buyers are both migrating and embracing the IaaS cloud by going "all-in." Figure 1 shows the implications of this migration and shift.

Figure 1

As both SaaS providers and enterprise SaaS consumers start to operate on the same platform, the SaaS "value-stack" is significantly diminished. Artificial data silos are created for the enterprise when their "SaaS" data is resident right next to their enterprise data separated just by a contractual boundary. SaaS buyers in many ways "pay" twice for their data. Once for storing it in the SaaS platform and a second time for backing it up into their "cloud environment" for security or analytical purposes. Many enterprises often overlook the hidden costs associated with SaaS. These include hard network and storage costs associated with copying data back and forth for backup/retention or analytics purposes.

Is Upgrading and Updating Software Really That Hard Now?
A key tenet of SaaS was to help reduce the cost and pain associated with upgrading and maintaining "shrink-wrapped" software. In 2016 and beyond, upgrading and managing software and systems is not as hard as it used to be. Continuous integration/continuous delivery (CI/CD), microservices, serverless computing, and managed cloud-native services are making it relatively easy to upgrade and deliver software.

If both the SaaS provider and the consumer have access to the same set of tools on the same cloud platform, what is the real value-add from the SaaS service? Just the software, right?

Upended Revenue Model
Over the years most SaaS services have been delivered on a "per-user" based annual subscription model. If a SaaS license for one user is $100 per year, and the enterprise bought licenses for 100 users, the enterprise would pay $10,000 per year. In the pre-IaaS days, this might have been great economics for both parties - the SaaS vendor and the SaaS buyer. But not anymore.

The customer now wants true pay-as-you-go or consumption-based pricing. This means paying for actual transactions when actual costs are actually incurred. This is especially true now that SaaS providers migrate to IaaS platforms that offer transaction-based pricing. The SaaS providers' underlying cost basis for infrastructure and related components is truly hourly and consumption driven. This has huge implications. Let's see this through a sample scenario.

Assume those 100 users consume 100 GB of space and five cloud servers. The customer adds another 50 users but because of limited usage, the storage and compute requirements did not really change much. Why should the customer pay an additional $5,000 for those additional 50 users, if the underlying incremental costs did not change that much?

SaaS buyers are starting to think real hard when deciding between a "per-user" SaaS annual subscription model versus a "cloud-hosted" managed "shrink-wrapped" solution. Given that in both scenarios the "raw material" is the same cloud platform.

Security and Compliance
Most newer entrants to the SaaS market underestimate the cost and complexity associated with the "Ops" part of the business. Many SaaS providers struggle with issues around vulnerability management, security scanning, compliance reporting, backup and recovery and service uptime. There are many factors for this. One of them is the changed cybersecurity environment. Buyers are demanding evidence of security best practices. Industry recognized certifications such as HIPAA, FFIEC, FedRAMP, or ISO 27001 are increasingly required by customers from SaaS providers. These come at a heavy price.

Further, as enterprises get better with cloud services, they are increasingly seeking access to their data stored on SaaS platforms. Data residency, access control and enterprise risk management are difficult questions that must be addressed. Now that the enterprise and the SaaS service are operating on the same cloud platform, the argument for "dedicated" SaaS is increasingly coming up.

Fast Forward to the Past?
As enterprises get comfortable with hyperscale cloud platforms such as AWS, there is a serious need to carefully evaluate the SaaS value proposition. New distribution models such as cloud marketplaces are making it easier for cloud buyers to find and deploy enterprise software within their own cloud environments. Wanting control on the data and emergence of data science are causing enterprises to view their data more strategically.

Will we see Application Server Providers (ASP2) that focus on delivering great software hosted within "dedicated" cloud environments or within the clients' cloud environment? Will the SaaS revenue model change from a per user annual subscription to a pay-per-call model as serverless computing takes shape?

Making the right strategic decisions is critical for both cloud services buyers and providers to ensure their ability to sustain and thrive in the cloud computing age. The emergence of serverless computing, cloud marketplaces and pay-per-call transaction pricing offer entrepreneurs a rich canvas to build the next generation of cloud-native services.

Industry Perspective
"Pricing, governance and security are key for enterprises consuming multiple SaaS services. It becomes challenging to understand the security footprint of the system as a whole as the number of SaaS services consumed increases." - Derek Collison, CEO and Founder, Apcera.

Call-to Action
Cloud executives both on the vendor and enterprise buyer sides must carefully evaluate and understand new cloud deployment and consumption patterns. Taking a strategic look at Managed IaaS, PaaS, Container-as-a-Service or Micro Marketplace deployment models is critical.

More Stories By Gaurav Pal

Gaurav “GP” Pal is CEO and Founder of is stackArmor. He is an award-winning Senior Business Leader with a successful track record of growing and managing a secure cloud solutions practice with over $30 million in annual revenues focused on US Federal, Department of Defense, non-profit and financial services clients. Successfully led and delivered multi-million-dollar Amazon Web Services (AWS) cloud migration and broker programs for US Government customers including the Department of the Treasury, and Recovery Accountability & Transparency Board (RATB) since 2009.

GP is the Industry Chair at the University of Maryland’s Center for Digital Innovation, Technology and Strategy (DIGITS). He has strong relationship-based consultative selling experience with C-level executives providing DevOps, Managed Services, IaaS, Managed IaaS, PaaS and SaaS in compliance with US FedRAMP, FISMA, HIPAA and NIST Security Frameworks. He has a successful track record of delivering multiple cloud solutions with leading providers including Amazon Web Services (AWS), Microsoft, Google and among others.

Comments (0)

Share your thoughts on this story.

Add your comment
You must be signed in to add a comment. Sign-in | Register

In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.


@ThingsExpo Stories
In his Opening Keynote at 21st Cloud Expo, John Considine, General Manager of IBM Cloud Infrastructure, led attendees through the exciting evolution of the cloud. He looked at this major disruption from the perspective of technology, business models, and what this means for enterprises of all sizes. John Considine is General Manager of Cloud Infrastructure Services at IBM. In that role he is responsible for leading IBM’s public cloud infrastructure including strategy, development, and offering m...
Product connectivity goes hand and hand these days with increased use of personal data. New IoT devices are becoming more personalized than ever before. In his session at 22nd Cloud Expo | DXWorld Expo, Nicolas Fierro, CEO of MIMIR Blockchain Solutions, will discuss how in order to protect your data and privacy, IoT applications need to embrace Blockchain technology for a new level of product security never before seen - or needed.
The 22nd International Cloud Expo | 1st DXWorld Expo has announced that its Call for Papers is open. Cloud Expo | DXWorld Expo, to be held June 5-7, 2018, at the Javits Center in New York, NY, brings together Cloud Computing, Digital Transformation, Big Data, Internet of Things, DevOps, Machine Learning and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding busin...
SYS-CON Events announced today that Synametrics Technologies will exhibit at SYS-CON's 22nd International Cloud Expo®, which will take place on June 5-7, 2018, at the Javits Center in New York, NY. Synametrics Technologies is a privately held company based in Plainsboro, New Jersey that has been providing solutions for the developer community since 1997. Based on the success of its initial product offerings such as WinSQL, Xeams, SynaMan and Syncrify, Synametrics continues to create and hone inn...
Digital Transformation (DX) is not a "one-size-fits all" strategy. Each organization needs to develop its own unique, long-term DX plan. It must do so by realizing that we now live in a data-driven age, and that technologies such as Cloud Computing, Big Data, the IoT, Cognitive Computing, and Blockchain are only tools. In her general session at 21st Cloud Expo, Rebecca Wanta explained how the strategy must focus on DX and include a commitment from top management to create great IT jobs, monitor ...
A strange thing is happening along the way to the Internet of Things, namely far too many devices to work with and manage. It has become clear that we'll need much higher efficiency user experiences that can allow us to more easily and scalably work with the thousands of devices that will soon be in each of our lives. Enter the conversational interface revolution, combining bots we can literally talk with, gesture to, and even direct with our thoughts, with embedded artificial intelligence, whic...
Cloud Expo | DXWorld Expo have announced the conference tracks for Cloud Expo 2018. Cloud Expo will be held June 5-7, 2018, at the Javits Center in New York City, and November 6-8, 2018, at the Santa Clara Convention Center, Santa Clara, CA. Digital Transformation (DX) is a major focus with the introduction of DX Expo within the program. Successful transformation requires a laser focus on being data-driven and on using all the tools available that enable transformation if they plan to survive ov...
Recently, REAN Cloud built a digital concierge for a North Carolina hospital that had observed that most patient call button questions were repetitive. In addition, the paper-based process used to measure patient health metrics was laborious, not in real-time and sometimes error-prone. In their session at 21st Cloud Expo, Sean Finnerty, Executive Director, Practice Lead, Health Care & Life Science at REAN Cloud, and Dr. S.P.T. Krishnan, Principal Architect at REAN Cloud, discussed how they built...
Recently, WebRTC has a lot of eyes from market. The use cases of WebRTC are expanding - video chat, online education, online health care etc. Not only for human-to-human communication, but also IoT use cases such as machine to human use cases can be seen recently. One of the typical use-case is remote camera monitoring. With WebRTC, people can have interoperability and flexibility for deploying monitoring service. However, the benefit of WebRTC for IoT is not only its convenience and interopera...
With tough new regulations coming to Europe on data privacy in May 2018, Calligo will explain why in reality the effect is global and transforms how you consider critical data. EU GDPR fundamentally rewrites the rules for cloud, Big Data and IoT. In his session at 21st Cloud Expo, Adam Ryan, Vice President and General Manager EMEA at Calligo, examined the regulations and provided insight on how it affects technology, challenges the established rules and will usher in new levels of diligence arou...
SYS-CON Events announced today that Evatronix will exhibit at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Evatronix SA offers comprehensive solutions in the design and implementation of electronic systems, in CAD / CAM deployment, and also is a designer and manufacturer of advanced 3D scanners for professional applications.
To get the most out of their data, successful companies are not focusing on queries and data lakes, they are actively integrating analytics into their operations with a data-first application development approach. Real-time adjustments to improve revenues, reduce costs, or mitigate risk rely on applications that minimize latency on a variety of data sources. In his session at @BigDataExpo, Jack Norris, Senior Vice President, Data and Applications at MapR Technologies, reviewed best practices to ...
Smart cities have the potential to change our lives at so many levels for citizens: less pollution, reduced parking obstacles, better health, education and more energy savings. Real-time data streaming and the Internet of Things (IoT) possess the power to turn this vision into a reality. However, most organizations today are building their data infrastructure to focus solely on addressing immediate business needs vs. a platform capable of quickly adapting emerging technologies to address future ...
No hype cycles or predictions of a gazillion things here. IoT is here. You get it. You know your business and have great ideas for a business transformation strategy. What comes next? Time to make it happen. In his session at @ThingsExpo, Jay Mason, an Associate Partner of Analytics, IoT & Cybersecurity at M&S Consulting, presented a step-by-step plan to develop your technology implementation strategy. He also discussed the evaluation of communication standards and IoT messaging protocols, data...
In his session at 21st Cloud Expo, Raju Shreewastava, founder of Big Data Trunk, provided a fun and simple way to introduce Machine Leaning to anyone and everyone. He solved a machine learning problem and demonstrated an easy way to be able to do machine learning without even coding. Raju Shreewastava is the founder of Big Data Trunk (www.BigDataTrunk.com), a Big Data Training and consulting firm with offices in the United States. He previously led the data warehouse/business intelligence and B...
"Evatronix provides design services to companies that need to integrate the IoT technology in their products but they don't necessarily have the expertise, knowledge and design team to do so," explained Adam Morawiec, VP of Business Development at Evatronix, in this SYS-CON.tv interview at @ThingsExpo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
"Digital transformation - what we knew about it in the past has been redefined. Automation is going to play such a huge role in that because the culture, the technology, and the business operations are being shifted now," stated Brian Boeggeman, VP of Alliances & Partnerships at Ayehu, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
Nordstrom is transforming the way that they do business and the cloud is the key to enabling speed and hyper personalized customer experiences. In his session at 21st Cloud Expo, Ken Schow, VP of Engineering at Nordstrom, discussed some of the key learnings and common pitfalls of large enterprises moving to the cloud. This includes strategies around choosing a cloud provider(s), architecture, and lessons learned. In addition, he covered some of the best practices for structured team migration an...
22nd International Cloud Expo, taking place June 5-7, 2018, at the Javits Center in New York City, NY, and co-located with the 1st DXWorld Expo will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud ...
22nd International Cloud Expo, taking place June 5-7, 2018, at the Javits Center in New York City, NY, and co-located with the 1st DXWorld Expo will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud ...