Thursday, June 12, 2008

SaaS is rocket science!

Yes...Am not talking about a SaaS consumer here...but the provider.
This is what analysts quote when SAP delays its SaaS offering. I was surprised to see SAP officials saying the SaaS offering will prove to be expensive for SAP itself. This is what SAP co-CEO says...
"We have to work out how expensive it will be for SAP if we run this product in a hosted environment. We have to make sure we make enough money with the product"
The offering is targeted at SME businesses and supposed to be cost-efficient for them. While the offering may prove cost-effective for end customers, it looks like it will prove the other way for the provider.

Having this story, I was trying to understand why is it so complex? What could be the technical barriers in building a platform and rolling-out the services, considering the fact that you have so many appliation platforms in the market?
ButI couldn't agree more that its not going to be a cake walk, because of the following reasons:
1. Multi-tenancy architecture is not easy. If the SaaS vendor wants to host multiple tenants in the same infrastructure and still able to deliver the SLAs which are different for different tennants, thats not a default feature of conventional platforms. You will need a new architecture to address the challenges.
2. Only if the multi-tenancy is in place, it would prove to be profitable for the service provider, where you get to host more tenants on less number of instances.
The same challenges apply to in-house shared service providers as well..who would build and host services that are consumed by different LOBs within the same company.


Lars Leckie said...

Great post - I hadnt caught the delay from SAP. I think SaaS requires more upfront infastructure than most people expect but in the SAP case I bet it is also a crossover to live with the slow build of SaaS recurring revenue (during infastructure building) compared with traditional upfront payments

Anonymous said...

You make a very valuable point. It is difficult to role out SaaS, more or less monetize it and make it a profitable venture. Do you know of any resources that help/support SaaS providers in the ventures? I have heard of one company, eVapt (; they offer a breadth of services that seem valuable, but I was curious what other resources are available. Do you know of any?

Bala said...


Microsoft provides lot of help for SaaS ventures. It provides architecture consulting, software at discounted price for SaaS providers. Check out!

Kevin Doherty said...

Bala makes a great point here that should be discussed more within the industry. Multi-tenancy is difficult and this challenge gets worse if you are offering a suite of software.

Agreed that there are a lot of folks "Trying" it, but if they have yet to work through the technical and development issues that we have... they have a long road ahead.

Kevin Doherty
Phase 2 International

Anil Kurnool said...

Can't agree more with you...