Anyone still laboring under the misconception that SaaS is just a different delivery model for conventional software should spend a few minutes talking to Treb Ryan, CEO of SaaS infrastructure hosting provider OpSource. More than 200 ISV attendees at last week's SaaS Summit, organized by OpSource, got a chance to hear the message loud and clear — although inevitably Ryan was speaking to the already converted.
During his conference keynote, Ryan listed some of the distinctive differences between the on-demand model and traditional software. "The best SaaS companies tend to think as web companies who have business customers," he said. This leads to changes in the way SaaS ISVs approach development, sales and marketing and technology infrastructure, he said (for more on this theme, see his recent Sandhill.com article, Are You Really a SaaS Vendor?). He went on to identify three must-haves for SaaS offerings:
- Available over the Web: "The next generation of buyers are not going to accept something they cannot buy online." It seems most SaaS vendors contravene this advice. According to findings announced a day previously by Tier 1 Research, only 13% of SaaS vendors enable online sign-up for their applications. Ryan told me he was "floored" by this figure. Not only is online sign-up the best way to acquire and filter prospective customers, it also encourages vendors to make sure their applications are truly web-ready, he told me: "You're going to force yourself to make your software easily accessible and understandable."
- Solutions not components: "Focus on the problem solved, not on the tools." Too often, conventional software provides little more than a toolset that customers still have to grapple with before they can produce any utility. On-demand applications should seek to offer a complete business result.
- Success-based pricing: "Based on customer adoption not consumption of resources." In the traditional hosting model, vendors charge according to bandwidth, disk and processor consumption, he said. In the on-demand world, customers should only be expected to pay for successful use of the application. It's up to the vendor to bear the cost of the infrastructure until customer usage scales up.
Last week, these messages were further reinforced by the announcement that OpSource is applying the same philosophy to its own SaaS infrastructure services. ISVs can now not only sign up online and start using OpSource's hosting services for beta testing. The provider is also making available a number of add-on services such as usage and performance reporting and analysis, billing, and service level management. ISVs using OpSource's hosting platform will be able to 'plug in' to these services via a flexible, SOA-based services bus.
One of the by-products of the hosting company 'eating its own dogfood' by making its services available on-demand is that "for the first time in my life in this business we can do a demo," Ryan told me during a break at the conference last Thursday. It certainly underlines how much of a departure from traditional hosting the company has made with its new services, branded Optimal On-Demand 2.0. Interestingly, many of the services are powered by software from OpSource customers — the reporting and analysis dashboard is from Visual Mining, the billing management will come from Aria Systems, both of whom host their services at OpSource. The services are delivered via an ESB using software from open source vendor MuleSource.
The benefit for OpSource's customers is a classic on-demand benefit: it means they can skip reinventing the wheel and share the same technology implementation instead of each of them having to repeat it individually. "The development cost for software as a service can be reduced by as much as 70 percent," claims Ryan, with the result that application development can be focused on the core business processes and not the outlying issues around how the software works.
Partnering for application expertise allows OpSource to concentrate on what it does best. "Our core competence sits in the fact we know how to make this stuff run," Ryan told me. The variety of applications OpSource hosts creates a spectrum of demands. "You need to understand how to make it work for a lot of different applications with a lot of different requirements."