Discovering best practice in SaaS

The recipe for success in delivering applications as a service is still being written. One company that wants to stay at the leading edge of discovering those ingredients is OpSource, which specializes in hosting SaaS solutions for software vendors and on-demand startups. Its motivation is simple: the closer it gets to understanding what determines on-demand success, the better a service it ought to be able to deliver to its clients.

OpSource already has more than 40 vendors live on its systems, which gives"A good indicator of success is, are you doing something that actually is new and couldn't be done before?" it a lot of collective experience and case studies to draw upon.  In an emerging sector where best practice is still being established, that sort of knowledge is very valuable (which arguably makes it different than email, for example). But OpSource isn't the biggest fish in the SaaS hosting pond, even though it certainly seems to be the fastest growing at present. NaviSite claims to be working with about 75 software vendors on its SaaS Enablement Platform, while IBM has helped large numbers of ISVs through its longstanding Software as Services program (where, by the way, you can download a report I wrote for Summit Strategies in 2004 on how established ISVs were adapting to Software-as-Services). OpSource has therefore taken two further initiatives to help keep its expertise ahead of the curve:

• SaaS Summit. Taking place from this evening at a resort hotel in California's Napa Valley wine region, this is a two-day conference to discuss SaaS best practices, targeted mainly at vendors, but also with some user input (and a sprinkling of recommended SaaS analysts). The on-demand sector does not have enough talking shops, and I will sorely miss being there but unfortunately I am already scheduled to visit San Francisco later this month, too late to fit this in as well.
• SaaS Incubator. This program offers six months' free use of OpSource's SaaS hosting resources, targeted at startup ISVs who want to progress beta testing of their on-demand applications with customers while they raise venture finance. If successful, they can then migrate to OpSource's paid service, which has a useful "Success-Based Pricing" model that relates charges to application usage rather than the conventional hosting model of charging based on server usage.

When OpSource's CEO Treb Ryan first told me about the SaaS Incubator and the unconventional pricing model last year, I must admit I was a little skeptical. But he convinced me that the company had done its sums and was right to be optimistic about the upside.

"We're going to end up wasting some resources," he admitted, "but the benefit of having this platform and getting people to grow will outweigh that by a longshot. Enough are going to grow to have viable businesses. It gives us an opportunity to work with companies to see who's winning and losing."

Many of the indicators of success are still unknown at present, he said, which makes it more valuable to give people an opportunity to try things out than to try and second-guess the results: "We've been wrong a number of times and we've been right a number of times."

Some patterns are already emerging, though.

"A good indicator of success is, are you doing something that actually is new and couldn't be done before, prior to Web 2.0 and the ubiquity of the Web. If you're trying to do something that used to be enterprise software and offer it as a service, it can be done, but it's more difficult. A company that's creating something new that couldn't be done before without this kind of application platform is going to be the one that has the most success."