Why Buy The Cow?
When I was barely into my teens, my mother’s (every mother’s of that era) version of the sex talk was captured in this expression: “Why buy the cow when you can get the milk for free?” This was long before birth control pills were invented, years before the “Summer of Love,” and decades before most of you were born, and I’ve often wondered if contemporary Moms still make this pitch.
What was so very insulting when applied to their daughters was central to persuading us that those nasty boys wanted something which, by our controlling the supply, we could trade for the financial security and social position of marriage. Yuck! Just be thankful that those of us in the front lines of women’s liberation did indeed free our younger sisters from being treated to this demeaning crap.
Roll the camera forward about fifty years, and it’s little wonder that I couldn’t stop laughing when I saw this visual for SaaS. The vendors of traditional licensed/on-premise enterprise software succeeded mightily by following in the footsteps of my mother’s advice, and it has provided them with considerable financial security and market position. By not letting you have the milk of enterprise applications unless you were willing to take on the cow of data center ownership and operations, applications management and upgrades, and so much more, the big ERP vendors and many others of that generation have served themselves and their investors very well. But the times they are achangin’.
Enter true SaaS. Why do I call it that? I have long since felt forced to make a distinction between the muddled marketing of everything under the sun as SaaS, faux SaaS, and what I think was always intended by that term because there are huge differences in terms of the business benefits, to both customers and their vendors. So what is true SaaS? In my view, true SaaS must include all of these:
- Software is subscribed to customers by the vendor;
- Software and data are hosted/operated/managed by the vendor; and — this is critical —
- Software architecture is multi-tenant with a single code base and data structures, including metadata structures, shared by all customers — a requirement of true SaaS; and
- The vendor pushes out multiple, functionally rich, new releases per year on a mostly opt-in basis.
Well, that’s all very interesting, but why should customers, especially HR leaders, care? What is it about true SaaS that really matters? Before offering a list of those potential benefits, let me note that, just as you can screw up most business as well as technology initiatives, it’s entirely possible to produce true HRM SaaS software that’s unprofitable, unusable, badly architected, built on outdated or just plain wrong object models, etc. — and it’s being done all around us. So I’m going to talk about the potential benefits of true SaaS here with the understanding that these benefits are only realized if the vendor provides half-way decent true SaaS software.
Those potential benefits include:
- Improved economics for the vendor — can be passed along to the buyer;
- Improved economics for the buyer — SaaS always turns CAPEX into OPEX;
- Improved time-to-market, quality-to-market, cost-to-market — innovation and agility matter;
- Much more frequent and lower cost/risk upgrades, bringing new capabilities much faster and with much greater adoption;
- Value added and/or new offerings via inheritance and aggregation across tenants;
- Ability to share a single instance of 3rd party embedded intelligence by those customers/tenants who select that option, thus reducing greatly the cost/pain of doing so;
- Vendor’s ability to focus, via crowd-sourcing, on areas of greatest functional need/interest/ROI, to include transformative ideas in HRM;
- Customers’ ability to share best practices, issue resolution, configuration artifacts, etc. with every other customer because whatever one does works with exactly the same software as all other customers; and
- Vendor and customer agility, with vendors being able to respond much more quickly to market requirements, to include the pace of change in mobile devices, and customers being able to respond much more quickly to the needs of their businesses.
Are there more potential benefits? I’m sure there are, and it’s early days for realizing all of them. Do the benefits outweigh the risks? Yes, but only when you pick the right vendor/product with which to partner. So how do you recognize the vendors and products which are making these potential benefits a reality? Stay tuned for my next post.
[…] you think we should add? Just let us know. Or, for another perspective on why SaaS matters, read What’s True SaaS And Why The Hell Should Customers Care? by independent US analyst and internationally recognised CM software expert, Naomi […]
[…] you think we should add? Just let us know. Or, for another perspective on why SaaS matters, read What’s True SaaS And Why The Hell Should Customers Care? by independent US analyst and long-time HCM software expert, Naomi […]
[…] you think we should add? Just let us know. Or, for another perspective on why SaaS matters, read What’s True SaaS And Why The Hell Should Customers Care? by independent US analyst and long-time HCM software expert, Naomi […]
[…] to be slower moving and more costly to keep up to date. And, as Naomi Bloom has pointed out, “SaaS always turns CAPEX into OPEX.” Multi-tenant SaaS shifts a lot of risk away from your bottom line and that makes your friends […]
[…] of the most respected thought leaders in the enterprise software industry, and a strong advocate of “True” Software as a Service (SaaS). Ms. Bloom doesn’t just write about this stuff, she’s been a practitioner for years. Her blog […]
[…] technologist and thought leader Naomi Bloom offers her own checklist of what makes “true SaaS.” Her column also describes its virtues and the benefits SaaS […]
Hello Naomi,
Thanks for this bit of unbiased clarity. I agree with your assessment. My train of thought went down these tracks:
1) Will the move for many organizations to SaaS with limited or no tenant/client specific customization cause the reawakening of in house programmers? More contractors probably.
2) HR is a great fit for SaaS because much of HR is not unique form a process and transactional perspective. Where it is differentiated (IMHO) is the focus on the strategic success of the organizations. in this area I see many different approaches. Currently more organizations do not value HR strategically so this may not matter, but in the firm where HCM strategy is key how will the SaaS accommodate the unique analytics that are likely to be developed and viewed as proprietary? If they include the techniques , processes will the originating organization like or accept that?
3) When the first data breach/unauthorized access in the cloud/SaaS environment takes place what will the legislative/adjudication response be? This is important because the model of a shared environment is only as secure as the weakest point of failure. With a distributed system well maintained the security should actually be better due to maintaining the latest patches, tools, etc. Easier to scale that for a mega-data center than in each firm. But there are also those data centers that do not actually execute on this level. Whether it is a NOC employee who feels like looking up data or a in completely secured port something will happen. During a vendor selection engagement many of the talent/perf/comp management vendors could not articulate how their clouds were hosted/secured or how that risk was mitigated. Having worked with some data center/cloud service providers this is an important item to verify.
All in all the use of cloud/SaaS products should reduce costs significantly and enable better HCM/HR effectiveness.
Where a firm cannot use the external cloud/SaaS the vendors may be able to locate their product on a private local company cloud but this diminish the benefits greatly. I am working on a project like this right now and it is not something I would recommend.
Thanks for waking my brain up this morning.
Some great points, and I welcome your review. Further thoughts:
1) No true SaaS vendor will agree to locating their product on what you’ve called a “private local company cloud.” That breaks their architectural, operational and business models, and they would be foolish to do this. But there are any number of vendors willing to subscribe their software and install it any damn place the customer wants. Not true SaaS, and I don’t believe there’s much of a future for this, but who am I to judge?
2) True SaaS InFullBloom (more blog posts to read) enables considerable configuration without breaking the software, and from what I’ve seen that’s visible and still to be unleashed, there’s going to be more than enough configuration options to meet the very specific needs of customers where they choose to be unique for sound business reasons. But the approach must still be to avoid uniqueness for its own sake, something customers should have been doing all along regardless of what the software allows.
3) You are completely correct — and it’s a very important point — that any evaluation of a true SaaS vendor and their products must include a VERT rigorous evaluation of their security/privacy/backup/recovery/etc. procedures and capabilities, hopefully a more rigorous evaluation than many firms would apply to their own data centers. You simply can’t be a true SaaS vendor unless you can meet the highest relevant standards here — and the best do so with room to spare.
[…] HCM) to cloud based offerings as there are a long list of tangible benefits for HR customers using true Multi-Tenant Software as a Service (SaaS). It should come as no surprise that SAP/SuccessFactors are now leading with their full HR cloud […]
So Naomi, the question of the day, what is the real difference between Saas and Cloud?
Bruce, The simplest answer is that a public cloud data center (and yes, the cloud is comprised of computers, data storage equipment, and more of what you’d expect in a mega-data center) is an industrialized, commercially available data center that uses a range of virtualization and shared resource techniques to provide a highly elasticized approach to resource allocation and consumption. You can host almost anything, including more traditionally architected vendor-provided or customer applications in the cloud. But when you combine properly architected true SaaS with public cloud hosting, you get the leverage from both of these quite different capabilities. Hope this helps. If not, may I suggest that you read some of the http://www.enterpriseirregulars.com coverage of both SaaS and cloud.
[…] What’s True SaaS and Why the Hell Should Customers Care? […]
Excellent post on defining SaaS and the benefits of SaaS. However, I do not agree with point #3. The software does not have to share the same code and co-mingle data for it to be called SaaS. You can provide dedicated single tenant instances with all the related operations automation and still pass #1,#2 and #4.
I think what is more important here is what the customer( who is paying you) wants and not what the vendor enforces on the customer.
You most SaaS vendors are software only companies. So that this is where they built multi-tenancy. So the last 10 years since the birth of SaaS have seen adoption from SMB market segments. They were satisfied with jumping to SaaS and benefit from all the points you have listed above.
The SaaS market is only recently seeing uptake from Enterprise market segment. These customers are more likely to demand that there data should not be co-mingled and demand more customized upgrade cycle.
So I think you will need both9single tenant as well as multi-tenant) if your SaaS product is targeted for SMB and enterprise markets.
Sandeep, I appreciate your atention to my blog, but couldn’t disgree with you more in this instance. Multi-tenancy is critical to effective SaaS for the reasons stated, and it is the architecture of choice among the true SaaS, built from the ground-up to be SaaS, enterprise software vendors, including Workday, SuccessFactors (which is the future architecture for SAP’s enterprise SaaS ERP products) and Cornerstone On-Demand in our space. I would also include ADP’s new Vantage products (and no one has more experience in true SaaS than ADP), Ceridian’s new DayForce products, and the list goes on.
[…] of the principle reasons that Naomi Bloom insists on true SaaS (multi-tenancy) is because it has a direct impact on operational cost. She cites many other examples. Many of the […]
[…] market offers — continuous learning needed here. There’s a ton of material on my blog (here, here and here are some good starting points), and an absolute must is attendance at a major HR […]
[…] technologist and thought leader (and TLNT contributor) Naomi Bloom offers her own checklist of what makes “true SaaS.” Her column also describes its virtues and the benefits SaaS offers. […]
[…] technologist and thought leader Naomi Bloom offers her own checklist of what makes “true SaaS.” Her column also […]
[…] technologist and thought leader Naomi Bloom offers her own checklist of what makes “true SaaS.” Her column also describes its virtues and the benefits SaaS […]
[…] What’s True SaaS and Why the Hell Should Customers Care? […]
Naomi I have to respectfully disagree with your central premise; that the vendors/owners/creators of digital intellecutal property must also provide hosting/dba/app management services in all cases going forward to be economically useful or competitive.
First, it’s just not realistic that major enterprises will be able to (or want to) shut down their data centers. Second, its not realistic that enterprises will not own/create/buy ANY software code that they want/need either for spot needs or for enterprise scaled needs in highly specific domains. Third, whilst not having to buy the cow is very nice, it’s also true that keeping one’s cow in another farmer’s barn can create certain unhappy tensions as well.
I love the SaaS model (it’s made our company’s bones) for all kinds of reasons, but I don’t think it’s the right model for every enterprise software need.
The fact is that software code as IP has actually been liberated by SaaS, allowing ecosystems of different code bases to get connected and do more and more of the world’s work. SoA is far more impactful than who has title to some servers and circuits.
The idea of “SaaS” as a defining feature may just be like ‘In Color” for TV programs c. 1966. In a few years, SaaS or not SaaS or just how much SaaS may well be down the list of what decision makers will really care about…..
To be fair and balanced, I think your ideas about real-world object models in system design will have a longer shelf-life (and are much more meaningful to the value chain) than the mere choice of delivery models will have, because the lens of “the new” can be distorting…
Martin, There will always be specialized needs that must be met via methods that range from custom development and/or hosting your own copies of packaged software to what I see as the momentum direction in HRM applications packages, namely true SaaS. And our huge inventory of licensed/on-premise last generation packages will be with us for a very long time. But I do believe strongly that the momentum direction for much to most HRM enterprise software is now true SaaS. That may well change again over the next ten years as it has done over the last ten, and you’re absolutely right that HRM object models have a longer shelf-life than their enabling technologies. Guess I needed to make more clear that my central premise here was to distinguish between true and faux SaaS and the relevant business benefits. My next post is on going from good to great SaaS, but many of the points raised are really more about great HRM software than confined strictly to that which is true SaaS. Many thanks for your comments and for spending some of your time with me.
Great article Naomi and leaves little uncovered as to what defines true Saas and the benefits of the same. There is only one thing I would offer in addition and is drawn from my experience of several years at Peoplesoft and approaching 3 years at Workday.
Peoplesoft was arguably , in it’s day , the best HR solution available with a customer focussed ethos. This led to an overall positive user community spirit.
I can honestly say though that this is nothing compared to the positive nature of Workdays user base, most on display at the annnual user conference. The reason for this is the point I feel you may have missed. True Saas solutions by there nature encourage a sharing of processes and reports, as you have noted, but this goes much further, I believe, to the creating of a single community. This community is made up of professionals at every level who have shared a common experience and can relate directly to every other user of that common environment. This community is impossible with ERP solutions where every deployment is different.
In time this community of users will create a wave of acceptance
to successful Saas solutions that the market will find impossible to resist. Here in EMEA Workday goes from success to success driven largèly by a growing band of senior executives and users who are only too willing to share their common experience to anyone who will listen.
Mark, I was a speaker at Workday Rising in both 2010 and 2011, and I saw firsthand — as I did at Ultimate Connections 2011 — the power of that shared experience. Thanks very much for adding this perspective.
Thanks for adding this perspective. I had not thought of this as the benefit of SaaS. But you are right. On premise enterprise software do require lot of customization. Where as will SaaS the best of the breed will automatically bubble up.
@sanskamat
Nice post.
Of the “four true SaaS conditions” 1,2 and 4 are pretty clear for me. Not sure about the third (the multitenant) as there is always room for fuzzy (un)definitions from the vendor side.
I use to manage a Linkedin Group about Business Applications (sorry, in Spanish) and recently I made a survey of “True SaaS” business applications you could suscribe in Spain. I found this multitenant condition the more difficult to demonstrate and even to explain from the vendor side as you must go trough deep technical domains.
Could you please provide some exemples, as a matter of preliminary checklist, to evaluate if a SaaS business app is “multitenant”?
Thanks for sharing
Luis, Many thanks for your feedback and for the excellent question about multi-tenancy. Kunal’s point below is very relevant because, in a true multi-tenant environment, all customers (all tenants) are running on the same software at roughly the same time — and I say roughly because it’s not uncommon or inappropriate, especially within our complex domain, for true SaaS vendors to offer a series of update waves within a window of a couple of weeks during which all tenants choose the particular wave which works best for them to take that latest release. But in theory, I could have hosted single tenant software to which I applied a very disciplined and highly automated update process such that, also within a tight window, I applied the relevant updates to each single tenant hosted instance of the software. While this would be more expensive and error-prone, because of all the moving parts and needed operational automation and oversight, it could be done. So I look at something which is MUCH more difficult and costly to do with hosted single tenant software, and that’s to manage aggregation across tenants, e.g. for crowdsourcing, benchmarking and the like. Another capability which is MUCH more difficult to provide without true multi-tenancy is establish 3rd party embedded intelligence, e.g. competency models, to be shared across all of the tenants who have subscribed that particular enhancement. Hope this helps.
Thanks for your quick reply Naomi. I understand the concept of multitenant and the exemples you provide are good but I find hard to explain MT without specific exemples related to business functionalities.
Just to put a couple of(counter)examples.
I had a client suscribed to NorthGate-Arinso euHReka and they complained they could see the CCs payroll codes of other NGA customers in the drop lists of some windows. It seemed they shared a database that was not company filtered. I’m not sure it was a bad implementation or the System could’n tilter by company
Recently I talked with a local (Spaniard) OpenBravo Partner that claims to offer it by multitenant SaaS. When I asked them some questions about it they finally admited they had to modify the standard product to enable basic things like the option to personalize the delivery note document/form by company (you could reach them at http://www.saasandgo.com/ )
Good conversation!
Just to update my comment about my concerns on NGA euHReka. The people of NGA in Barcelona gladly invited to me to take a look on the last version of euHReka and discuss on my concerns on cross-visibility of configuration data between customers.
I must say that I get impressed on the new version of euHReka and fully convinced that with the new version my concerns dissapear.
The situation I described happened in an old version.
Luis, Thanks so much for this update. I hope that everyone will read your notes on this.
Great piece.
Is a software vendor true SaaS? Ask them this simple question:
What percentage of your customers are running the latest version of your software/code? If the answer is less than 100%, they are not a true SaaS vendor.
KP.
Kunal, Many thanks for your feedback. One distinction I would make — and I think it’s an important one given all of the consolidation, refactoring, stealth development and more that’s going on in our market right now — is that a vendor, like your own firm, can be an experienced true SaaS vendor with one or more true SaaS platforms/products even as you’re committed to supporting licensed/on-premise customers, on the same or different platforms/products, out of a business commitment and focus on historical customers. There’s no shame in having been in business long enough to have put down roots in an earlier generation of technology/architecture/business models etc., and I thnk it’s to the credit of companies like Ultimate that they have continued to support those earlier customers (but not forever) even as they’ve made the full shift to being a true SaaS vendor. But it’s a VERY difficult shift to make for established firms, something with which your new owners would certainly agree.