Software as a Service: You're Not in This Alone
As SaaS picks up steam, more resources are coming online to help with
the transition to on-demand delivery.
- By Keith Ward
- November 01, 2006
Lots of businesses are starting to examine whether the emerging Software
as a Service (SaaS) model will work for them. If you're one of them, consider
this: It's working fine for a company that does twice eBay's volume of
Ariba Inc., based in Sunnyvale, Calif., claims the world's largest supplier
network, handling about $93 billion worth of transactions annually. It
has annual revenues in the $300 million range and about 1,600 employees.
Thus, deciding to rework its flagship solutions for helping corporations
manage their corporate spending, a category known as spend management,
was not an easy or quick decision. But, once decided, there was no turning
back, says Rick Collison, Ariba's director of spend management solutions.
Ariba implemented the first wave of its SaaS offerings in November 2005,
and has been solution complete on SaaS for about nine months. As with
most companies' transition to SaaS, it's been a bumpy road, but worth
the wear and tear. "We're walking, not running," Collison asserts.
But it's also walking in the right direction both for the company
and for its customers. For instance, Pittsburgh, Pa.-based regional grocery
store chain Giant Eagle turned to Ariba's SaaS offering to more efficiently
manage its supply chain and saved $17 million in the first year. According
to Christine Crandell, Ariba's vice president of marketing, efficiency
is where customers usually start seeing the savings. "They say, 'Now
that I've done that [utilizing SaaS] and seen the savings, I can now move
to do other things like visibility' -- and that way, they can see where
they're spending their money," she says.
Ariba, which plans to become a Registered Member, is a large company with
significant resources to spend on a conversion to SaaS. But what about
the smaller, established ISV or start-up with less capital that still
wants the advantages of SaaS? (For more on Microsoft and SaaS, see "Get
Ready for Software as a Service," March 2006.)
The happy fact is that there are probably more resources available for
those types of companies. Among the first places to start looking is in
Redmond, with Microsoft's Live offerings. The software titan has jumped
into the SaaS space, rolling out a number of initiatives aimed at capturing
a slice of the burgeoning market, says Marie Huwe, general manager of
marketing for the Microsoft Worldwide Partner Group: "Our commitment
is to make sure that across our Live offerings, we have a model for each
type of partner, so they can take advantage of new properties that enable,
for instance, a small company that can't afford a server to take advantage
of a CRM offering."
Huwe admits, however, that even Microsoft is still trying to find its
way in the SaaS world. "We don't have it all figured it out, and
we want to make sure we're building the right programs around the Live
offerings," she says. "Live itself is a huge move to advertising
and subscription-based models." Microsoft's Live offerings aren't
complete yet, but Huwe estimates that they will be by late 2007.
John Rowell, CTO of OpSource Inc., a Santa Clara, Calif.-based
company and Gold Certified Partner that helps other businesses with the
switch to SaaS, agrees that Microsoft is wading in cautiously, but he's
confident that Redmond will do well. "[Microsoft has] put some of
its best and brightest on this. [It has] a lot of tactical challenges
to delivering SaaS." But he sees promise in some of Microsoft's nascent
efforts. "The Dynamics platform is going to take a run at Salesforce.com.
Most people don't think of the Microsoft platform in that way," Rowell
says, but adds that the tide may be turning.
Huwe believes a major part of that tide is small and midsize organizations.
"What's attractive about Live is that there are a lot of medium and
small partners that don't want to be service providers, but want to extend
their reach. Our message to them is 'get engaged with us now.' If you
have a CRM business today, it's very easy for you to add smaller customers
with CRM Live, and you can grow your customer [base]."
Increasing your customer list without building out additional infrastructure
or becoming an IT services company is among the goals of Microsoft's SaaS
offering, says Huwe: "If you're a small customer, it's not how you
want to grow from $10 million to $100 million [in revenue] per year, but
how you maintain current customers and add customers without adding additional
Beyond its in-house programs, Microsoft is also building an impressive
list of SaaS partners such as OpSource and Andover, Mass.-based NaviSite
Inc., which is adding SaaS components that Microsoft doesn't currently
NaviSite, a Gold Certified Partner, was originally a hosting and co-location
company, says Doug Mow, vice president of marketing. Although it still
offers those functions, along with managed services, it moved into SaaS
when it saw an opportunity.
"We have an initiative with Microsoft to develop an ISV sandbox.
It's a rack in our data center with Microsoft technologies in a virtual
slice of server capacity," Mow explains. The several-months-old sandbox
contains a messaging component and database component. Mow says NaviSite
is complementing Microsoft's offerings to the SaaS community.
"We're filling in the blanks with very, very specific components
in areas for which they're not able to provide direct support," Mow
continues. These include messaging and provisioning components. Partnering
with Microsoft has worked out well for NaviSite, which has SaaS-enabled
about 70 clients so far.
OpSource's SaaS offerings are more comprehensive. It specializes in helping
companies convert -- or start from scratch -- to the SaaS paradigm. OpSource
classifies the types of companies by color:
- Greens are brand-new companies that build in SaaS capabilities from
- Yellows are established companies starting the transition
- Blues are large companies that may have a particular pain point, such
as ultiple distribution nodes.
Rowell estimates that slightly less than half of OpSource's clients are
greens, about half are yellows and the remaining few are blues. He warns
all companies, regardless of size, that the changeover to SaaS can be
But the pain won't last forever, Rowell adds, "Companies that jump
with both feet into the marketplace and deliver full functionality have
That advice is seconded by Mike McDonald, CEO of Visual Mining Inc.,
a Rockville, Md.-based Registered Member. His 10-year-old ISV provides
data visualization to convert data into actionable intelligence through
a dashboard program. "You have to make a real commitment to it. It's
far too easy to want to go back to the cash cows" of perpetual licensing,
Although Visual Mining still sells software packages that way, they're
adding SaaS capabilities and not looking back. "What got us into
the SaaS model was our experience with CRM software that caused problems
with consultants, [high] costs, maintenance," and more, McDonald
Visual Mining is a "yellow" company that's used OpSource to
help prepare for SaaS. McDonald says the biggest obstacle his company
faced in its conversion was process changes, the discipline required before
moving new software onto a production machine. "If you put something
on a production server that has a bug in it, your customers are all done.
You have to be very aware of every customer, and how it can affect them,"
he says. (OpSource isn't the only SaaS partner Visual Mining's been working
with. San Francisco-based Salesforce.com has been a valuable resource
as well, especially its AppExchange platform.)
The Live Umbrella
Visual Mining is just the kind of company Microsoft is heavily
targeting with its SaaS offerings: small and midsize businesses. Those
offerings fall under the umbrella of the new catchall phrase "Live."
"We'd like to see all our partners on Live," Huwe says. One
big advantage for those smaller clients is data, Huwe adds: "You'd
be amazed at how many [small and midsize companies] don't have the best
Of course, you don't have to bring in partners to switch to SaaS. Qdabra
Software, for instance, chose the mostly go-it-alone method. Qdabra, a
Registered Member, started about three years ago as a solution provider
for Microsoft technologies, explains Shiraz Cupala, Qdabra's general manager
and marketing director.
Through its work Qdabra started to see a pattern emerge. "Lots of
small businesses wanted access to databases without any infrastructure
or knowledge," Cupala says. "We realized there was a market
for folks who needed solutions but without the infrastructure."
That meant building out Qdabra's own infrastructure to handle a different
business model; initially, though, that model wasn't SaaS. "First,
we were building an internal application, but soon we decided the service
model was the way to go," Cupala says.
Being a bootstrap company, Kirkland, Wash.-based Qdabra built out its
infrastructure and software packages with no outside investment, instead
using its consulting business to fund the changeover. Qdabra's first SaaS
offering, expected to be in public beta in December, is a project planning
and traffic tracking application for small businesses.
Qdabra didn't seek assistance from Microsoft, OpSource, Salesforce.com
or other vendors, but that doesn't mean it didn't have any help. "We
have the tech people we need for the baseline, but we had to hire experts
in large scale, distributed SaaS-type environments," Cupala says.
Quick Time to Success
Qdabra, a 100 percent Microsoft shop, sees gradual growth as a
key to cash flow. "The architecture is one where we start small,
maybe five or six servers, and as customers and data grow, we add more
bricks," Cupala says.
Working with smaller companies such as Qdabra, which has fewer than 40
employees, is a key part of Microsoft's strategy. Huwe says the company
is finding creative ways to work with clients to save on expenses such
as advertising. "There's been a huge shift in the advertising business.
About $18 billion today is spent on online advertising. Today, if you're
a large company, you can take advantage of [that]. But if you're a smaller
company, it's harder. We're trying to make online advertising accessible
to smaller companies by offering partners credit toward online [ads]."
Huwe says the advertising credit program will soon be a pilot effort in
the United States.
OpSource is taking much the same approach. For the "green"
companies that are still in the startup phase, OpSource offers an online
SaaS Resource Center. The center, Rowell says, contains information for
ISVs-for example, on how to structure an application for SaaS delivery,
along with sales and marketing help.
In addition, Rowell says, "a green company needs to know how to
get a product to market, and deliver it, with the lowest amount of capital.
A company can come on to our incubation platform and use resources for
six months at no charge. We're fully into building the SaaS ecosystem."
Ariba's Collison cautions those about to join the ecosystem, however,
to keep their eyes on the ball. "The transition to SaaS is much more
[involved] than you think, so you have to think about every aspect of
your business very deeply," he says. "And don't get confused
about your objective: it's not about delivering a URL and password. Quick
time to success is the focal point, not quick time to go live."
From Microsoft The place to start with Microsoft is its Dynamics
Live home page. Dynamics Live is its most advanced SaaS program.
ISVs, especially, will want to head to the SaaS
section of MSDN, which is truly multimedia, with print articles, video
Microsoft also has a CRM
Virtual Labs demonstration site for CRM.
Blogs Blogs are one of the best places to get solid, unbiased
SaaS information. Here are some of the best:
- Phil Wainewright
has one of the best, on ZDNet. http://blogs.zdnet.com/SAAS/
- Microsoft architect Gianpaolo
Carraro covers Microsoft's SaaS efforts, and those of the industry,
- Keychain Logic founder Ken
Boasso does a lot of SaaS blogging on his "Boasso on Business"
site. Keychain is a large SaaS provider.
- SaaS visionary Axel
Schultze is currently CEO of Tanooma Corporation and previously
held the posts of CEO at BlueRoads Corp. and CEO at Infinigate AG.
Other Resources The Software Developers' Forum has a SaaS
special interest group (SIG) that meets regularly in Silicon Valley;
it's a good opportunity to network with other SaaS players.
The Software and Information Industry Association, a trade association
for the software and digital content industry, has a valuable SaaS