The Future of SaaS

Barcelona -- Welcome to a special BriefingsDirect podcast from the HP Software Universe 2010 Conference in Barcelona, an interview with Kevin Bury, Vice President and General Manager, and Neil Ashizawa, Manager of Products, both with HP Software as a Service.

We were at Software Universe in early December to explore some major enterprise software and solutions, trends and innovations, making newsacross HP’s ecosystem of customers, partners, and developers. [Disclosure: HP is a sponsor of BriefingsDirect podcasts.]

This discussion, with two executives from HP, focuses on the software as a service (SaaS) market and how it and cloud computing are reshaping the future of IT.

Dana Gardner, Principal Analyst at Interarbor Solutions, moderated the discussion just after the roll-out of HP’s big application lifecycle management (ALM) news, the release of ALM 11.

Here are some excerpts on the future of SaaS discussion:
Bury: We are seeing a lot of interest in the market today for SaaS and cloud. I think it’s an extension of what we've seen over the last decade, of companies looking at ways that they can drive the most efficiency from their IT budgets. And as they are faced especially in these trying economics times of trying to do as much as they can, they're looking for ways to optimize on their investment.

When you look at what they are doing with SaaS, it gives them the ability to outsource applications, take advantage of the cloud, take advantage of web technologies to be able to deliver those software solutions to their customers or constituents inside of the business, and do it in a way where they can drive speed to value very, very quickly.

They can take advantage of getting more bang for their buck, because they don’t have to have their people focused on those initiatives internally and they're able to do it in a financial model that gives them tremendous value, because they can treat it as an operating expense as opposed to a capital expense. So, as we look to the interest of our customers, we're seeing a lot more interest in, "HP, help us understand what is available as a service."

Various components then include SaaS, infrastructure as a service (IaaS), certainly platform as a service (PaaS), with the ultimate goal of moving more and more into the cloud. SaaS is a stepping stone to get there, and today about half of all of the cloud types of solutions start with SaaS.

Where is this thing going? When is it going to end? Is it going to end? I don’t believe it is. I think it’s an ongoing continuum. It’s really an evolution of what services their constituents are trying to consume, and the business is responding by looking for different alternatives to provide those solutions.

For example, if you look at where SaaS got started, it got started because business departments were frustrated, because IT wasn’t responsive enough. They went off and they made decisions to start consuming application service provider (ASP) source solutions, and they implemented them very, very quickly. At first, IT was unaware of this.

Now, as IT has become more aware of this, they recognize that their business users are expecting more. So, they're saying, "Okay, we need to not only embrace it, but we need to bring it in-house, figure out how we can work with them to ensure that we are still driving standardization, and we're still addressing all of the compliance and security issues."

Corporate data is absolutely the most valuable asset that most companies have, and so they have seen now that they have to embrace it. But, as they look down the road, it moves from just SaaS into now looking at a hybrid model, where they're going to embrace IaaS and Platform as a Service, which really formed the foundation of what the cloud is and what we can see of it today. But, it will continue to evolve, mature, and offer new things that we don’t even know about yet.

Somewhere in between

Ashizawa: About a year, year-and-a-half ago, people were still trying to get their minds wrapped around this idea of cloud. We're at a stage now where a lot of organizations are actually adopting the cloud as a sourcing strategy or they are building other strategies to adopt it. We're probably past early adopter and more into mainstream. I anticipate it will continue to grow and gain momentum.

Now, IT is becoming much more involved. I would say that they are actually becoming more of a broker. Before, when it came to providing services to drive business, they were more focused on build. Now, with this cloud they're acting in a role as a broker, as Kevin said, so that they can build the business benefits of the cloud.

One of the key differentiators, as it’s evolved, in the way I see it, is really in the economic principles behind cloud versus managed service and ASP. With cloud, as Kevin mentioned earlier, you basically leverage your operation expense budgets and reduce that capitalization that typically you would still need to do in a historic ASP or managed service.

Cloud brings to the table a very compelling economic business model that is very important to large organizations.

Cloud brings to the table a very compelling economic business model that is very important to large organizations.

But if they are going to adopt the SaaS solution, that they vet out the integration possibilities -- to get out in front that. Also, integration doesn’t just stop at the technical level. There are also the business aspects of integration as well. You need to also make sure that the service levels are going to be what your business users' desire and that you can enforce, and also integration from the support model.

If the user needs help, what’s the escalation? What’s the communication point? Who is the person who is actually going to help them, given the fact that now there is a cloud vendor in the mix, as well as the cloud consumer.

Bury: Organizations can become overwhelmed by the promise and the hype of cloud and what it can offer. My recommendation is usually to start with something small. I go out and spend a lot of time talking to our customers and prospective customers. There are a couple of very common bits of feedback that I hear that CXOs are looking at, when they view where to start with a cloud or as a service type of initiative.

The first of these is, is it core to my business? If a business process is absolutely core to what they are doing, it’s probably not a great place to start. However, if it’s not core, if it’s something that is ancillary or complimentary to that, it’s something that may make some sense to look at outsourcing, or moving to the cloud.

The second is if it’s mission-critical or not. If it’s mission-critical and it’s core, that’s something you want to have your scarce resource, your very highly valued IT resources working on, because that’s what ultimately drives the business value of IT. Going back to what Neil said earlier, IT is becoming a broker. They only have so much bandwidth that they can deliver to those solutions and offerings to their customers. So, if it’s not core and it’s not critical, those are good candidates.

We recommend starting small. Certainly, IT needs to be very involved with that. Then, as you get more-and-more comfortable and you’re seeing more value, you can continue to expand. In addition, we see projects that make a lot of sense, things like testing as a service, where the IT organizations can leverage technology that’s available through their partners, but deliver via a cloud or a SaaS solution, as opposed to bringing it in-house.

Key opportunity for HP

We see SaaS as one of the key drivers, one of the strategic initiatives for HP to embrace. As I talk with my peers on the leadership team, we recognize SaaS as one of only two consumption model customers have for obtaining software from HP. In the traditional license play, they can consume the license and pay maintenance or, if they want to treat as an operating expense, it will be via the SaaS model.

As we look to what we need to do, we're investing very heavily in making all of our applications SaaS ready, so that customers can stand them up in their own data center and our data center or via a hybrid, where we may involve either a combination of those or even include a third-party.

For example, they may have a managed service provider that is providing some of the testing services. To your point earlier about the integration, HP, because of our breadth and our depth of our applications, can provide the ability to integrate that three-way type of solution whereas other companies don’t have that type of depth to be able to pull that off.

As SaaS now becomes much more mainstream and much more mature, big customers are now looking to companies like HP, because of the fact that we have the size, the depth, and the breadth of the solutions.

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