Near Shore and SaaS

SaaS is about driving down the TCO of applications. There has always been this issue related to SaaS applications. How do you customize it as quickly and as inexpensively as possible?

In the long run, the innovations that are shared reduce the cost to each party but how do you reduce the cost of customizations? How do you speed them given the inherent tension that exists when the SaaS vendor wants slow, incremental change to the platform and customers want rapid evolution of their capabilities?

The answer lies in three areas: Sound SOA in the platform, a robust customization architecture that is supported by off platform services and servers and near-shore development to reduce development costs.

1. Sound SOA practices: SOA has a lot of meanings but the simplest explantion is that the platform is architected in such a way as to provide services to the outside world through defined interfaces. For instance, an ecommerce platform might have a "payment" service that it exposes so that it allows people to create their own services to different payment gateways. The platform never changes but clients can extend the platform. Without this, no SaaS platform will survive for very long.

2. Customization Architecture: Our clients are not willing to wait for their enhancements while a SaaS platform vendor decides whether or not to create a customization for them in the platform. At SaaS Accelerator, we rely on a software/hardware architecture that allows us to create applications and services, host them on our own servers and have them seamlessly interact with the SaaS platform. This allows for rapid deployment, unlimited customization and avoids the biggest pitfall of SaaS: non-sharable customizations adding so much complexity to the platform that the entire thing grinds to a halt.

3. Near shore development: Off shore development is find but near shore is always better. Time zones make a difference. Having real-time access to your team is important. Cultures make a difference. Groups that are more similar work together better. I can't tell you how many times cultural differences have hurt projects we have worked on. It is worth admitting that development will be eternal and reducing the costs of that part of the equation is as much an operational expenses as is the fee for the servers.

Through these three key concepts, mature organizations can leverage SaaS platforms, reduce their TCO and reduce their development expenses, thus driving even more efficiency from their IT systems. They have to be willing to throw out some bureaucracy but that's a small price to pay for this kind of cost savings.

SaaS Knowledge Innovation

by Arthur Lawida
Managing Partner

At first glance, companies usually consider SaaS solutions in order to reduce implementation and operational costs. The TCO of a SaaS solution should be less because the core operational costs are spread across all of the tenants.

While this alone is a very good reason to consider a SaaS solution, I think the best reason for a company to consider SaaS has more to do with leveraging the shared innovation that becomes inherent in the solution over time.

At one level, this innovation is in the technology. When tenants ask for enhancements to the core technology, all can benefit and share the costs. When a client asks for a core enhancement, the SaaS vendor must analyze the usefulness to the other tenants. Depending upon the result of this analysis, the cost to the client who requests the customization can range from the entire cost, if it is not likely to be a shared innovation, to completely free if the SaaS vendor feels the innovation will significantly enhance their core offering. In all cases, this ends up in a negotiation based upon functionality delivered, time to delivery and cost.

What is often overlooked by the market is the deep knowledge and wisdom that becomes collected at the SasS vendor across both vertical and horizontal markets served by their solution. This experience can be an extremely valuable asset to a new tenant, especially if they are entering a new business area or sales channel.

Whether it is an eCommerce solution or an HR solution, the SaaS vendor is likely to have seen practices develop over time that it can share with the new client in a way that does not violate the confidentiality of the other tenants. This kind of knowledge, gained from actual operating experience, means each new client doesn’t have to make the same mistakes everyone else made and over time will become a vital differentiator between SaaS vendors and premise based solutions. The key is that unlike traditional software companies, SaaS vendors must operate their client’s businesses and this provides a significantly faster feedback mechanism to drive further innovation into the shared platform.