On demand hosting - what, when and how
Do-it-yourself enterprise software has proved to be an expensive, complex necessity for many organisations. But now there is another way – on demand hosting or Software as a Service (SaaS) is gaining ground, and could be the answer that CIOS and IT directors have been looking for
Enterprise software is complicated, expensive stuff, with long lead times and it quite often needs the help of a partner or massive consultancy to get it right. For every pound spent on some licences, around five pounds will be spent on consultancy – this stuff is tricky.
It is no wonder really. Enterprise software is the stuff that runs today’s businesses. Whether it is the finance, HR, CRM or ERP part of the company, organisations rely on their enterprise software, so it had better offer good value for money, and work effectively when it is needed.
Until recently buying software licences from one of a dwindling number of main vendors was the norm. Organisations would buy the license and then spend years and massive amounts of money trying to get it to work effectively and deliver the promised business benefits. There has been a catalogue of unsatisfactory, and downright useless enterprise software installations over the last ten years, but persevering with them was often the only way forward. Many IT Directors have fallen on their swords as a result of poorly executed enterprise systems, often through no major fault of their own.
But another business model has emerged that could help even the most hard-pressed and cash poor IT Director. ‘On demand’ or Software as a Service (SaaS) delivers software through a rental model, the theory being that customers only pay for the software they use to run their businesses, and for many it seems to be working.
Market research organisation IDC believes the acceptance of SaaS delivery models will continue to gather momentum. "2005 was a high-profile year for the software-on-demand delivery model, marked by increased software industry education, customer awareness, and focus on the positive customer experience," says Erin Traudt, research analyst for IDC's Software as a Service programme. "Worldwide revenue associated with on-demand software grew healthily, although adoption is still at a relatively early stage. IDC anticipates continued customer interest and demand as well as provider innovation as more customers request this type of software delivery."
Although SaaS has had predictable reactions from the established players like Oracle and SAP it is gaining ground amongst customers fed up with paying for software, which either they don’t use or that isn’t working. For IT Directors it is definitely worth taking a look.
At this year’s Wimbledon tennis championship IBM will provide the on-demand hosting for the tournament, as it has been doing for a number of years. In fact stuffy old Wimbledon was one of the early adopters of the on-demand delivery model, and was IBM’s first global reference site for on-demand, as it used the model for its web site as early as 1995, when it had around 200,000 hits during the fortnight. Last year it had four million.
Because it is still early days in the SaaS market there are still many arguments over long-term costs and security. But Salesforce.com, which has made a big impact on the market likens software to utilities. You wouldn’t build a power plant, so why build an IT department, when you can buy software like a utility.
Of course it is not as simple as that, but a mixture of hosted and owned software seems the likely future path for many organisations. The vendors are already positioning themselves. IBM recently announced that it would add to the numbers of on-demand applications available – currently it is most active in areas like CRM - and will be actively encouraging and helping its partners to provide SaaS offerings. For IT Directors under constant pressure to provide costs savings and improved efficiency, SaaS may be a great path to take.
