Welcome!

CRM Authors: Xenia von Wedel, Ian Khan, PR.com Newswire, Steve Mordue

Related Topics: @CloudExpo, @BigDataExpo, @DevOpsSummit

@CloudExpo: Article

Is SaaS Dead? | @CloudExpo #BigData #IoT #IaaS #SaaS #AI #DevOps #FinTech

The rapid growth of hyperscale IaaS platforms such as AWS is changing the SaaS playing field

Is SaaS Dead? Are We Headed to a World of ASP 2.0 or Dedicated SaaS?

The emergence of hyper-scale Infrastructure as-a-Service (IaaS) platforms such as Amazon Web Services (AWS) is challenging the traditional Software-as-a-Service (SaaS) value proposition. SaaS CEOs, investors and SaaS buyers must carefully evaluate the implications of "all-in" migration to hyperscale IaaS platforms that offer value-added platform services that go beyond simple infrastructure services. This article provides a point of view and insights into changes in the SaaS market, which has three principal drivers 1) technical, 2) business, and 3) security and compliance.

History of SaaS
SaaS solutions were born in 2000 with the promise of web-based delivery of hosted software delivered over the internet. SaaS solutions helped reduce the pain and cost associated with upgrades and maintenance headaches of "shrink-wrapped" software. The SaaS business over the last 15 years has disrupted major software platforms and in many ways helped set the stage for wider enterprise adoption of cloud services.

The early success of SaaS helped change customer behavior. Customers became comfortable with data and software running outside of their firewalls. The concept of management by SLAs was in many ways driven by the initial success of SaaS. In the past few years the trend towards SaaS creation and adoption has exploded with the adoption of hyperscale IaaS platforms by SaaS vendors.

This is the great paradox.

The emergence of public cloud IaaS platforms on the one hand is fueling the explosive growth of SaaS, but at the same time it will kill (or dramatically disrupt) SaaS as it destroys the fundamental value proposition.

Will SaaS Work in the Public Cloud Era?
The explosive and constantly accelerating growth of IaaS platforms such as AWS Elastic Cloud Computing (EC2) is changing the economics of SaaS.

Your Cloud or My Cloud?
The trend is unmistakable - public IaaS has won. Major SaaS providers as well as large enterprises that are major SaaS buyers are both migrating and embracing the IaaS cloud by going "all-in." Figure 1 shows the implications of this migration and shift.

Figure 1

As both SaaS providers and enterprise SaaS consumers start to operate on the same platform, the SaaS "value-stack" is significantly diminished. Artificial data silos are created for the enterprise when their "SaaS" data is resident right next to their enterprise data separated just by a contractual boundary. SaaS buyers in many ways "pay" twice for their data. Once for storing it in the SaaS platform and a second time for backing it up into their "cloud environment" for security or analytical purposes. Many enterprises often overlook the hidden costs associated with SaaS. These include hard network and storage costs associated with copying data back and forth for backup/retention or analytics purposes.

Is Upgrading and Updating Software Really That Hard Now?
A key tenet of SaaS was to help reduce the cost and pain associated with upgrading and maintaining "shrink-wrapped" software. In 2016 and beyond, upgrading and managing software and systems is not as hard as it used to be. Continuous integration/continuous delivery (CI/CD), microservices, serverless computing, and managed cloud-native services are making it relatively easy to upgrade and deliver software.

If both the SaaS provider and the consumer have access to the same set of tools on the same cloud platform, what is the real value-add from the SaaS service? Just the software, right?

Upended Revenue Model
Over the years most SaaS services have been delivered on a "per-user" based annual subscription model. If a SaaS license for one user is $100 per year, and the enterprise bought licenses for 100 users, the enterprise would pay $10,000 per year. In the pre-IaaS days, this might have been great economics for both parties - the SaaS vendor and the SaaS buyer. But not anymore.

The customer now wants true pay-as-you-go or consumption-based pricing. This means paying for actual transactions when actual costs are actually incurred. This is especially true now that SaaS providers migrate to IaaS platforms that offer transaction-based pricing. The SaaS providers' underlying cost basis for infrastructure and related components is truly hourly and consumption driven. This has huge implications. Let's see this through a sample scenario.

Assume those 100 users consume 100 GB of space and five cloud servers. The customer adds another 50 users but because of limited usage, the storage and compute requirements did not really change much. Why should the customer pay an additional $5,000 for those additional 50 users, if the underlying incremental costs did not change that much?

SaaS buyers are starting to think real hard when deciding between a "per-user" SaaS annual subscription model versus a "cloud-hosted" managed "shrink-wrapped" solution. Given that in both scenarios the "raw material" is the same cloud platform.

Security and Compliance
Most newer entrants to the SaaS market underestimate the cost and complexity associated with the "Ops" part of the business. Many SaaS providers struggle with issues around vulnerability management, security scanning, compliance reporting, backup and recovery and service uptime. There are many factors for this. One of them is the changed cybersecurity environment. Buyers are demanding evidence of security best practices. Industry recognized certifications such as HIPAA, FFIEC, FedRAMP, or ISO 27001 are increasingly required by customers from SaaS providers. These come at a heavy price.

Further, as enterprises get better with cloud services, they are increasingly seeking access to their data stored on SaaS platforms. Data residency, access control and enterprise risk management are difficult questions that must be addressed. Now that the enterprise and the SaaS service are operating on the same cloud platform, the argument for "dedicated" SaaS is increasingly coming up.

Fast Forward to the Past?
As enterprises get comfortable with hyperscale cloud platforms such as AWS, there is a serious need to carefully evaluate the SaaS value proposition. New distribution models such as cloud marketplaces are making it easier for cloud buyers to find and deploy enterprise software within their own cloud environments. Wanting control on the data and emergence of data science are causing enterprises to view their data more strategically.

Will we see Application Server Providers (ASP2) that focus on delivering great software hosted within "dedicated" cloud environments or within the clients' cloud environment? Will the SaaS revenue model change from a per user annual subscription to a pay-per-call model as serverless computing takes shape?

Making the right strategic decisions is critical for both cloud services buyers and providers to ensure their ability to sustain and thrive in the cloud computing age. The emergence of serverless computing, cloud marketplaces and pay-per-call transaction pricing offer entrepreneurs a rich canvas to build the next generation of cloud-native services.

Industry Perspective
"Pricing, governance and security are key for enterprises consuming multiple SaaS services. It becomes challenging to understand the security footprint of the system as a whole as the number of SaaS services consumed increases." - Derek Collison, CEO and Founder, Apcera.

Call-to Action
Cloud executives both on the vendor and enterprise buyer sides must carefully evaluate and understand new cloud deployment and consumption patterns. Taking a strategic look at Managed IaaS, PaaS, Container-as-a-Service or Micro Marketplace deployment models is critical.

More Stories By Gaurav Pal

Gaurav “GP” Pal is CEO and Founder of is stackArmor. He is an award-winning Senior Business Leader with a successful track record of growing and managing a secure cloud solutions practice with over $30 million in annual revenues focused on US Federal, Department of Defense, non-profit and financial services clients. Successfully led and delivered multi-million-dollar Amazon Web Services (AWS) cloud migration and broker programs for US Government customers including the Department of the Treasury, and Recovery Accountability & Transparency Board (RATB) since 2009.

GP is the Industry Chair at the University of Maryland’s Center for Digital Innovation, Technology and Strategy (DIGITS). He has strong relationship-based consultative selling experience with C-level executives providing DevOps, Managed Services, IaaS, Managed IaaS, PaaS and SaaS in compliance with US FedRAMP, FISMA, HIPAA and NIST Security Frameworks. He has a successful track record of delivering multiple cloud solutions with leading providers including Amazon Web Services (AWS), Microsoft, Google and among others.

Comments (0)

Share your thoughts on this story.

Add your comment
You must be signed in to add a comment. Sign-in | Register

In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.


@ThingsExpo Stories
IoT is at the core or many Digital Transformation initiatives with the goal of re-inventing a company's business model. We all agree that collecting relevant IoT data will result in massive amounts of data needing to be stored. However, with the rapid development of IoT devices and ongoing business model transformation, we are not able to predict the volume and growth of IoT data. And with the lack of IoT history, traditional methods of IT and infrastructure planning based on the past do not app...
Internet-of-Things discussions can end up either going down the consumer gadget rabbit hole or focused on the sort of data logging that industrial manufacturers have been doing forever. However, in fact, companies today are already using IoT data both to optimize their operational technology and to improve the experience of customer interactions in novel ways. In his session at @ThingsExpo, Gordon Haff, Red Hat Technology Evangelist, shared examples from a wide range of industries – including en...
To get the most out of their data, successful companies are not focusing on queries and data lakes, they are actively integrating analytics into their operations with a data-first application development approach. Real-time adjustments to improve revenues, reduce costs, or mitigate risk rely on applications that minimize latency on a variety of data sources. Jack Norris reviews best practices to show how companies develop, deploy, and dynamically update these applications and how this data-first...
Intelligent Automation is now one of the key business imperatives for CIOs and CISOs impacting all areas of business today. In his session at 21st Cloud Expo, Brian Boeggeman, VP Alliances & Partnerships at Ayehu, will talk about how business value is created and delivered through intelligent automation to today’s enterprises. The open ecosystem platform approach toward Intelligent Automation that Ayehu delivers to the market is core to enabling the creation of the self-driving enterprise.
"We're a cybersecurity firm that specializes in engineering security solutions both at the software and hardware level. Security cannot be an after-the-fact afterthought, which is what it's become," stated Richard Blech, Chief Executive Officer at Secure Channels, in this SYS-CON.tv interview at @ThingsExpo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
Consumers increasingly expect their electronic "things" to be connected to smart phones, tablets and the Internet. When that thing happens to be a medical device, the risks and benefits of connectivity must be carefully weighed. Once the decision is made that connecting the device is beneficial, medical device manufacturers must design their products to maintain patient safety and prevent compromised personal health information in the face of cybersecurity threats. In his session at @ThingsExpo...
SYS-CON Events announced today that Grape Up will exhibit at SYS-CON's 21st International Cloud Expo®, which will take place on Oct. 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Grape Up is a software company specializing in cloud native application development and professional services related to Cloud Foundry PaaS. With five expert teams that operate in various sectors of the market across the U.S. and Europe, Grape Up works with a variety of customers from emergi...
Detecting internal user threats in the Big Data eco-system is challenging and cumbersome. Many organizations monitor internal usage of the Big Data eco-system using a set of alerts. This is not a scalable process given the increase in the number of alerts with the accelerating growth in data volume and user base. Organizations are increasingly leveraging machine learning to monitor only those data elements that are sensitive and critical, autonomously establish monitoring policies, and to detect...
SYS-CON Events announced today that Massive Networks will exhibit at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Massive Networks mission is simple. To help your business operate seamlessly with fast, reliable, and secure internet and network solutions. Improve your customer's experience with outstanding connections to your cloud.
Everything run by electricity will eventually be connected to the Internet. Get ahead of the Internet of Things revolution and join Akvelon expert and IoT industry leader, Sergey Grebnov, in his session at @ThingsExpo, for an educational dive into the world of managing your home, workplace and all the devices they contain with the power of machine-based AI and intelligent Bot services for a completely streamlined experience.
Because IoT devices are deployed in mission-critical environments more than ever before, it’s increasingly imperative they be truly smart. IoT sensors simply stockpiling data isn’t useful. IoT must be artificially and naturally intelligent in order to provide more value In his session at @ThingsExpo, John Crupi, Vice President and Engineering System Architect at Greenwave Systems, will discuss how IoT artificial intelligence (AI) can be carried out via edge analytics and machine learning techn...
With tough new regulations coming to Europe on data privacy in May 2018, Calligo will explain why in reality the effect is global and transforms how you consider critical data. EU GDPR fundamentally rewrites the rules for cloud, Big Data and IoT. In his session at 21st Cloud Expo, Adam Ryan, Vice President and General Manager EMEA at Calligo, will examine the regulations and provide insight on how it affects technology, challenges the established rules and will usher in new levels of diligence a...
In the enterprise today, connected IoT devices are everywhere – both inside and outside corporate environments. The need to identify, manage, control and secure a quickly growing web of connections and outside devices is making the already challenging task of security even more important, and onerous. In his session at @ThingsExpo, Rich Boyer, CISO and Chief Architect for Security at NTT i3, discussed new ways of thinking and the approaches needed to address the emerging challenges of security i...
SYS-CON Events announced today that Datera, that offers a radically new data management architecture, has been named "Exhibitor" of SYS-CON's 21st International Cloud Expo ®, which will take place on Oct 31 - Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Datera is transforming the traditional datacenter model through modern cloud simplicity. The technology industry is at another major inflection point. The rise of mobile, the Internet of Things, data storage and Big...
An increasing number of companies are creating products that combine data with analytical capabilities. Running interactive queries on Big Data requires complex architectures to store and query data effectively, typically involving data streams, an choosing efficient file format/database and multiple independent systems that are tied together through custom-engineered pipelines. In his session at @BigDataExpo at @ThingsExpo, Tomer Levi, a senior software engineer at Intel’s Advanced Analytics ...
SYS-CON Events announced today that Datera will exhibit at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Datera offers a radically new approach to data management, where innovative software makes data infrastructure invisible, elastic and able to perform at the highest level. It eliminates hardware lock-in and gives IT organizations the choice to source x86 server nodes, with business model option...
With 10 simultaneous tracks, keynotes, general sessions and targeted breakout classes, Cloud Expo and @ThingsExpo are two of the most important technology events of the year. Since its launch over eight years ago, Cloud Expo and @ThingsExpo have presented a rock star faculty as well as showcased hundreds of sponsors and exhibitors! In this blog post, I provide 7 tips on how, as part of our world-class faculty, you can deliver one of the most popular sessions at our events. But before reading the...
SYS-CON Events announced today that CA Technologies has been named "Platinum Sponsor" of SYS-CON's 21st International Cloud Expo®, which will take place October 31-November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. CA Technologies helps customers succeed in a future where every business - from apparel to energy - is being rewritten by software. From planning to development to management to security, CA creates software that fuels transformation for companies in the applic...
In his session at 21st Cloud Expo, Carl J. Levine, Senior Technical Evangelist for NS1, will objectively discuss how DNS is used to solve Digital Transformation challenges in large SaaS applications, CDNs, AdTech platforms, and other demanding use cases. Carl J. Levine is the Senior Technical Evangelist for NS1. A veteran of the Internet Infrastructure space, he has over a decade of experience with startups, networking protocols and Internet infrastructure, combined with the unique ability to it...
SYS-CON Events announced today that GrapeUp, the leading provider of rapid product development at the speed of business, will exhibit at SYS-CON's 21st International Cloud Expo®, which will take place October 31-November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Grape Up is a software company, specialized in cloud native application development and professional services related to Cloud Foundry PaaS. With five expert teams that operate in various sectors of the market acr...