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Software as a service: Why, when, and how?

Julie Smith David and Michael Lee: December 8, 2009. Software as a service: Why, when, and how?. Overview. History of the project Today’s objectives Software as a Service What’s happened in the past Why SaaS is emerging How it might be integrated Research help Survey evaluation.

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Software as a service: Why, when, and how?

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  1. Julie Smith David and Michael Lee: December 8, 2009 Software as a service:Why, when, and how?

  2. Overview • History of the project • Today’s objectives • Software as a Service • What’s happened in the past • Why SaaS is emerging • How it might be integrated • Research help • Survey evaluation

  3. Emergence of applications in THE CLOUDS: Saas, On Demand…

  4. Driver: Economies of Scale • 70’s: Time sharing Co 2 Software & Hardware Co 1 Software & Hardware Co 3 Co 1 Co 4

  5. Economies of Scale • 70’s: Time sharing • 80’s-90’s: Application Service Providers (ASP) Software & Hardware Co 2 Co 1 Co 3 Co 1 Co 4

  6. Economies of Scale • 70’s: Time sharing • 80’s-90’s: Application Service Providers (ASP) • 00’s: Software as a Service (SaaS)/On Demand Co 2 Co 1 Software & Hardware Co 3 Co 1 Co 4

  7. As a result… SaaS is a Disruptive Technology Source: Mann and David, 2007. For more, see: Harrigan, K. R. 1984. Formulating Vertical Integration Strategies The Academy of Management Review 9 (4):15. Rothaermel, F. T., M. A. Hitt, and L. A. Jobe. 2006. Balancing vertical integration and strategic outsourcing: Effects on product portfolio, product success, and firm performance. Strategic Management Journal 27:1033-1056. * ODSA: On-Demand Software Aggregator, an earlier term for PaaS.

  8. SaaS Characteristics • Technical • Browser based: • Reduced upgrade issues • Lower cost hardware • Hardware acquisition, operations, maintenance • Multi-tenant • Agile development: 2 week sprints • Strategic • Low initial acquisition costs • Quick Implementations • Predictable pricing • Reduced support staff needed

  9. Diversity in the Market:Examples The “Visible” Leaders Diverse Functionality Traditional SW Suppliers “Unknown”… but large adoptions Switch to Service Consolidation

  10. Source: Spinola, M. 2009. Why Large Public and Private Sector Organizations (not just SMB's) Are Seriously Considering Cloud Computing? (October 5) http://web2.sys-con.com/node/1132867.

  11. The Risks of SaaS • Data control • Supplier viability1 • Regulatory risks2 • Examples: Sarbanes-Oxley (SOX), Gramm-Leach-Bliley (GLBA) and HIPAA, and industry standards like the Payment Card Industry Data Security Standard (PCI DSS) • SAS 70 audits – Type I and Type II • Reliability Bell, M.Z. 2009. The Risks of SaaS. Feb 2. http://blog.riskythinking.com/2009/02/risks-of-saas-software-as-service.html Finch, A. 2008. The Rise of SaaS and your Regulatory Risks. January 31. http://www.ecommercetimes.com/story/61448.html?wlc=1258340695 Significant Contract implications2

  12. Privacy Considerations: Example

  13. Who will adopt SaaS?Factors influencing the decision SaaS Adoption Strategic importance of the application Security concerns with data Compliance issues with data Diffusion of current applications Infusion of current applications

  14. And how will we integrate saas into our existing applicatoins? Traditional software: Market maturity, strategic decisions and eai

  15. Model We’ll Explore SaaS IaaS PaaS Cloud Computing 0 1 0 3 1 Technology Platform 2 2 4 0 2 In house Integration Legacy Best of breed Single source Market Segment Maturity Integration Options 0: No integration 3: IaaS 1: Single Sign On 4: PaaS 2: In-house, API/WS

  16. A long time ago… when information systems were beginning & Fin Sell Goods Financing • Strong framework with Dr/Cr approach • Simple adding & subtracting • The language of business • Everyone submitted summary data to be entered Accounting Manufacture Goods Hire Employees Buy Inventory Buy Fixed Assets

  17. A long time ago… when information systems were beginning Sales & Fin Sell Goods Financing • Most departments started using IT • Systems developed independently • And installed independently • Summaries still sent to accounting • PROBLEMS? Accounting Manufacture Goods Hire Employees HR Manufacturing/ Warehouse Systems Buy Inventory Buy Fixed Assets

  18. Market Maturity:ERP - An Integrated Solution

  19. Strategic decisions • Centralized vsdecentralized decision • Standardized vsvariable implementations • Customize vs configure for process execution • Flexible vs stable • Single source vs best-of-breed Implications for Integration?

  20. Decision Complexity

  21. Progress: Cloud Computing Technology Platform In house Integration Legacy Best of breed Single source Market Segment Maturity

  22. More Progress! SaaS Cloud Computing Technology Platform In house Integration Legacy Best of breed Single source Market Segment Maturity

  23. Julie Smith David, Michael Lee, and Arti Mann, October 6, 2009 Integration implications

  24. Integration Issues Still important… but different: • Best of breed vs Single source: SaaSvs “PaaS” • Standardization across your organization • Customize vs configure for process execution And now… • Variation of locations of technology • Data • Applications • Hardware… • Variation in control of applications • Upgrade cycle – huge increase in releases • Security: behind or out front of the firewall?

  25. Integration Options: No real integration – different menu options on the user’s screen 0 Legacy System SaaS Application

  26. Integration Options Single Sign On (SSO): Log in and some controlled data duplication (and may lead to additional security issues!) 1 Legacy System 6. Authentication and data sent 7. Application confirms authorized access and is launched sso 4. Requests log in SaaS Application 3. Authentication req 5. Log in sent 2. Application requests authentication 1. User requests an application

  27. Integration Options In house integration, using API’s and/or web services 2 Legacy System 2. Make a call (less often API) 3. Return (data, screen, functionality) SaaS Application 3. Return (data, screen, functionality) Integration Platform, Internal Dev 4. Integrate and display 2. Make a call (often API) NetWeaver 1. Start an application Source:

  28. Integration Options Integration as a Service (IaaS) 3 SaaS Application Legacy System 3. Return sent IaaS 3. Return sent 2. IaaS requests data, functionality 2. Requests data, functionality 3. Return sent SaaS Application 4. Integrate and return 2. IaaS requests data, functionality 1. User requests an application

  29. Integration as a Service example:CastIron

  30. Case Study Implementation:The Schumacher Group implements Cast Iron Source: Woods, D. and C. Prattabhiram. 2009.

  31. Integration Options Using PaaS capabilities 4 Legacy System PaaS Capabilities 3. Return (data, screen, functionality) 4. Integrate and send to user SaaS Application 2. Make a call 1. Start an application

  32. CRM Vendor No – On Demand Platform

  33. AppExchange

  34. PaaS: Electronic Market Places Native Dev, By PaaS PaaS Platform Developed Apps Developer 1 Developer 2 Developer x

  35. Platform as a Service Example, cont.:Force.com Source: http://www.salesforce.com/platform/cloud-platform/, September 13, 2009

  36. And for more robust integration Source: http://sites.force.com/appexchange/listingDetail?listingId=a0N300000016cUTEAY

  37. Model We’ll Explore SaaS IaaS PaaS Cloud Computing 0 1 0 3 1 Technology Platform 2 2 4 0 2 In house Integration Legacy Best of breed Single source Market Segment Maturity Integration Options 0: No integration 3: IaaS 1: Single Sign On 4: PaaS 2: In-house, API/WS

  38. Additional SaaS Market Maturity Insights: Consolidation • SaaS acquiring IaaS • Movement toward Single Source (vs Best of Breed) acquires acquires ,

  39. Strategic decisions

  40. Who will adopt SaaS?Factors influencing the decision Integration approach SaaS Adoption Strategic importance of the application Security concerns with data Compliance issues with data Diffusion of current applications Infusion of current applications • Percentage of applications in the cloud (versus behind the firewall) (Biske, 2008) • Infusion/diffusion of integration capabilities • Complexity of authorized access rules • Reporting needs and complexity of business environment • Adoption of PaaSvsSaaS • Best of breed vs single source

  41. Who will adopt PaaS?Cost Structure Source: David, J.S. and A. Mann (2007).

  42. PaaS: Hypothesized Cost Pattern Source: David, J.S. and A. Mann (2007).

  43. Resulting Model SaaS IaaS PaaS Cloud Computing 0 1 0 3 1 Technology Platform 2 2 4 0 2 In house Integration Legacy Best of breed Single source Market Segment Maturity Integration Options 0: No integration 3: IaaS 1: Single Sign On 4: PaaS 2: In-house, API/WS

  44. Factors Driving Integration Efforts In House IaaS IaaS market share Inexperienced in-house staff Cloud applications > Legacy COTS Applications > Custom Open standards • Criticality of best of breed applications • Infusion/diffusion of in house integration platform • Infusion/diffusion of in house integration expertise • Legacy applications > Cloud applications PaaS • PaaS market share • Number of applications available • Inexperienced in-house staff • Cloud applications > Legacy • COTS Applications > Custom • Acceptance of THEIR standards Source: Castner & Ferguson, 2000.

  45. So, what do we do?

  46. Survey Others • Could you review the survey for us? • Do the questions make sense? • Would you be able to answer them? • Would you be WILLING to answer them? • Are we missing anything you’d like to know?

  47. Sources • Anonymous. 2009.Wal-Mart Marketplace represents new SaaS market: process-as-a-service. http://www.webguild.org/2009/09/wal-mart-marketplace-represents-new-saas-market-process-as-a-service.php • Biske, T. 2008. Integration as a Service(Feb 12) http://www.biske.com/blog/?p=371 • Castner, G. and C. Ferguson, 2000. The effect of transaction costs on the decision to replace ‘off-the-shelf’ software: the role of software diffusion and infusion. Info Systems J (2000) 10, 65–83. • David, J. S. and A. Mann. 2007. The Emergence of On-Demand Software Aggregators: Implications for Developers, Customers, and Software Companies. Proceedings of the Thirteenth Americas Conference on Information Systems, Keystone, CO, USA August 9th-12th, 2007. • Evans, B. 2009. Global CIO: Salesforce surge pushes SaaS into mainstream. (August 27). InformationWeek.www.informationweek.comGruman, G. 2007. Integration issues may hinder SaaS Adoption. CIO Update. (August 17): http://www.cioupdate.com/trends/article.php/3695096/Integration-Issues-May-Hinder-SaaS-Adoption.htm • Hayes Weier, M. 2008. Critical Link: SaaS Integration: Real-World Problems, And How CIOs Are Solving Them. October 18. http://www.informationweek.com/news/services/saas/showArticle.jhtml?articleID=211200952 • Hayes Weier, M. 2008. Workday lands software industry’s biggest SaaS deal. InformationWeek. www.informationweek.com • Mann, A. and J. S. David. On-Demand Software Aggregators (ODSA): The Next Wave for the Software Market? Proc. Enterprise Systems mini-track, (ICIS), Montreal, Canada. • Woods, D. and C. Prattabhiram. 2009. Integration: The Critical Path to Cloud Computing. (June). Cast Iron Computing white paper. • Photos are by kevindooley and used under the creative commons license. They are available at http://www.flickr.com/photos/pagedooley/

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