Sage’s introduction of SalesLogix for cloud computing has caused me to do a lot of thinking. The operative terms we use in the industry for software functionality delivered across the Internet is “SaaS” (Software as a Service), or now “cloud computing,” and numerous vendors find themselves twisting themselves and the definition into barely recognizable forms. Enough of this, I say; let’s do a re-think.
If SaaS and cloud computing are mysterious to you, let me provide some background.
I started covering the field (it wasn’t a market yet) in 2000, and I devoted my practice at Aberdeen Group to it. In those early years, other terms dominated the discussion, notably “hosted,” “on-demand” and “ASP.” All applications were hosted and available on-demand, but the earliest distinction, one that persists today, was between ASPs and multi-tenant solutions.
ASP vs. Multi-Tenant
Briefly, ASPs, or application service providers, offered client server products like Siebel served from a central location across the Internet. It was slow going, and each customer had a single instance of the software running out on the Internet. It didn’t work out well, and many VC funds took goose eggs on their report cards from the ASPs.
Multi-tenant was another matter. Salesforce.com was a pioneer, but so were Salesnet, RightNow and UpShot. Ironically, only Salesforce understood the power and value of its proposition (RightNow got religion a little later), and most treated the multi-tenant on-demand solution as simply a delivery model and not much more. UpShot was bought by Siebel, Salesnet by RightNow, and the debate about superiority abated because Salesforce and RightNow (which hardly competed then) had prevailed.
Then something interesting happened. Vendors like Oracle (which bought Siebel) started dabbling in on-demand services and began delivering application services that hybridized the on-demand and ASP models. They did this by re-architecting away from client-server and supporting applications in browsers. They then began hosting their applications in a have-it-your-way scenario. The re-architected applications had been retrofitted to support the multi-tenant model, but multi-tenancy was strictly voluntary. Customers could elect to run their applications as single instances in their IT departments or from a remote data center.
With multi-tenancy, everyone shares a single instance of the application, and through metadata configures and customizes their instance. All data in a multi-tenant system is stored in one server farm, with metadata again serving to segregate it. Some people worry about this virtual segregation, but so far it has been resilient to corruption and hacking. Nonetheless, some vendors offered single-tenant solutions to assuage jittery nerves.
But Wait, There’s More
Terminology evolution continued, and SaaS and cloud computing have been front and center for several years (in the case of SaaS). In its quest to differentiate multi-tenant from conventional single-tenant, the industry keeps adding differentiators. SaaS has usually meant multi-tenant, and cloud usually refers to a plethora of computing services available on the Internet. So, raw computing power is also called “Infrastructure as a Service” (IaaS), there’s still SaaS, and cloud seems to refer to platform — the whole computing stack of hardware, operating system, database, middleware, applications and more.
So where does this leave us?
In a word, confused.
A Modest Proposal
The relative dearth of terms has caused us to re-use what we have in ways that have confused the market. I also do not leave out the possibility of savvy marketers hitching a ride on a popular term to bend it to mean whatever they need it to, which lead me to my opening paragraph.
So I propose the following:
ASP is the new term used to describe a single-tenant implementation in some remote data center that serves applications across the Internet. A vendor that serves multiple customers with this architecture would be said to be delivering an application service in single-tenant mode. Full stop. No need to apologize for it. If that’s what the customer wants, then sell it to them. It doesn’t have all the advantages of multi-tenant cloud computing but some people clearly don’t see these things as advantages anyhow.
SaaS refers to multi-tenant application delivery across the Internet.
Cloud computing is an umbrella term encompassing ASP and SaaS as well as IaaS and Platforms. ASPs and SaaS providers may very well use infrastructure from other cloud providers, as Sage is doing with SalesLogix.
My whole point in doing this is simple. I think the industry and the market are mature enough for us to develop some new terms or possibly adapt an old one. Since there are obviously several models for delivering Software as a Service, why not differentiate enough to give concreteness to them? Calling everything SaaS without qualifiers is not helpful to the market or the customer, and the confusion it can cause can only slow down a sales cycle, and who needs that?
Denis Pombriant is the managing principal of the Beagle Research Group, a CRM market research firm and consultancy. Pombriant’s research concentrates on evolving product ideas and emerging companies in the sales, marketing and call center disciplines. His research is freely distributed through a blog and Web site. He is working on a book and can be reached at email@example.com.