What Is On-Demand?

I have an ongoing conversation with an industry executive about the nature of on-demand, SaaS and cloud computing. The central question is, what is it exactly? Our conversation is always thought provoking, and I come away from it with at least some additional perspective. Sometimes I think the discussion is incredibly philosophical, like the question about a tree falling in the forest — does it make a sound if no one is there to witness it?

I was always flummoxed by the tree question. Of course it makes a sound, I thought. But then my kids, who are musicians, explained to me that sound is the perception of certain energy waves emitted by the falling tree. Kids! When the tree falls, it certainly makes those waves, but unless an ear and therefore a person or some other animal is there to hear it, the energy is never converted into sound.

So my conversation with the executive goes like that. Is SaaS just application hosting with delivery through the Internet? Is it SaaS if the hosting service is completely within the company? Can a company with such an infrastructure support remote sites that way and claim to have its own cloud?

These are all good questions, and they are issues that we are still dealing with. The SaaS and cloud computing market is still so new that there are many issues like this that have not been nailed down yet to everyone’s satisfaction, and they may never be.

The Multi-Tenant Issue

It is my belief that you can’t separate SaaS or cloud computing from a multi-tenant architecture. Over the years, and as I have written before, the difference between SaaS computing and conventional applications that are hosted have dwindled to a small core, largely consisting of the multi-tenant issue. Initially, conventional applications were client-server, and hosting them meant using virtual private networks and high server overhead. They were definitely not SaaS.

Vendors have done a good job of bringing those client-server applications into the Internet age — the user interfaces run in browsers like SaaS applications do, and some even offer the capability of multi-tenancy. Some vendors have become good at offering a choice of hosting options to customers, so are they truly SaaS? Are they candidates for cloud computing?

The answer is complicated, like the issue of sound and the falling tree. First things first. As long as a customer has the option of multi-tenancy, then I think it’s not possible to call a solution “SaaS” or “cloud computing.” In an optional setting like that, the vendor still has to manage and maintain multiple versions of the application, and with that comes all of the overhead and complexity of conventional computing.

Ironically, a vendor who offers the same software as both single-tenant and multi-tenant instances straddles definitions. A customer using that Software as a Service in a multi-tenant mode is using a SaaS solution. But a customer using the same software tucked behind another company’s firewall in single tenant mode is simply using a conventional solution, and the same can be said of a company using a single-tenant solution in some other data center — that’s just facilities management.

Private Clouds?

As for cloud computing, I think it’s not possible for a company to have a private cloud. A private cloud is like an old cellphone gathering dust on a shelf somewhere. The very idea of the cloud is of a network, a communally accessed resource for accomplishing a growing list of personal and business pursuits.

I suppose a company could have and make good use of a private section of the cloud but there is a big difference here. Private clouds imply many incompatible little networks, and what good is that? Recall that Metcalfe’s law says that the value of a network is proportional to the square of the number of connected users.

Don’t Bother With the Nitty-Gritty

However, I think the best way to come to terms with SaaS and conventional computing is through the business model. True multi-tenant SaaS leaves the user completely unconcerned about the nitty-gritty of system ownership — the licenses, the versions, the compatibility, the hardware capacities — all of that is hidden and immaterial to user decisions about provisioning.

The multi-tenant SaaS business model is simpler and much less costly, and for that reason, it is catching on globally, especially in places where infrastructure costs are simply not affordable. More importantly, though, it’s clear that multi-tenancy is the new standard because the business model is a better fit for the times and for the growing world market.

I expect that single-tenant solutions that look very SaaS-like will be around for a long time for several reasons. Most importantly, there is customer demand — some customers are still not on board with the idea of multi-tenancy either for personal reasons or because of various restrictions. Second, many vendors have not yet converted their technology and so they will continue selling what they have. Third, some vendors’ business models can’t stand the strain of converting — it may still be too early to try to convince investors that a business model shift makes sense.

Business model conversion may prove to be the biggest obstacle.

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 protected].

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