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Keynote Benchmark
t’s a promise that seemed almost too good to be true: Overnight, one of the company’s enterprise-critical applications is updated
to the latest version. In the morning, employees — at the home office and field offices across the country — are working along as
usual, noticing only some important new features that help them get their jobs done better. Later, at a management meeting, the
CMO reports that faster responses to opportunities have bumped their share five points. And the CIO reports that the technology
spend is exactly on target, no additional budget needed.I
Forecast: Partly Cloudy and A Chance of Applications
The Promise and Performance Challenges of Software-As-A-Service
2
Elsewhere, in a nondescript glass-and-steel
building in northern Virginia, the CEO of a
two-year-old tech startup reports to his team
that the overnight upgrade to their core
enterprise application offering went flawlessly.
Monthly subscription revenue is up by high
double-digits. Customers are happy. The press
veritably glows about their cloud-based
application’s wonders. And Google, Microsoft,
and a host of VCs and investment bankers are
lighting up the phone lines with offers of
truckloads of cash.
SAAS AT LAST?After years of latency, software-as-a-service is
moving to center stage, swept along with the
bigger concept of cloud computing. On the
software side, applications like Salesforce,
Workday and Freshbooks — and yes,
GoogleApps — have become serious players in
enterprises of all sizes. And in the bigger
cloud, services like Amazon’s EC2 Elastic
Compute Cloud and IBM Smart cloud
services — and yes, Google AppEngine — are
changing the way IT departments approach
their missions and their development tasks,
enabling greater speed and flexibility than
ever before.
Forrester Research counts
“ubiquitous deployment of software-as-a-
service for packaged applications” as one of its
15 tech trends for the next three years.i
Gartner predicts a 23.8 percent compound
annual growth rate for SaaS through 2012,
more than doubling overall market growth of
11.4 percent.ii And according to a Piper Jaffray
report quoted in Information Week, spending
on the cloud will outstrip the overall software
market by a factor of five.iii
We’ve seen this type of technology
trajectory before and can recognize its course;
think back to the Web itself, to early social
networking, to the still-snowballing mobile
data market. The dominant SaaS providers are
still rising to the top; economics, standards
and best practices are being sorted out;
business models are being built and business
cases made. The difference is that these
sweeping technological changes keep
happening faster and faster.
Many point to Salesforce.com as a
success story and example of what’s possible.
Indeed, a Gartner consultant recently put
Salesforce’s share of the total SaaS spend at
14.6 percent.iv But without certainty as to the
potential, nor enough track record to know
and avoid the pitfalls, how willing will
enterprises be to trust their critical
applications to cloud-based solutions that
ultimately are out of their control? A few
stories in the press about outages at Google,
Facebook, and Twitter are enough to give any
business decision-maker pause. Even so, the
SaaS train has apparently left the station. The
question is, at what stop will businesses get on,
and for how long a ride?
CLOUDY TERMINOLOGYTo the average business person, the whole
concept can be a little — cloudy. In the most
general sense, “the cloud” refers to IT
infrastructure and functionality that exists
outside a company’s walls (except in the case of
“internal clouds,” but that’s another story),
whether it’s for data infrastructure
(Infrastructure as a Service), processing power
(Platform as a Service), or business
applications (SaaS). These things collectively
make up “the cloud.”
While all aspects of the cloud can
and do impact businesses as a whole, as well as
individual users, it is software-as-a-service
that is the most visible and has the most direct
effect on how people do their jobs every day.
SaaS either replaces or supplements the
on-premises or desktop applications that
workers use day-in and day-out, whether it’s
simple word processing or complex CRM or
HR functions. In some cases, most notably
Microsoft and its Office suite, hybrid solutions
combine familiar desktop applications with
added functionality from the cloud, such as
enhanced collaboration, online file storage and
anywhere-accessibility.
Such hybrid configurations may
serve as the gateway to cloud applications for
many companies. But by any route, it is likely
that SaaS is going to become business as usual.
Even Bill Gates saw it coming while still
running Microsoft, describing the “services
wave” as “the next sea change.”v
Anshu Agarwal, vice president of
marketing for Keynote Systems, sees users
themselves as important drivers of SaaS
adoption. “What I have seen is that, after years
of being dependent upon internal business
system schemes, users and companies have
become tired of having to deal with upgrades,
installations, and internal bottlenecks,” he
says. “Software-as-a-service is being driven as
much by internal users as it is by software-as-
a-service companies. It comes down to users
saying ‘I’m just tired of having to wait for what
I need. I can turn this on next week. I don’t
have to wait in a queue, I don’t have to be
denied the kinds of automations I want.’ I
think that’s what’s driving it.”
PROMISES, PROMISESIt’s a great idea on paper — replacing big
outlays for software and maintenance with flat
monthly fees, fast implementation, never
having to worry about upgrades, slashing
hardware expenses — but the SaaS cloud may
have to come closer down to earth for these
promises to be realized. Some of them are
more in reach than others.
Lower Cost. It’s a reasonable
conclusion that initial implementation cost
can be significant lower with SaaS than with
on-premises software. Forrester Research says
SaaS implementation can typically run .5x to
1x the first year’s subscription fee, vs. 1x to 5x
for traditional software.vi Total cost of
ownership, however, is not so clear-cut.
Keynote Benchmark
SaaS TCO can be lower if it brings
corresponding reductions in IT hiring,
hardware purchases, and database and
app server licenses.vii The balancing of price
and performance will ultimately determine
whether money is saved, or value added for a
comparable investment. One big advantage
SaaS does have is that costs are knowable,
and predictable, based on fixed monthly
per-user fees.
Rapid Deployment. Speed of
implementation is a real advantage for SaaS.
Companies have no need to gear up with
hardware or devote IT resources to
installation, testing, and rollout. All that is
done on the vendor side. The trade-off,
though, is that implementations are fairly
standard, with limited opportunity for
customization. If it fits as is, great. If not,
business processes need to be adjusted to
accommodate the software, instead of vice
versa. For some, that is a serious trade-off.
Seamless Upgrades and Maintenance.
Another checkmark in the plus column for
SaaS — instead of the highly disruptive and
expensive process of upgrading on-premises
software, SaaS upgrades happen on the
vendor side, often without any interruption of
normal business processes. And with SaaS,
upgrades and fixes can happen more
frequently. The SaaS vendor team is dedicated
to one system that serves many clients — with
no string of legacy products to support — and
therefore can bring innovation more quickly
to client companies with none of the stress
and turmoil of traditional upgrades. As an
example, in the ERP arena, in the five-year
period from 2004 to 2009, SAP rolled out just
two product releases, and Oracle and
PeopleSoft three each. During the same
period, Workday, a SaaS competitor,
implemented nine product releases.viii
And underlying all these benefits is
the potential for a now-smaller corporate IT
staff to focus on gaining competitive
advantage instead of routine housekeeping
and utility work.
THE ELEPHANT IN THE CLOUD: PERFORMANCEFor all of its tremendous potential, there’s one
thing that will make or break the SaaS model
both for vendors and users: Performance.
No longer is technology contained within the
walls of the enterprise, running on its own
proven network, controlled closely by its own
IT department. Now, the nerve center of the
enterprise, the productivity of workers, the
integrity of information assets is controlled by
an outside entity, flows through the various
pipes from a remote data center over the
Internet into the enterprise’s network and
ultimately, into a browser. And that presents
challenges both for performance and
user experience.
“My browser is not like a dedicated
desktop application,” Agarwal says. “Take for
example, Outlook. It’s fired up in the morning
and it synchronizes and voilà! The mail is
there. But I can also use Web mail, right? And
it’s a very different experience.”
“It may not be as rich, it’s not as
responsive. And of course, the performance
will vary. I think what’s likely to happen is,
there’s going to be some amount of buyer’s
remorse. Users are going to feel like
they gave up a lot of rich features and
functionality. It’s not the same, experiencing
an application through a browser. It’s not
going to come close.”
The problem with the browser being
the front-end for SaaS applications is that
users have very clear expectations of a browser
experience, based on their use of the Web.
Users go to a site and expect it to load fast —
in two seconds or less. They don’t like to
wait, and won’t. Google says that for every
additional 500ms of delay, the site loses 20
percent of its traffic. With fast broadband and
wireless connections everywhere, users expect
blazing speed when they fire up their browser.
3
Keynote Benchmark
Once you take an application outside the confines of the enterprise data center, a whole host of factors can have an impact on performance.
“You need to understand the browser,” says
Robert Hughes, director of Global Services &
Solution Consulting at Keynote. “Browsers are
now full-fledged application environments,
rendering, executing, initializing, and
transacting every day.” Even though there are a
whole string of opportunities for performance
to degrade between the SaaS data center and
the enterprise user, what happens in the
browser may have the biggest impact.
“Researchers have found that 75
percent of the performance problems with
Web applications actually happen in the
browser,” Agarwal says. “Not in the data center,
not in the database, not in the network or
anywhere in the back end, but in the browser.
And so the way you architect the user interface
with JavaScript and all the other browser
technologies is really what is going to impact
the performance of the service.”
And then there’s the 25 percent of
opportunities for something to go wrong that
are not browser-related — CDNs, domain
name servers, routers, load balancers,
client-side scripts, browser add-ons, etc.
Understanding where along the line
performance is compromised is the key to
delivering applications that will satisfy and
retain users.
MEASURE YOUR WAY TO SUCCESSIf performance is the key to success,
measurement is the key to performance. For
both SaaS vendors and enterprise customers,
the combination of active performance
monitoring and robust, enforceable service
level agreements is essential for successful,
profitable operations.
SaaS vendors will keep their
customers happy with proactive performance
management and, if written into SLAs as
standard operating procedure, will have a
distinct marketing advantage over those who
do not. Additionally, a clear understanding of
where and when slowdowns occur can help
keep their partners honest — if the bottleneck
is with one of their vendors — and also protect
and maximize their return on investment. For
example, investment in additional servers or
network capacity may not be required, if the
problem can be pinpointed to the application-
browser interaction, a third-party component,
or at some other point along the path.
Performance visibility enables SaaS vendors to
invest their resources where they will reap the
highest return. And to get that kind of
visibility requires stepping outside the walls of
the data center.
“You have to understand how it’s
experienced as an end user,” Agarwal says.
“You have to monitor the true experience, look
at the transaction and look at where the
slowdown is. You have to see whether it’s a
data center problem, whether it’s the network,
or whether it’s just the way you built the
application that is now being accessed by your
customers through their browsers.”
“Your users are not sitting in a
data center,” Hughes adds. “Test from the
Internet, test with a browser, test with what
your users use.”
TURNING INCREDIBLE PROMISE INTO CREDIBLE REALITYNew technology adoption is always a push-pull
dance. Enterprises want the productivity and
competitive advantage, but are understandably
cautious until the risks are understood and
performance proven. New technology vendors
want to get out ahead of their competitors and
gain preemptive market share quickly,
sometimes before all the kinks are worked out.
For both sides, it boils down to credibility.
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Keynote Benchmark
Performance degradation can happen at any point in the circuitous journey a SaaS application and its data take to get to the user’s desktop. That’s why end-to-end, internal and external testing are so critical to ensure optimum performance.
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Keynote Benchmark
© 2010 Keynote Systems, Inc. All rights reserved. The trademarks of Keynote Systems, Inc. include Keynote®, DataPulse®, CustomerScope®, Keynote CE Rankings®, Keynote Customer Experience Rankings®, Perspective®, Keynote Red Alert®, Keynote Traffic Perspective®, Keynote WebEffective®, The Internet Performance Authority®, MyKeynote® , SIGOS®, SITE®, keynote™, The Mobile & Internet Performance Authority™ and all related trademarks, trade names, logos, characters, design and trade dress are trademarks or registered trademarks of Keynote Systems, Inc. in the United States and other countries and may not be used without written permission.
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FOOTNOTES
i. Forrester Blogs, “CIOs: Develop A Technology Watch List,” by Sharyn Leaver, 11/6/09
ii. Gartner, “Market Trends: Software as a Service, Worldwide, 2007-2012,” Sharon A. Mertz and others, 9/12/08
iii. Information Week/Plug Into the Cloud blog, “Piper Jaffray Sees Gold Rush In Cloud Software,” by Charles Babcock, 2/23/10
iv. Gartner webinar, “Ensure Your SaaS, Cloud Investment Will Deliver Results and Save You Money,” 4/2010
v. Trumba, “White Paper: Five Benefits of Software as a Service,” 3/8/07
vi. Forrester Research, “The ROI Of Software-As-A-Service,” by Liz Herbert and Jon Erickson, 7/13/09
vii. Gartner webinar, “Ensure Your SaaS, Cloud Investment Will Deliver Results and Save You Money,” 4/2010
viii. Knowledge Infusion Center of Excellence Research, “The Continuous Innovation Advantage of Software-As-A-Service,” by Jason Corsello, 10/2009
Some SaaS vendors are proactively putting
their performance stake in the ground and
backing it up with guarantees. RightNow, a
CRM application provider, starts giving money
back to clients if up-time drops below 99.9
percent. Intacct, which offers financial
management and accounting applications,
offers a similar guarantee, and publishes their
uptime stats right on their Web site.
“Web performance monitoring helps
you to protect your bottom line, but also to
build your brand and build customer loyalty,”
says Neeraja Rasmussen, Keynote senior
marketing manager for Web Performance,
about SaaS vendors. “You can guarantee that
you can deliver a certain level of service.
Verified third-party data with high levels of
trust is a definite competitive advantage for
SaaS providers.” Such data is the heart of
effective, enforceable SLAs. And in a nascent
SaaS marketplace, solid SLAs are imperative
for credibility.
A KEY COMPONENT OF THE CONNECTED FUTUREThe lines are increasingly blurred between
what happens on our computers, and our
phones, and our TVs, and what happens in the
cloud. What’s important is getting the tasks
done efficiently and effectively. SaaS will no
doubt play a bigger and bigger role in
accomplishing that end, though we eventually
may stop making that distinction. It will all
just be “computing.”
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