The past couple weeks I have been peering over reams and reams of investment analysis regarding ‘cloud computing’. It has been surprising to me that cloud computing as a concept is being misused to label disjointed offerings as the same. For example, viewing Google App Engine and Amazon EC-2 as conceptually the same is a fantasticly bad characterization and ripe for bad decision making for IT managers, software vendors, and investors.
In my mind…
The past couple weeks I have been peering over reams and reams of investment analysis regarding ‘cloud computing’. It has been surprising to me that cloud computing as a concept is being misused to label disjointed offerings as the same. For example, viewing Google App Engine and Amazon EC-2 as conceptually the same is a fantasticly bad characterization and ripe for bad decision making for IT managers, software vendors, and investors.
In my mind, the issue of what cloud computing is or is not, is misguided to some degree and only useful for the software professionals that are leveraging the different offerings. And these folks should be sophisticated enough to recognize the different underlying technologies. From an end user perspective, what you can do with the end result of cloud computing is much more interesting. And in that regard, the offerings are much more easily understood. For example, using Google PicasaWeb or Smugmug to store your family’s pictures on sharable, replicated, backed-up storage is an end user value you can measure.
In all this research I did come across a nice and simple scorecard that Goldman Sachs uses to educate its clients about one form of cloud computing: SaaS. Goldman Sachs uses the following characteristics to judge the value proposition of a SaaS vendor or on-premise ISV.
- Does the application provide value as a stand-alone workflow or does it require extensive integration with other applications?
- Integration is the biggest hurdle a SaaS provider encounters. When applications, and the workflows they automate, become more standardized with accepted APIs, this will become less of a hurdle but right now stand-alone value is the litmus test for success.
- Does the application represent an industry best-known-method or does it require extensive customization?
- Due to the fact that SaaS business models can only create value if they aggregate multiple users on the same software and/or hardware instance, customization dilutes the profitability.
- Is the application used by a distributed workforce and non-badge employees?
- This is clearly the driving force behind SaaS and other forms of cloud computing. In my mind, this is routed in a pattern that has been driving IT innovation for the past decade. Consumers have become accustomed to mobility of information in their personal lives. Universal access to email or travel itineraries is so natural that it is aggravating when corporate data systems don’t provide the same sophistication. It is hard to have confidence in your IT department if they push applications on you that look and work horribly compared to the applications you use in your personal life.
- Does the data managed by the application cross a firewall?
- This is the security aspect of SaaS applicability. If much of the data comes from outside the firewall as aggregated information to help the business unit then this is a simple decision. Many B2B workflows have this attribute. If the data being manipulated are the crown jewels of the company, attributes such as security, SLA, accountability, rules and regulations become big hurdles for adoption.
- Does the application benefit from customer aggregation?
- This is the benchmarking opportunity of SaaS. If you host thousands of similar businesses then you have the raw data to compare these companies among each other, and possibly against industry wide known metrics.
- Does the application deployment show dramatically lower upfront costs than on-premise solution?
- Low upfront costs can defuse deployment resistance. This is very important attribute for a SaaS offering that is targeting the Small and Medium sized Business (SMB) segments.
- Does the application require training to make it productive?
- If it does it is bad news: internet applications need to do task extremely well particularly if your access to the application is through some seriously constrained interface like a smart phone or MID.
- Can the application be adopted in isolation?
- This is similar to the stand-alone requirement, but more focused on the procurement question for the SaaS solution. If the solution can be adopted by a department instead of having to be screened for applicability across the whole enterprise, it clearly will be easier to get to revenue.
- Is the application compute intensive/interactive?
- SaaS applications don’t do well with large compute requirements mainly due to the multi-tenancy that is the basis of the value generation. If one customer interacts with the application and makes a request that pegs the server on which the application runs, all other customers will suffer.
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