Is it SaaS or pseudo-SaaS?

Posted: June 9, 2009 in CRM
Tags: , ,

We’ve seen this movie, right? 

It’s amazing to watch the software industry re-engage in the single vs. multi-tenant debate for enterprise SaaS computing.  After several years in which the debate seemed to be settled a new round of claims and counter claims is shaping up giving new meaning to the idea of “much heat and little light.”

SaaS vendors are contacting me with stories of new entrants in their markets claiming to offer software as a service but without multi-tenancy.  What’s going on here?  Enough to write a book, probably, though I doubt if anyone would read it.

I’m thinking that the usual has happened.  After years of warning signs that the conventional software business model was increasingly misaligned for the future, SaaS solutions have become a threat to conventional vendors.  During those years of warnings, many conventional software vendors chose to do nothing to upgrade their offerings and businesses to the SaaS business model — including rewriting their code.  These vendors are now attempting to throw a Hail Mary pass.

It has been apparent to anyone with a functioning eye on the software business that the on-demand model was moving in, setting up shop and planning to stay for a while.  Now that the lag time is really up, vendors that did nothing are slapping browser front ends on their products and offering to “host” their wares on their own servers and calling it literally “software as a service.”  They’re literally right too — it is software delivered as a service — but these offerings are a long way from offering the power and flexibility of true SaaS based on a multi-tenant architecture.  I think of it as pseudo-SaaS.

The crux of the issue is the architecture model — single tenant or multi-tenant?  Single tenant simply puts conventional software into a facilities management paradigm reminiscent of the 1970’s.  You get software delivered as a service and certain other benefits like fixed pricing and reduced overhead compared with doing it yourself.  But you miss a lot too.

What pseudo-SaaS vendors are not able to provide is all of the benefits of a single code base that enables rapid configuration, simplified upgrades and integration, significantly lower total cost of ownership and a lot more.  More importantly, multi-tenant SaaS is hardly standing still.  The newest wrinkle, Cloud Computing, depends on the multi-tenant model for its underpinnings. 

Cloud Computing promises great things like anywhere computing where your information is always accessible and multiple deployments from a single application definition.  That means your applications run on your BlackBerry or iPhone as well as your PC or laptop without a massive porting effort.  Then there’s integration.  Applications built on multi-tenant platforms are far easier to integrate and can more easily contribute to a best of breed scenario that supports your business processes.  No more having to buy everything from a single vendor.

All this and a lot more is possible because multi-tenant SaaS brings a lot of standards to the table while single tenant solutions use the standards of a particular vendor.

If I could translate the single tenant/multi-tenant debate to telephone service, I would say it’s the difference between buying a rotary phone or a cordless model.  Skeptics will say the rotary phone is just fine for basic communication and they’d be right if voice communication was all anyone wanted to do.  That’s because the network is backward compatible.  But look at what you give up — voice mail, auto-dialing, redial and lots more.  It’s all stuff we take for granted because the standard has moved on.  And it’s all made possible by a better design of the basic service.

Multi-tenant is like that.  It’s the design of the future.  We can argue about single tenant and multi-tenant and it will confuse some technology buyers into making bad decisions.  But it won’t change history.  Because of bad decision making earlier in this decade a lot of software companies are being increasingly left high and dry by changing times. 

They’ve got lemons and they’re trying to make lemonade.  Fair enough, there might still be companies out there that can’t see past the traditional objections of security or mobility or whatever to embrace multi-tenant SaaS.  For them a single tenant solution might look really good and it will deliver business benefits the same way a rotary phone would let you make an emergency call — though I doubt you could simply dial 911. 

Just don’t tell me there’s no difference between the two models.  There’s a gap between the two models as big as the Grand Canyon and it’s growing.

Comments
  1. christophercabrera says:

    Completely agree. From my perspective at a company designed from the ground up to be 100% SaaS, it’s been interesting to witness the emergence of these “pseudo SaaS” players and their attempted sleight of hand. Traditional enterprise software vendors “slapping browser front ends on their products and offering to host their wares on their own servers” are essentially wolves in sheep’s clothing. With a true multi-tenant solution, customers share the exact same platform – just as they all share the same low cost base, rapid introduction to new functionality, robust version control, data security, disaster recovery and scalability. So buyer beware – don’t be misled by labels. Traditional software vendors attempting to masquerade as SaaS are doing a colossal disservice to customers unfortunate enough to buy into it. – Christopher Cabrera, CEO Xactly Corp.

  2. bpatter says:

    Interesting post – I think I struck a chord. 🙂

    Consider me intrigued: does this accurately reflect a multi-tenant solution: “share the exact same platform – just as they all share the same low cost base, rapid introduction to new functionality, robust version control, data security, disaster recovery and scalability?”

    I wonder your thoughts on the following article (which I found as result #1 on Bing)…

    http://msdn.microsoft.com/en-us/library/aa479086.aspx

  3. mls73273 says:

    Well said and forefully stated. It is very frustrating to hear the naysayers now say “me too”. Pseudo-SaaS, or as I call it Faux-SaaS, can look the same as true SaaS to an unwitting buyer. It is clear that mulit-tenant architecture is the only viable financial strategy and the one that gives its users the most functionality.

    In our market space Harry Debes of Lawson software has loudly pronounced that SaaS will “collapse” in 2 years. Pam Lopker at QAD is pitching Faux-SaaS after years of telling people how unsafe the Internet is. Epicor, Exact and Infor have not yet acknowledged the world shifting under their feet.

    – Mark Symonds, Plex Systems, Inc.

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