Software as a Service (SaaS) is by far the largest, and also the fuzziest, area of the cloud computing market. Its "cloud characteristics" lie in how it obscures the IT infrastructure needed to deliver a business application, making it seem like an infinite resource always on tap…as long as you pay the bill.
Abstraction of complex systems is very beneficial and highly attractive.
Shail Khiyara, chief of marketing at Taleo,
IDC reports that SaaS was an $8 billion dollar market last year, half the entire cloud market. By 2014 it will be a $20 billion market, growing an astounding 27% each year.
But software services have another advantage; they bring a smorgasbord of evolving features for users that on-premise applications and home-grown solutions don't. SaaS providers can focus on continually improving the product, whereas enterprise IT has to prioritize "keeping the lights on."
"We had a guy who literally spent 35 hours a week in Excel," said Scott Jones, purchasing agent at The Container Store, a nationwide retailer that sells boxes. Jones said that the process of purchasing, provisioning and accounting for store items had evolved into an epic mess, albeit one that will strike a familiar note to many.
Jones said that store managers recorded and sent weekly updates in spreadsheets detailing their sales and requirements; his department did the same at their main distribution center in Texas. A lost soul was in charge of the ugly job of bringing those pieces of information together and making sure nothing was changed, misplaced or incorrect.
He turned to Coupa, a hosted procurement application that offers a portal to manage goods and supply chains. Jones said it had two major advantages. Firstly, it did a far better and safer job of tracking and displaying retail goods than Excel did (and in a graphical interface); secondly, Coupa was able to integrate a couple of his major suppliers, so he could have ordered goods delivered direct to stores and skip the distribution center.
"It looks a lot like shopping on Amazon," Jones said, except he's in charge of the inventory. Store managers can see items pictures, prices and statistics and order them online, just like Amazon.com. Coupa handles partnering with suppliers.
Jones said the price for Coupa was $65,000, equivalent to the salary of the guy who wrangled with spreadsheets before. "We've eliminated that position," he said.
Jones added that the real return on investment (ROI) was in drawing down distribution costs. "I've cut my [distribution center] operations in half," he said, and those costs would go down by 75% in the end.
SaaS is the cure for the spreadsheets blues
Another tale of spreadsheet hell comes from Jay Carter, head of project management at Missouri-based Sisters of Mercy Health System. Mercy has 18 acute-care hospitals and numerous other facilities across seven states, along with roughly 35,000 employees. Carter is of the IT world but not entirely in it; his job is to manage the ongoing technology projects across the system.
"I'm sort of half-in and half-out of the IT department," he said. He came into the job using Excel and emails and meetings, familiar but necessary parts of project management. He said Mercy had been trying to consolidate IT operations into one unit.
"All the hospitals had their own IT shops and we were kind of loosely affiliated… we had some issues with silos and people not talking to each other, and a great volume of work coming in," Carter said. He too felt hidebound by the challenges of a geographically diverse environment and creaky spreadsheets. He estimated his office lost three or four days a month to making spreadsheets alone.
I've cut my [distribution center] operations in half.
Scott Jones, purchasing agent at The Container Store, on the value of SaaS,
Carter said Mercy isn't ready to move fundamental IT operations, like patient records, into cloud services, but project management was a very good fit. He bought Daptiv, which, like Coupa, provides a portal where many users can go and enter information. Scheduling, progress reports, and budgeting are all in one place. It's both hard to mess up and easy to see where gaps are, according to Carter.
He said it fit his vision of "best practices" for project management and actually brought IT people on his side, since they received less project meetings and more accountability from management. He also said that SaaS was much easier to justify to his bosses. Mercy is a Catholic charity and a non-profit in a budget crunch.
"We went down the path of capital at first, we tried to bring something on," he said, "but we're in a capital crunch, so we changed the color of the money and went operational."
Also, Daptiv has governance and financial planning built in, so that's a good sell to management; Carter says the visibility and flexibility it offers at the fingertips is very attractive to C-level management. He said that long term, there's a new, hidden benefit to using the platform service; budget accountability for projects. Daptiv has a series of business analytics (BI) tools built in that can show what a project costs in real-time and where the money goes. Over time, this will enable Mercy to get far more accurate in projecting spending.
This is becoming an industry trend: as SaaS vendors get into tight vertical markets, they end up with masses of operational data about their customers and they have a vested interest in making their customers more efficient, said Shail Khiyara, chief of marketing for talent management SaaS firm Taleo.
"Abstraction of complex systems is very beneficial and highly attractive," he said.
Khiyara said Taleo saw precisely the same potential for SaaS users, and with a customer portfolio of almost 5,000 companies and millions of records, the firm was ready to start feeding that wealth of operational information back to its customers…and charging for it, of course.
Carl Brooks is the Technology Writer at SearchCloudComputing.com. Contact him at firstname.lastname@example.org.