The fundamentals of SaaS

Over recent weeks, I’ve had a number of informal discussions with people who have seen “SaaS” mentioned but have no idea what it means or the philosophy behind it. Therefore, this post is designed to help provide an explanation. Excerpts from(Wikipedia)

Software as a Service (SaaS) is generally associated with business software and is typically thought of as a low-cost way for businesses to obtain the same benefits of commercially licensed, internally operated software without the complexity and high initial costs.

Consumer-oriented web-native software is generally known as Web 2.0 and not as SaaS.

Many small businesses have little interest in software deployment, but do have substantial computing needs. Application areas such as Customer Relations Management (CRM), Video Conferencing, Human Resources, Accounting and Email are just a few of the initial markets showing SaaS success.

Key Point – The distinction between SaaS and earlier applications delivered over the Internet is that SaaS solutions were developed specifically to leverage web technologies such as the browser, thereby making them web-native.

Key characteristics of SaaS software are:

– Network-based access to, and management of, commercially available (i.e., not custom) software

– Activities that are managed from central locations rather than at each customer’s site, enabling customers to access
applications remotely via the Web

– SaaS applications are generally priced on a per-user basis, sometimes with a relatively small minimum number of users, and often with additional fees for extra bandwidth and storage. SaaS revenue streams to the vendor are therefore lower initially than traditional software license fees, but are also recurring, and therefore viewed as more predictable, much like maintenance fees for licensed software.

Drivers for SaaS adoption

Everyone has a computer: Most information workers have access to a computer and are familiar with conventions from mouse usage to web interfaces. As a result, the learning curve for new, external applications is lower and less hand-holding by internal IT is needed.

Computing itself is a commodity: In the past, corporate mainframes were jealously guarded as strategic advantages. More recently, the applications were viewed as strategic. Today, people know it’s the business processes and the data itself — customer records, workflows, and pricing information—that matters. Computing and application licenses are cost centers, and as such, they’re suitable for cost reduction and outsourcing. The adoption of SaaS could also drive Internet-scale to become a commodity.

Applications are standardised: With some notable, industry-specific exceptions, most people spend most of their time using standardised applications. An expense reporting page, an applicant screening tool, a spreadsheet, or an e-mail system are all sufficiently ubiquitous and well understood that most users can switch from one system to another easily. This is evident from the number of web-based calendaring, spreadsheet, and e-mail systems that have emerged in recent years.

Web systems are reliable enough: Despite sporadic outages and slow-downs, most people are willing to use the public Internet, the Hypertext Transfer Protocol and the TCP/IP stack to deliver business functions to end users.

Security is sufficiently well trusted and transparent: With the broad adoption of SSL organizations have a way of reaching their applications without the complexity and burden of end-user configurations or VPNs.

Wide Area Network’s bandwidth has grown drastically following the Moore’s Law (more than 100% increase each 24 months) and is about to reach slow local networks bandwidths. Added to network quality of service improvement this has driven people and companies to trustfully access remote locations and applications with low latencies and acceptable speeds.

Most Small Businesses will be virtual by 2020

Outsourced business services and hosted applications will be the norm for small and mid-sized businesses (SMBs) by the year 2020, according to a report by the Social Issues Research Centre.

While 2020’s always-on Generation “C” – C for Content, Connectivity, Creativity, Collaboration and/or Communication, says SIRC – will be more able to communicate with a wider cross-section of people, virtual businesses will be outsourcing the majority of business functions, the report claims.

The study (here) predicts that purchased and locally installed software will be replaced by Software as a Service (SaaS), accessed over the internet.

If I was an IT director, I’d want my staff focused on delivering value to the business, not patching servers,” he noted. “For example, with the hosting provider now doing security, the security team’s job is as custodians, not fire-fighters.”

Personally, I’m excited by SaaS. Today’s web innovators and entrepreneurs already get this – Outsource as much as possible, use the freeness of Web 2.0 consumer apps. However, once their businesses experience significant growth, the free consumer based Web 2.0 stuff will no longer meet their needs. This is where SaaS comes in.

Serious Business – Web 2.0 Goes Corporate

A report from the Economist Intelligence Unit titled “Serious Business: Web 2.0 Goes Corporate” (Link to paper below).

The report is based on a poll of 406 global senior executives who were asked questions about the impact of Web 2.0 on their businesses.

Some interesting key conclusions:

– 31% of companies think that use of the web as a platform for sharing and collaboration will affect all parts of their business
– Almost four-fifths of executives surveyed see the sharing and collaboration aspects of Web 2.0 as an opportunity to increase their company’s revenue and/or margins
– 21% of companies also expect Web 2.0 tools to lower public relations, advertising and marketing costs, while 17% expect to reduce the costs of product and service innovation

An interesting paper and well worth a read.

Download the paper

Seth, Our Small Business Saviour

Web Smoothie, Seth Godin, has written a nice post on his blog regarding how small businesses (doctors, plumbers, etc.) can set up a presence on the web, for just $60 and a few hours of investment.

It is important to remember that Squidoo is his own product, so there is a little bit of shamless plugging going on. However, the advice is very useful. His article follows below.

Memo to the very small

What should my local chiropractor do? Or the acupuncturist? Or the pet store? What about that small church or mosque?

The web has changed the game for a lot of organizations, but for the local business, it’s more of a threat and a quandary than an asset. My doctor went to a seminar yesterday ($100+) where the ‘expert’ was busy selling her on buying a domain name, hiring a designer, using web development software, understanding site maps and navigation and keywords and metatags and servers…

These are businesses that have trouble dealing with the Yellow Pages. Too much trouble, too much time, way too expensive. So, should local micro-businesses just ignore the web? Or should they become experts in the art of building and maintaining a website?

We’re talking about people who don’t like to tweak. About local businesses that are struggling to be found by people a block or a mile or five miles away. Entrepreneurs who can’t be bothered to understand typography or HTML. Why does my dog’s vet have such a lame website? Why do basement waterproofing sites sit moribund? Do they all have to become experts and spend the money–or sit it out and lose out?

I think there’s a third way, one that gets them just about everything they need, takes an hour or two a month and costs about $60 a year. Here goes:

Step one: head on over to Typepad and sign up for their cheapest service. It’s about $5 a month. Pick a ‘quiet’ and professional blog layout. Your first post should include the name of your business, your address, your specialty and your hours and phone number. Click the button that says “Feature this post.” From now on, this post will be at the top of your blog (which is really your ‘website’, so first time visitors
will see it front and center. When you go on vacation or stock a new line of products or have a story to tell, just blog it.

The beauty of this first step is that for $5 you have a web server, a professional layout, no worries about design, a site you can edit yourself in no time and no hassles with weird domain names.

Next step: build a Squidoo lens about your business. List your hours and stuff. Then insert a google map of where you’re located. Put in a list of books if you think your potential (or current) customers will benefit from an understanding of what you do. Insert a guestbook so your favorite customers can give you testimonials. Put in an RSS feed from your blog, so every time you update it, it will show up here, too. If this is too tricky, have your smart next-door-neighbor do it for you. You won’t have to do it again.

Next step: Get a sign featuring your name and phone number. Something 1 foot by 2 foot or so. Printed on cardboard. Now, take your digital camera and start taking pictures. Pictures of your offices. Of your staff. Of your satisfied customers. Each picture should include the sign! Now, go post those pictures on Flickr. (And then put the pictures into a set and pull that set into your Squidoo lens, and post the best pictures on your blog too).

Last step: Ask your best customers to build Squidoo lenses about your business. Ask the ones who blog to mention you in their blogs. Ask the happiest of all to pose for a picture holding your sign, or to give you a testimonial for your blog.

So, you’ve probably invested a few hours by now. You’ve spent a few dollars, read a book or two on blogging. But you haven’t become an expert, not by a longshot, in any technologies. You haven’t tweaked a font or focused on a sitemap. Instead, you’ve been running your dry cleaner or writing your sermons.

Even better, no one is judging you on whether or not you’re an expert at building websites. No one is choosing not to do business with you because your website looks like your cat designed it. And you’re not spending big money tweaking tweaking tweaking just to get the last ounce of blood out of your site.

A month later, if someone types, migraine acupuncture des moines, into Google, they ought to find you. Or pet store 10706. The beauty of your situation is this: if only 5 or 10 new people a week find you via this ring of links and google searches, you’re going to have a shot at doubling your customer base within a year. For $60.

Do bloggers need a code of conduct?

Do bloggers need guidelines about blogging conduct and civil behaviour? Tim O’Reilly is drafting a Blogger Code of Conduct, which is shaping up by the collaborative effort of bloggers on a wiki committed to the “Civility Enforced” standards.

O’Reilly has posted the first draft, which is also posted on the Blogging Wikia, where you can join in and edit the wiki and encourage others too. The final version will be posted on, along with the html to display the badge and link to the code. It is based on the Blogher community guidelines, that embrace the spirit of civil disagreement and declines to publish unacceptable content.

Here is what the blogger conduct code says now –

1. We take responsibility for our own words and reserve the right to restrict comments on our blog that do not conform to basic civility standards.
2. We won’t say anything online that we wouldn’t say in person.
3. If tensions escalate, we will connect privately before we respond publicly.
4. When we believe someone is unfairly attacking another, we take action.
5. We do not allow anonymous comments.
6. We ignore the trolls.
7. We encourage blog hosts to enforce more vigorously their terms of service.

You may not agree on many of these points. So they have also decided on a “anything goes” badge for sites that want to warn possible commenters that they are entering a free-for-all zone.

Bluffer’s Guide to Web 2.0?

News from South By South West SXSW

“How to Bluff your way in Web 2.0” by Andy Budd and Jeremy Keith. The focus of the session was to teach you how to appear like you are a Web 2.0 master. Here are some notes and pics

Slides from the presentation

Video: What is Web 2.0?

Opening remarks:

– Web 2.0 is a fantasic area to bluff since no one knows what it means anyway.
– We will have you talking like Jason Fried in a few minutes.
– We will have you create a company that Yahoo will buy.

Four aspects of Web 2.0
– supports social interaction
– encourages user participation
– enhanced user experience
– and open data.

Must use handy buzzwords

– long-tail
– tipping point
– leverage
– Ajax
– Tagging

Popular Web 2.0 apps (some): flickr, technorati, plazes, Yelp, Meebo, twitter. There is a great Twitter drinking game.

Misc items:

– Shows Carbonmade as a perfect Web 2.0 app – loads of colors and gradients and illustrated icons, lots of use of transparency and rounded corners.
– Everything is wet in web 2.0
– 3-D logos are where it’s at
– Throw in your favorite typeface when you are out at a party
– With Web 2.0 it’s all about giving A-list geeks toys. You should have microformats, rss, APIs.
– Two kinds of APIs, simple kind is called REST, the tougher alternative is SOAP
– Two APIs = mashup
– Most common mashup uses maps = most common one is the, shows overplot and Gawker stalker
– Must have Ajax’y goodness – use moo.fx for quick tutorials

To build a good Web 2.0 app you need:

– Drop the e in any er words
– You could use .us or .tv
– Sub domains rock!
– Add “get” in front

You need a cool logo
Then setup a mysterious homepage and a blog to talk about everything around the app
Then you think of a concept

– Think of an old idea, add tagging and social network = flickr
– Take a site like Digg or YouTube and make another one
– Put two apps together: Digg plus Flickr = Dickr
– Build it on the cheap
– Hire a 15yr old cheap kid – pay in pizza
– Spend all money on the design
– Demo – pay for a demo at a large conference
– Wait for Yahoo or Google to buy you – use the bluffing tactics in the parties

Social side of Web 2.0

– Starts with the wisdom of crowds book
– The greater internet f***wad theory = normal person + anonymity + audience = f***wad
– You want community – like a lunatic asylum
– Loves Milk & Two
– Must have ratings for the social network
– Must have tagging
– Must have bookkeeping
– Must have comments

‘You Who?’ – Trust in Web 2.0

At the end of 2006, Time magazine decided that its person of the year was ‘You’. Yes, You. All the You’s that create and rate content on heavy hitting sites such as MySpace, Wikipedia and YouTube. The reason behind this is that a shift has happened where content isn’t generated or rated by experts anymore. Instead it’s by everyday folk like you.

This is further back up by a recent Revolution survey showed that within the 16-44 age group:

48% have been to a blog site
26% have created their own blog
74% have rated or reviewed products, content or services
You and user generated content
User generated content is one of the key foundations of Web 2.0. (For those of you that haven’t heard the hype, Web 2.0 is a term created to define the second phase of the Internet following the dot com crash.) One of the key foundations of Web 2.0 is new functionality that changes content within a page based on what a user does. But let’s get back to You – after all, this article is all about You!

First of all who are You and more importantly how can I trust You? In fact the same question applies to me from your perspective. Who am I and more importantly how do you know that anything I write is worth the HTML it’s coded in?

Currently there’s an avalanche of new content being written on the web. The problem is that it becomes very hard to work out whether the source is accurate and whether the people looking at it know anything at all. So is there anything from web 1.0 that can help us?

Trust in Web 1.0
In the old days (read the 1990’s) trust was mostly to do with ecommerce. How could you trust a website enough to either give your personal details or credit card numbers to buy something? A whole set of standards was subsequently developed to ensure users trusted your website.

Some of the key points were to:

Prove there’s a real organisation behind your site (e.g. contact details, about us section)
Explain what you’re going to do with sensitive information
Provide third party evidence of your credibility (e.g. testimonials)
Have a professional design
Regularly update the site so it looks alive and fresh
Avoid all errors of any kind
But are these guidelines still relevant? Do we need any other guidelines?

The problem with user generated content
In Web 2.0 the issue of trust has moved away from the people that run the site and is now starting to focus more on the people that populate it. People are engaging with each other at a one to one level in so many ways, such as:

Business (e.g. eBay)
Pleasure (e.g. MySpace, YouTube, Secondlife)
Information (e.g. Wikipedia, Digg)
Classifieds (e.g. Craigslist, Gumtree)
The issue of ‘Can I trust this site?’ still exists, but the new issue, ‘Can I trust the people on it?’ is now equally important. The main difference now is that content is being generated by anyone and then being rated by anyone. How can you be sure that what other users write is true?

For example, there’s been some controversy about the reliability of articles on Wikipedia, the online encyclopaedia. Even more controversy occurred when a guy solicited dates from other men pretending to be a woman on the personals section of Craigslist. He then published all their personal details on the web!

Yet another example is online restaurant guides. How can you trust someone’s review when you don’t know their tastes? Is the reviewer someone who goes out solely for tasty food or someone who goes out for the atmosphere/occasion?

So, how do we resolve these issues?

Trust 2.0: Ensuring trust in Web 2.0
To ensure site visitors continue to trust your site, you need to ensure users are who they say they are. Ways you can achieve this when users are registering include:

E-mail an activation link
Send a text message with an activation code
Send the activation code to a home or business address
You can also:

Only allow site visitors access to content/functionality if recommended by a registered user (LinkedIn, the online career network, does this)
Show people you know their IP address when they’re logged in
Collect users’ credit card details
If site visitors know you’ve validated the credibility of users creating content, they’re far more likely to trust that content.

Other ways of increasing trust of user generated content, and enhance the credibility of users, include:

Make users’ profiles publicly available to everyone in the community (the profile can include tastes, expertise or experience, for example)
Allow users to rate a person for their content, services or products (eBay does this)
Set up a reference system to highlight respected contributors (Amazon now gives out ‘badges’ to reviewers, where they get tagged with ‘real name’ (if the site can verify that it’s their real name) or ‘top 500 reviewer’ (if the site feels the person has given good reviews))
Have real time face-to-face interaction (e.g. Skype on eBay, Winebit)
You won’t of course need (or want) to implement all of these techniques – think about what your site is trying to achieve and the needs of your audience. You should then be able to come up with an appropriate trust strategy.

Guidelines for ensuring trust borne out of Web 1.0 still remain very valid in today’s Internet. After all, web users need to be able to trust your website and the content that you’ve put on there. They also need to trust content generated by other users – follow some of the advice in this article to ensure this!

This article was orginally written by Mark Halabi.

Results on the use of Web 2.0 in business emerge

From Dion Hinchcliffe’s Blog

The last few weeks have seen a series of interesting new reports, studies, and papers on the past, present, and future of Web 2.0 concepts and applications as applied to businesses. Most notable for many industry watchers have been fairly rigorous new works by McKinsey & Company as well as Forrester, whom have each released the results of broad surveys of executives in various industries. The focus of both surveys was to capture a picture of the interests, activities, motivators for Web 2.0 adoption of several thousand C-level executives in medium to large companies.

While both the McKinsey study and Forrester report have summaries online — and you can read a detailed breakdown of the fascinating adoption numbers in Nick Carr’s excellent roll-up of many of the key numbers in the reports — what stands out clearly from the state of Web 2.0 in business last year is the almost surprisingly high levels interest in some of the more advanced, and powerful, concepts in the Web 2.0 practice set.

Gartner, for its part, had its own take on things last year with their widely covered hype cycle report on Web 2.0, indicating the things like collective intelligence (ostensibly the core principle of Web 2.0) would be a long term, transformational business strategy that they felt at the time would take at least 5 to 10 years for broad industry uptake. However, the report from McKinsey intriguing suggests something much different may be taking place.

The numbers McKinsey provides from actual business leaders seems to indicate that broad, active interest in collective intelligence is rapidly forming in the offices of many company’s CIOs, CTOs, and other executives. McKinsey cites that fully 48% of the nearly 3,000 leading executives surveyed are actively investing in collective intelligence approaches. What makes this interesting is that this number is a good bit more than executives are currently reporting that they are investing in other well known Web 2.0 approaches including social networking, RSS, podcasting, and even wikis and blogs, which come in about 1/3 lower in overall interest. In fact, out of all the Web 2.0 trends surveyed, only Web services has a bigger footprint than collective intelligence in terms of current investment. This strongly suggests some kind of sea change in business thinking since last year.

This is a fascinating outcome since at a grassroots level in the enterprise, and certainly out on the Web, the rise of wikis and in particular blogs, are a much more common phenomenon than apps that focus on collective intelligence, the latter which would manifest itself as any software which aggregates the combined user created input of employees and/or customers, partners, and suppliers en masse to create better knowledge and decisions. And although both wikis and blogs both accumulate collective intelligence (albeit relatively unstructured) via user participation — open group editing of content in the case of wikis, and conversations via comments and trackbacks in blogs — it’s probably the more formal, more structured, and centrally driven collective intelligence model that respondents were likely referring to since blogs and wikis were already represented in the survey.

Collective intelligence leads blogs and wikis in terms of business interest?

Taking a look at these results in general reminds us that many of the outcomes that Web 2.0 technologies enable — the free flow of information, emergent structure, higher levels of social activity, and decentralized do-it-yourself peer production — are sometimes subversive and even somewhat disruptive to traditional corporate structures and management processes. Because I suspect that a survey of these same items taken of the general user community — and not management — would find a different set of answers, and one that would likely emphasize the Web 2.0 platforms that are under more end user control. By this I mean the aforementioned blogs and wikis, but probably social networking applications as well.

Why is this an important distinction? This question takes us to the actual changes that the consumer Web appears to be imposing increasingly on our organization from the bottom up. The diagram I have above shows which aspects of Web 2.0 tools and technologies are primarily created and controlled with relative democratization by users (which is why they’re called peers in this case), and which ones are primarily enabled, in fact are made possible at all, by centralized IT. Web services, APIs, and mashups are classic examples of centrally created things which need governance and management, not to mention good design and architecture, something that is still just not very DIY, at least yet. On the other hand, blogs and wikis are simple, elemental Web 2.0 platforms for self-expression and participation and are as simple to create by anyone — along with the latest best practices — as spending 30 seconds in the setup pages of your favorite enterprise blog or wiki hosting site.

However, as Dion has seen with things like IBM’s promising QEDWiki platform that allows wikis to be the front end of an SOA, the world of end-user powered Web 2.0 platforms like blogs/wikis and the world of enterprise IT infrastructure and SOA — the latter which organizations world-wide have been pouring billions and billions into the last few years — are not separate worlds at all. In fact, it’s increasingly apparent that the Web 2.0 technologies which emphasize the most user control are also the very tools that can unleash the investments the business world has been making in information technology for almost a decade, particularly around interoperability and reuse based on the open Web services model. The best way to exploit and leverage our businesses is increasingly likely to use the combined power, reach, and ease-of-use of platforms such as blogs and wikis to tap into and make use of our vast, and all-too-often underutilized islands of data and IT infrastructure.

As Dion discusses in an earlier post, effective Web 2.0 in the enterprise, whether that’s basic Enterprise 2.0 or a much broader and expansive view of Web 2.0 design patterns and business models which Dion calls Product Development 2.0 for lack of a better term, actually requires the active support of both the users on the ground as well as the top levels of an organization to really take off. Business are structured much differently that the consumer Web and major impediments to use of Web 2.0 production and consumption scenarios exist. This include lack of good enterprise search, mountains of closed legacy systems, the challenge of securing highly open, deeply integrated applications, and conflicting data models (XML, relational data, rich media, and more.) These are all challenges to the ultimate success of Web 2.0 in the enterprise, even to the point that some organizations are increasingly at risk of IT users doing so much themselves that the IT department can begin to lose control. That is, unless they jump into the trenches with their users and help guide the application of Web 2.0 tools without significantly hindering forward progress.

More and more Web 2.0 tools and techniques studies become available

But the true story of what is happening is still very much emerging. Fresh results from organizations like Edelman, Dartmouth, and many others have all been published recently.. To get a sense of the full body of knowledge on the use of Web 2.0 platforms in business (as well as the curiousity driving it), Bill Ives recently did an excellent job summarizing many of the Web 2.0 related studies in the last year alone.

Note that with lack of well-known success stories or famous industry examples, documents such as these become the meat upon which executive decision makers feast to drive and justify their decisions on new technologies and innovation in general, sometimes even betting their careers. And while we don’t have enough information yet to satisfy many that are on the fence, it’s clear that the conventional wisdom is beginning to shift from the wait-and-see of 2006 to the beginning of the adoption cycle in earnest this year.

The list of studies above provide useful information for readers here but also as an example that further shows the contrast between studies like McKinsey’s and the trends in the general public uptake of social media platforms like blogs and wikis. In particular, I’m referring to the wealth of studies around the rise of social media in contrast with general, corporate collective intelligence projects and initiatives, which doesn’t seem to have anywhere near the same grassroots interest. Finally and somewhat surprisingly, being another example of the wide variety we’re finding in early results, even mashups — a very exciting DIY phenomenon on the Web — are not particularly well represented (10-20% investment/interest) both in terms of studies of top down activity by business executives or by the studies coming out. It is better forms of collaboration, knowledge retention, organizational intelligence, and open, interoperable IT systems that currently seem to rule the discussion of Web 2.0 for business at present.

Does McKinsey’s study identify a major new Web 2.0 trend in business? And will it matter if Web 2.0 is going to tend to flourish from the bottom up in many organizations?