Cloud Computing, SAAS – A comparison with traditional industry approaches

Here’s a small round-up of Cloud Computing, SAAS that I wrote out while comparing its advent with the traditional industry setting.
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Cloud Computing, more so than a buzzword, is here to change the way business models operate in terms of not just IT services but consequences far-reaching such as ownership and risk associated with capital itself.
SAAS – or software as a service, one of the three primary facets of emerging cloud computing platforms, specifically allows users to use features of softwares to their advantage without requiring them to have the infrastructure to host the software nor the associated cost of ownership. We take a progressive view of SAAS and its impact on the traditional business landscape in the next three sections.

i. The contrasts of business models

Traditionally, a business model has had four distinct phases attached to assets or processes involved in value creation. These are outlined in the overlapping vein diagram shown below–

Figure 1: Traditional business model phases

Quite evidently, a typical ERP implementation at a big corporate house would then involve ownership of robust hardware infrastructure, associated cost of ownership of the ERP software, the operator and scheduled maintenance and patch fixes until the next big thing emerges on the horizon – which is a matter of less than five years in the field of computer science.

With the arrival of SAAS, this total cost of ownership takes a big slash with the firms only paying as they use – rather only paying for the operating part and do away with all other phases of the traditional value creation model. The resulting diagram is now pretty simple –

Figure 2: SAAS impacted business model phases

To put things in the right perspective, the phases of value creation remain much the same – with a SAAS provider owning, maintaining and disposing the associated infrastructure & soaking in the total cost of ownership; but hundreds of other organizations can now benefit by only paying as they use – changing the entire product-based chain to a service-oriented approach. The risks and costs now lie exclusively with the SAAS provider while organizations are happy to use the services offered at an extremely tiny fraction of costs.

ii. The crossover chromosomes

The more poignant question then is how do we go about assimilating an upcoming trend like SAAS into the time-tested processes? Will it make things significantly better or merely fade into obsolescence with the ‘next-big-thing’?

It would be worthwhile here to note that SAAS is merely an extension of the cloud computing model that has been around for over two decades now. Most websites, since inception, have been hosted on servers available on rentals/subscriptions and also registered via domain registrars/resellers offering such a service. Thus, having a third-party host has been an industry trend for most concerns operating on the internet for quite some time now – the term assigned being IAAS or infrastructure as a service or PAAS (platform as a service) in some other cases.

With SAAS, we take the next logical step of bridging the gap between traditional ways of carrying out business processes and the way things have been done over the internet for years now. Although not without associated risks and privacy concerns, SAAS offers a great deal in its service-oriented way.
A generic approach to adopting SAAS for say, a firm looking to move from a traditional office applications suite, would primarily involve the following flow –

Figure 3: Steps to assimilate SAAS into traditional processes

For any organization, a pilot project or initial analysis of which fronts to approach SAAS for would be essential. Once the results from the same have been assessed, and weighed for organizational & operational fit, the specific wing or process line can migrate to a SAAS adoption strategy.

iii. The need for meiosis over mitosis

Before we conclude, it would be in the best interest to identify the best practices from the traditional setting as well as the most favourable offerings from SAAS. The competitive landscape has always been about evolving and not simply replicating from past experiences – let us take note of the same with respect to SAAS while incorporating it into the traditional organizational setting. We focus on retention factors (those that need to be carried forward from traditional settings) and adoption factors (those needing incorporation going forward).

Retention Factors –
• Risk Analysis – Traditionally, risk analysis, with respect to ascertaining which party owns how much of what and in what respects is accountable for recovery and business continuity, has been of great importance. Going forward, we find, the same would be equally important – even with increasing reliance on SAAS.

• Business Continuity Planning – BCP has been another important aspect of traditional business settings. With the infrastructural ownership lying outside organizational domain, a denial of service by SAAS provider could render processes arriving at a grinding halt. In order to ensure continuity, fallback plans assume critical importance going forward.

• Total Cost Benefit Analysis– Although SAAS appears to be a cost-effective service offering, there can be cases where an organization may possess enough skill and infrastructure to support an in-house deployment more economically than taking up SAAS. A critical evaluation of total cost benefits derived is therefore still relevant, especially in the light of a nascent SAAS industry.

Adoption Factors –
• Discarding extensive ownership – By definition, an adoption of SAAS would provide organizations the advantage of doing away with most of the costs related to owning and operating of facilities that augment software usage.

• Focussing on result-oriented approach – With a paradigm shift from product-oriented to service-oriented offering, the criticality of defining the results desired from an application/software assume high importance. Since the costs are now tied to such metrics as CPU cycles and usage time clocking, one cannot allow peripheral tasks to take lead and end up defeating the whole purpose of SAAS. It is therefore essential to identify the precise results we seek to derive from the application rather than focussing on supplementary tasks.

• Driving a service-oriented culture – With an increasing emphasis on concentrating on core competencies and value creation, most supplementing processes will continue to face outsourcing or in broader terms, a service-oriented approach – whereby, the focus would be on driving processes for executing an organization’s core tasks while getting as much of peripheral tasks executed by a service-oriented culture as possible.

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