25 Feb SaaS: Amid growth of on-demand software, security and integration concerns remain
Milwaukee, Wis. – While the software-as-a-service model is enabling companies to capitalize on their expertise and realize tremendous efficiencies, the industry still battles concerns about data security and integration. But insiders agree that the model, also called on-demand software, is the future of application development.
“Software as a service will likely be the future as long as there will be innovation from developers and as developers let clients more fully innovate with the software,” said Rick Davidson, Global CIO for Manpower, Inc. in Milwaukee.
But for large global corporations such as Manpower, on-demand software is not necessarily the most cost-effective way to engage IT, Davidson said.
“For small and medium-sized businesses, the financial factor is the key draw for software as a service for technology deployment and hosting,” he said. “But the challenge is when you get to large corporations; the savings might not be there.”
Manpower looked at on-demand software for customer relationship management, but determined the pricing model at the time was not attractive for the thousands of users it would have to subscribe for.
But perhaps a bigger issue was that Manpower did not see on-demand software as the most effective solution for its business process. Davidson said the on-demand industry needs to allow greater customization – an issue of particular importance to the staffing industry, which tracks its clients and sales in a manner significantly different from other industries.
That difference presents key integration challenges, said Paul Stillmank, vice president for Global Solutions at Manpower.
“Small and medium-size businesses are driving the sales funnel and working to get deals done,” Stillmank said. “Our sales process might not be that different from those companies, but how we use the information involved in that process is very different, and that can present an integration challenge with on-demand software.”
“For a small or medium-size company, it probably makes sense,” Davidson added. “But bigger corporations like ours generally want to configure the software beyond what is currently possible. When I look at software as a service, you might be able to get lower costs, but you give up some customization abilities.”
“We know they are working to solve those issues,” Stillmank said of the software-as-a-service industry, adding that the happy medium will be found where large corporations can more fully benefit from the economies of scale of on-demand software while enjoying great configuration abilities.
There are large users of enterprise on-demand software. The insurance company Aon, for example, has 7,000 people using Salesforce.com, an industry leader that counts many other large corporations among its users.
On-demand software is making the advances that companies say are necessary for them to fully exploit it, said Geoff Bastow, CEO of Thin Air Software, a Milwaukee company that develops enterprise software-as-a-service products for companies throughout the U.S.
For example, Salesforce.com offers its Force.com platform for customizing and integrating its product and for developing new products on the Salesforce.com foundation. “We’re already seeing fascinating applications in spaces [where] we have no intention of going,” said Peter Coffee, director of platform research at Salesforce.com.
One example is an international company that uses the Salesforce.com foundation for a web-based program that monitors and troubleshoots movie theater sound and picture systems.
“Integration can be a challenge, but it can be done,” said Bastow. “We do it all the time; we’re building products that are integrating with a lot of legacy data. If you want to be in this business, you’d better be able to do that.”
Thin Air Software has expanded its software engineering team to meet the demand for development of web-based applications, said Kelley Starr, company president.
“Part of what we are seeing is a huge demand to get applications up and running under the software-as-a-service model,” Starr said. “Businesses are very comfortable with web-based delivery of services through a subscription model that reduces the cost of doing business. Many of these are niche solutions that can’t be economically deployed without a software-as-a-service strategy.”
The ability to get software-as-a-service customers up and running quickly is a “tremendous advantage” of on-demand software, Bastow added.
“Additionally, speed to market should be improved and the time between releases can be dramatically reduced,” he said.
Those are both attractive to on-demand software providers who want to quickly capitalize on an idea and respond to market demands in a timely manner.
“I can be much more aggressive in a release cycle, partly because I am working on a known, controllable target development platform,” Bastow said. “Because it’s a single platform, there is a smaller footprint of what has to be produced.”
The single platform issue carries through to deployment, “so what I have to build into it is also improved,” he added. “I can take more advantage of the features of that platform.”
Bastow also sees a big support advantage to on-demand software. “If I have a software-as-a-service product, the platform is operating in my organization, so I can actually see what’s going on with the software during support situations,” he said.
That’s a much more effective and efficient way to handle support than telephone conversations, he added.
All parties agree that anyone looking at a software-as-a-service product needs to engage thorough due diligence and look deeply beyond product sales pitches. Client referrals and size of the installation base are important to look at, Bastow said, but more important are questions about security, redundancy, and data protection.
Security becomes especially important for corporations that are affected by regulations such as the Sarbanes-Oxley Act (SOX) or the Health Insurance Portability and Accountability Act (HIPAA). Companies subject to SOX should have their software-as-a-service vendors provide a SAS 70 Audit Report, issued by the American Institute of Certified Public Accountants and attesting to the quality of internal controls.
Bastow maintains that security can actually be better with software as a service.
Coffee says security remains the top concern of companies looking to engage software as a service, calling it “the most counter-productive misconception.”
“The No. 1 concern is security and the perception that there is some major increase in risk from putting sensitive data in the hands of an outside provider,” Coffee said.
But in reality, he added, most data loss occurs internally when an authorized person abuses his privileges.
“A misconfigured system or a lost laptop presents a bigger risk to data security,” Coffee said. “If you lose a laptop, you lose all the data it contains. But if you’re using software as a service, you’re only downloading what you need at the moment.”
The other big concern Coffee regularly faces regards down time. He counters that worry by noting that these days, so much more than on-demand software relies on Internet connectivity.
“Today, if your applications that come as a service are down, your business is pretty much down too,” Coffee said. “Ten years ago, if your ISP connection went down, you were still in business. Today, so much more of a business operation relies on the Internet that a loss of connection will have widespread impact.”
He also notes that business is all about taking risks – in measured fashion. “If you want zero risk in your business, you’ll have zero business,” he said.
Giving value its props
For businesses, the value proposition of software as a service can be financially attractive.
“Without software as a service and the economies of scale it creates, these kinds of applications would otherwise be unavailable to small and medium-sized businesses,” Bastow said. “These are world-class, enterprise-type platforms that most businesses simply could not afford on their own. Additionally, somebody else is taking the risk of development – risk they would not be able to handle.”
Davidson agreed that software as a service “is probably the most efficient model” for applications, while Coffee added that “all enterprise providers now are saying that on-demand is important and where most of the future growth is.”
Ultimately the issue should be based on business needs, Davidson said.
“The idea is not to get so stuck on where the solution is coming from,” he said. “The focus really should be on the business need.”