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CogHead's CTO sees Service Consumption as the Next Evolution for SaaS

by Jean-Jacques Dubray on Feb 19, 2008 |

In what could remain one of the most untimely visionary statement because of the S3 Outage last week, Greg Olsen sees a major evolution taking place in the barely maturing SaaS market.

Olsen who has lead the transition of CogHead's infrastructure to Amazon's S3 and EC2 notes that:

Services that are built largely from other services are a reality, and offer many clear advantages. [For instance] ... by leveraging service options like Amazon’s EC2 and S3, a very small company can build a simple, narrowly focused service and can cost-effectively sell it to a mass audience.

The types of services that could be used in the creation of new services span the spectrum, from base infrastructure services to complementary high-level application services that can be composed or mashed up.

Example services include: compute and storage services; DB and message-based queuing services; identity management services; log analysis and analytic services; monitoring and health management services, payment processing services; e-commerce services like storefronts or catalogs; mapping services; advertisement services; in addition to the more well-known business application services like CRM and accounting.

Zoli Erdos is quick to point out that:

this is the first time Amazon S3 went down, and it’s already back up. Salesforce.com had its fair share of outages, so did other SaaS providers, and so did just about any in-house systems companies run their own installed software on.

But not everybody agrees with Greg's point, Larry Price argues:

EC2 and S3 are amazing and cool and Werner Vogels is a rock star for having lead the team that created them; but until there is a common portability standard and multiple suppliers, the market for virtual infrastructure services is not mature.

Yet, EMC has just announced that it too, is entering the Storage as a Service market with some rumors of a partnership with SAP. IBM will also be entering the market momentarily with Blue Cloud.

Greg goes further in his analysis and speaks about the impact the emergence of this new class of services on traditional SaaS vendors:

A new software service economy is rapidly unfolding and is causing disruption in the software industry.

The move to SaaS applications built on SaaS is a much more profound shift than the move from on-premise applications to SaaS applications.

Ironically, some of the first victims of this new economy may be some pioneers of the software-as-a-service movement.

Eric Norlin adds:

I believe that Greg is right on the money with the idea that the very process of building a "software company" is being altered by the service-based architectures being provided by "saas infrastructure enablers."

Alex is not sure the SaaS market is ready for an evolution just yet and comments:

As a buyer of these services you have to measure ROI. PERIOD!!!! SaaS is about:
1) ROI
2) Selling to the CFO not the IT guy/gal
3) Scalability
4) Having 24×7 Presence
5) On-demand features add on functionality (i.e. CRM + IP Telephony)
6) Peace of mind…. well maybe this last point is a stretch:)

This sentiment is echoed by Suuad:

the real value is that the, until now, unserved mid-market can now access these sophisticated tools within their budgets. With a SaaS model there is typically no need for IT involvement, there is no deployment and no need for a professional services team to be onsite for 3 months.

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