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Why SaaS and ISVs Clash

What ISVs need to remember as they plan their SaaS strategies

Interest in cloud-based applications continues apace, but hosting can be a complicated endeavor for ISVs.

The enduring popularity of Software-as-a-service (SaaS) isn't accidental. Whether you're a technology reseller or a traditional enterprise, there's a lot to like about the use of a service model for software delivery, including low monthly cost, fast time-to-market and few deployment hiccups. But SaaS does not reward all organizations equally.

Unfortunately for ISVs, who fall on the 'delivery' side of the service-delivery relationship, the benefits of SaaS are tempered by risks. The nature of being an ISV complicates many decisions about technology and some of these will be amplified when ISVs move toward SaaS delivery. In order to make a smooth transition, ISVs must develop a strategy in full recognition of these unique challenges.

ISVs Are Different
Business has never been a one-size-fits-all proposition. The software industry is no exception. Simply put, ISVs have challenges that other companies don't. Here's a few of the ways in which ISVs are different:

  1. They must anticipate what customers will want and try to accommodate as many of these options as possible. Narrow solutions yield limited revenue.
  2. They must be prepared to accommodate special changes and customization, especially from high-value accounts.
  3. Because solutions frequently transact data from many different customers (and those customers are often close competitors), ISVs must pay extra heed to security to vouchsafe data seclusion.
  4. They must be sure that the technologies they use will be relevant and supportable indefinitely.

Enterprises, which can concentrate on consuming technology rather than provisioning it, can usually absorb the consequences of the occasional short-sighted decision without too much pain. Rewriting an ill-conceived software application is something they can do behind the scenes, while treading water with the sub-optimal system in the meantime. They can even decide to outsource that function on a temporary basis.

ISVs, on the other hand, can rarely afford to back pedal their technology choices. A full rewrite of any customer-facing software system means taking their foot off the gas, the impact of which goes straight to the bottom line. Worse, there is little way to obscure such mistakes from the notice of customers. When ISVs guess wrong about technology, both short-term revenue and long-term reputation are equally at risk. And not everyone will get the opportunity to recoup those losses.

Into the Cloud
The unique challenges faced by ISVs are not new and most ISV executives are well aware of them. But as market pressure and customer demand for SaaS-based applications increase, it can be easy to lose sight of the importance of planning a strategy with these challenges in mind.

Most ISVs are struggling to get to market quickly so they can keep pace with early competitors. With time short, architectural decision planning is curtailed. And the desire to avoid taking on unfamiliar technical competencies, such as server management, become important decision criteria. As a result, the driving importance of customer concerns, such as functionality and customization, as well as control and flexibility over central business assets is being compromised.

Finally, there are new entanglements that arise with hosting, many of which directly conflict with the pressure on ISVs to make broad, inclusive architectural choices. These include:

  • Physical location of data: Many customers will be subject to regulatory or policy requirements related to the physical storage of data. For example, they may require storage only within national boundaries or to be able to identify the exact server machines where data is stored. For the organizations that have them, these requirements are deal-breakers.
  • Security of data in shared databases: Traditional installed applications have naturally isolated data repositories, and thus do not pose the same risk that data could be leaked outside of the organization. Shared storage architectures are simply too risky for some customers.
  • Limitations on customization: Customers will not cease to request customizations simply because their application has moved to the cloud. Will your new infrastructure support your need to customize applications and databases on a customer-by-customer basis? If you don't do it, a competitor will.
  • Supplier vulnerability: ISVs choose suppliers and technologies carefully to minimize their risk exposure to deprecation or loss of support. It may be tempting to choose a cloud infrastructure provider such as Salesforce Force.com or Microsoft Azure in order to keep from absorbing expensive new burdens related to data center maintenance, but these platforms are outside of your control. Hinging your revenue on the indefinite cooperation and success of a third party may be unnecessarily reckless.

Caution and Control
There is much to love about being in the business of helping companies solve their technology problems but, sadly, ISVs have precious little freedom to experiment. They must exercise extraordinary caution when changing tactics. The move toward SaaS-based application delivery is without question one of those times. Those that move ahead on a SaaS initiative without being mindful of the challenges will put key customers and future revenue at risk.

As you move applications to the cloud, give yourself ample time now to choose the architectures, technologies and suppliers that will help you maintain both flexibility and consummate control of your business.

More Stories By Eric Farrar

Eric Farrar is a senior product manager at Sybase, an SAP company, working on the SQL Anywhere embedded database. He is focused on bringing the power of embedded database technology into the new world of the web, and cloud computing environments.

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