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Friday, October 6, 2006

Its not VoIP, AJAX, Web 2.0 - its SAAS (Software as a Service)


The topic itself is not that new. Anyone who is no one has in the past posted at least some sort of ramble regarding how either AJAX is a cure for cancer, or, how it has been tried in the past, and has and will miserably fail. Amidst all the hooplah and badly thought out articles, I read one here, which I believe the author has put thought into. I liked it.

In the past year, I’ve been spending a lot of time on how to effectively merge the ‘web 2.0’ world (to re-use a much used term) into the world I think I know relatively well, the VoIP world.

Here is the problem: most of the people busy adding “2.0”, “3.0” etc. to marketing terms don’t spend too much time putting their arms around what the model of entry/execution/exit really is and focus only on the technologies.

I remember a conversation with a friend a few months ago, where in a moment of excitement, he exclaimed “The client is interested in new technologies such as AJAX, google maps, presence, IM, RSS, voip and presence. Can we slap together something that shows a group of people located on google maps, including presence tags, throwing out special RSS feeds, talking and chatting – and all of this happening simultaneously ?”

This cartoon, from Randy Glasbergen, depicts the situation exactly.


Copyright notice: From "Today's Cartoon by Randy Glasbergen", posted with special permission. For many more cartoons, please visit Randy's site @ www.glasbergen.com

News flash – slapping individually successful services together is more often a recipe for immense failure rather than fabulous vision. And that is exactly where this entire “Web 2.0” community is headed. Very few actually ask some key questions:

  • How is it different from what happens today ?

  • Why would people use it ?

  • How do I beat existing competition ?

  • How do I keep ahead of future competition ?

  • What is my revenue model ?

  • Who is my target market ?

A colleague of mine recently commented, "You know, this entire web 2.0 evolution, if done correctly, could have the same impact as the evolution from books to movies"

So back to what I am doing these days: I’ve been working on interesting models of how all these diverse techologies could be applied to the deployed VoIP world today. I certainly cannot talk about what it is, since its company confidential, but the reason I bring it up is that I’ve validated it with several key players in the media and telecom industry and they all agree with this vision. And this makes me believe that there is a future in this space. But only if treated wholistically. Looking at it from the AJAX level is like trying to figure out if your car is a keeper by looking at just the quality of its air-conditioning. AJAX is not the engine here. Its a useful presentation layer. The engine is the business model - that ties everything together. For example, a good buddy of mine had a useful insight when talking about the relevance of AJAX. "How does it matter to you if AJAX succeeds or not? Tomorrow, flash could get more agressive in technology and marketing. So why tie your business model to to a presentatation layer technlology?". How true. When you think about the end-end model, AJAX becomes less relevant.

Understanding the model – SAAS (Software as a Service)
First things first – AJAX is a technology (well, a collection of, really). It is NOT a business model. Web 2.0 is a marketing mechanism, not a business model. The business model which will govern whether AJAX and related technologies will succeed is called ‘Software As A Service’ (SAAS)

Yes, SAAS has been around for a long time. It is somewhat similar to the ASP model in terms of ‘being hosted’, but there are significant differences. Yes, it’s the same four lettered acronym which Google is really depending on, eventually. It’s the same four lettered acronym which Ray Ozzie is trying to implement in Microsoft. It’s the same four lettered acronym that is behind Amazon’s EC2 and S3 initiatives. It is the same four lettered acronym that Salesforce is all about.

Simply put, it is a shift in thinking. Instead of selling ‘software’ as a chunk (the microsoft desktop OS model), you sell ‘what it does’ and you ‘pay as you use it’. This has several ramifications, in terms of cost of deployment, potential for better content aggregation and overall reduced cost for both the producer and the consumer. The usual pricing model between SaaS and perpetual typically converge after 3 yrs -i.e. perpetual theoretically becomes cheaper - but that is only assuming no new software upgrades/functionality upgrades, which is not realistic. I’m not going to explain this – do a google for SAAS and you can read its benefits

SAAS has existed before. What’s different now ?

  • Broadband deployment rates have significantly increased since 2001. More than 60% of the US internet community is broadband enabled. Worldwide broadband growth is growing at the rate of 210% annually. In other words, the infrastructure is capable of handling SAAS now (sorry, I don't remember the growth numbers exactly - refer to my article on broadband evolution earlier, where I researched and reported the exact figures)

  • Technologies such as AJAX have proved to be an effective presentation layer for the SAAS model, where desktop powered features can be offered on the net. The browser-server experience has vastly improved due to these improved technologies (you no longer need a browser refresh to get a single byte of data)

  • Applications have been rolled out by technology pioneers such as Google, Writely, Zoho and others. I have always maintained that those who prove a technology works are not necessarily the ones who succeed. Those who watch these folks plough in the money, and then step in when the technology is mature are usually the folks who gain. These applications, which are live in the market today prove that the technology is ready. It’s the business model that is needed. So when people say gmail has 25% of the subscriber base of a hotmail and therefore no biggie, I don’t think they get the picture.

Understanding the business – SAAS (Software as a Service)
Before we understand what implications SAAS has, let us first try and figure out;
a) What is the value chain ?
b) Who are the players ?
c) What are the risks ?
d) For each step in the value chain, what are the potential revenue models ?

And then, ask, “Where can I play?”

So here is a diagram that I drew up. To put a structure we can put our arms around, before talking about whether AJAX has potential to overthow mankind and preside in the Oval Office. I am not going to comment on this diagram right away. A lot of it is self explanatory. I would like YOU to comment on it, however.

How do you interpret what you see below ?

(Please click on the image for a larger version. After you click on it, your browser may still be resizing the image, making the text jagged, so either disable that feature, or download the image and then see it)

4 comments:

  1. excellent post. I like the diagram you posted at the end as well. When do you think the adaptor market will evolve ? is this similar to the opera mini efforts ?

    ReplyDelete
  2. Excellent post.

    I'd love to put the SaaS diagram up as a poster on my wall, right over the old SS7/IN protocol poster. Times have certainly changed.
    I found the positioning of the aggregator box enlightening. In my mind's eye, I saw the aggregation opportunity as a service embedded in the application, rather than a front-end mashup opportunity. For example, your diagram led to the following idea: an aggregator can front-end SalesForce, and add aggregated data to the customer records stored within this CRM app. The aggregated data may be publicly avaiable, but more likely to be secure within the context of the enterprise (e.g. a customer rating based on recent history).
    The trail between the SaaS producer and the user is fraught with danger, especially with so many players in the chain. How do you see security play into this? For example, the connection between the user and the SaaS app will exist over an encrypted channel, so how might a 3rd party aggregator go about inserting its service into this security chain?
    I believe there is an opportunity for a bonded service provider to manage and secure identity and data paths, and to audit SaaS provider security measures, all on behalf of the user. Firewalls and desktop virus scanners are not up to the challenge of securing a transaction thru this value chain.
    What do you think?

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