Succeeding with SaaS
Introduction
Software-as-a-service (SaaS) has quickly moved from niche to mainstream adoption across every industry vertical, from financial and retail to healthcare and entertainment. Every type of organization, from small nonprofits to large global enterprises, is taking advantage of SaaS for its low cost of entry, fast time to value, pay-as-you-go economics, convenience and scalability. They are also realizing substantial IT benefits by avoiding the responsibilities associated with application management, including installation, configuration, testing, patching and upgrades. SaaS applications are now replacing traditional software
applications in nearly every category. Analytics, business intelligence, collaboration, document management, e-commerce, finance & accounting, and other software categories now offer multiple competing SaaS applications. The advantages of this new mode of delivery and consumption are quickly driving it toward ubiquity.
The strengths of SaaS make it seem like a panacea, and customers are indeed adopting it en masse. However, SaaS providers face a number of perilous challenges in keeping their customers satisfied and reaching their desired level of success.
Market Evolution and Dynamics
Early SaaS pioneers demonstrated what it takes to succeed from both a business and technology perspective. By delivering applications through the Internet, and charging customers on a per-user, subscription basis, they have changed the way users consume applications. SaaS providers have also eliminated IT challenges such as setting up on-premises infrastructure and deploying applications.
Many of these disruptive capabilities are enabled through cloud architectures and virtualization technology. SaaS providers have also innovated around multi-tenancy and scalable, elastic, multi-tier application architectures to deliver faster provisioning times, and accommodate user demand even when it spikes. The benefits of this model have led to an explosion in the number of applications being delivered through SaaS.
“The advantages of this new mode of application delivery and consumption are quickly driving it toward ubiquity.”
Repeating Success
Of course, there is a lot happening behind the scenes that may not be obvious. The truth is that SaaS providers do a lot of heavy lifting to keep their services running and customers happy. Performance and user experience have never been more important, as applications now traverse private wide area networks (WAN) and the Internet, which are both out of the provider’s control. Maintaining availability and providing consistent, reliable performance are critical for de livering an engaging user experience and retaining customers.
SaaS providers need to meet a variety of security and compliance requirements if they want to be considered by enterprise customers. For some, compliance with specific industry regulations, such as PCI and HIPAA, is essential. Many customers also have data encryption and isolation requirements.
Infrastructure resources must be highly scalable to accommodate new customers and growing demand – and they must operate within multiple geographic regions. To improve business continuity and enable rapid disaster recovery, providers need the ability to failover automatically to other data centers. They must also respect data sovereignty while meeting local regulations.
New SaaS providers are building on the success of their predecessors, but solutions to fundamental SaaS challenges are not always obvious. Those among the current generation of “born as SaaS” providers still have to invent and reinvent methods to meet strict customer expectations.
Shifting to SaaS
Existing software applications are shifting to SaaS. Independent software vendors (ISV) see an opportunity to re-architect existing applications and develop new SaaS-based applications and revenue streams. These vendors have deep expertise in developing software, but many not have designed multi-tenant, Internet-delivered applications. They may also lack the operational experience to deliver applications at scale, on a 24x7 basis, for customers across multiple geographies.
Enterprise IT organizations are also beginning to develop their own SaaS applications for customers, partners and employees. Some of these applications are revenue generators, while “Providers need the ability
to failover automatically to other data centers.”
activities must still deliver the same levels of availability, reliability, performance and security as a commercial offering. Enterprises have developed traditional applications in the past, but like ISVs, they lack the architecture and operations expertise to deliver them as a service.
Competition and Rising Customer Expectations
The SaaS market is one of the most strategic segments in the IT industry. It is highly competitive and continues to evolve with a steady stream of new applications. Mergers and acquisitions are frequent, and often spark new innovation and disruption. Time-to-market is key for new SaaS providers and their applications, as well as for existing providers with new applications.
There is significant competition in the SaaS market to capture the hearts, minds and loyalty of customers, and success requires more than a land-grab
mentality. Providers can’t simply onboard customers and cross their fingers that lifetime profit value will be positive. Customer retention – through the best customers experience – is what drives success today.
SaaS providers must deliver a meaningful, engaging user experience with consistent, reliable, high-performance delivery to all customers, regardless of their location and not matter what device they use. Today, providers compete to deliver the greatest benefits and the highest levels of satisfaction, which in turn drives new demand and even higher expectations from customers. To achieve success, SaaS providers must focus on reducing churn within their customer base, while maximizing subscription renewals on their services.
Barriers to Success
The SaaS market is ripe with unique technology challenges, and incumbent players have set the bar high in terms of customer expectations.
Churn
A decade ago, the high switching costs associated with traditional software prevented many customers from shifting to new solutions, even when they were highly dissatisfied. For example, moving to a new ERP system required millions of dollars in capital investment and plenty of risk, making it a board-level decision and extending the life of software solutions longer than desired.
The switching costs for SaaS applications today are dramatically lower. There is still some data migration, systems integration, and user training required to migrate to or switch between SaaS
“Customer retention – through the best customers experience – is
offerings. But at a fraction of the cost and time of traditional migrations, SaaS customers are much more willing to abandon existing solutions if they are dissatisfied with their current service.
Customer Concerns
Customers may have the greatest influence in determining which providers succeed and fail. By understanding their perspectives and concerns, SaaS providers can take the right steps to satisfy demands and go beyond expectations.
There are a multitude of considerations for any complex product or service, including feature sets, support offerings, and management tools, all of which apply to SaaS applications. Neovise has repeatedly found that the most fundamental concerns for SaaS and other “as-a-service” offerings tend to fall into 4 categories that conveniently form the acronym PASS: performance, availability, security, and scale. Similarly, a 2014 Exoprise Cloud Trends survey of IT and business managers showed that security, performance and availability were the top concerns impeding adoption of cloud applications and services.
Performance
Not only do enterprise customers tend to have much higher than average expectations, a single enterprise can have thousands of users. Enterprise and other large organizations serve employees, customers and partners on a global basis, and need to deliver consistent performance across a variety of access devices and operating systems, which the SaaS provider does not manage or control.
Performance is an end-to-end requirement for enterprise customers. Contrary to convention, performance is not contained within the boundaries of the service provider’s data center, and their responsibility to provide high levels of performance doesn’t stop at the firewall. SaaS providers must know how to manage performance both inside and outside the data center.
Implementing a routing and load balancing solution to accommodate this framework can be quite challenging. Additional capabilities such as route optimization and TCP optimization are frequently required to achieve desired levels of performance.
“SaaS providers must know how to manage performance both inside
Availability
Customers, including large enterprises, use SaaS applications for business-critical processes. By doing so they are putting their fate in the hands of service providers. Many of these customers have high reliability requirements and expect guaranteed uptime and rapid failover if hardware or full data center outages occur.
Ideally, SaaS solutions should deliver at least the same level of availability as onsite applications, but when they don’t, customers usually turn to the service provider. Providers that fall short of expectations can face monetary impacts from having to reimburse customers for SLA gaps, and they may incur indirect costs from a loss of customers and future revenue. Global traffic management services are often required to ensure end-to-end service availability.
Security
The data that is generated and consumed by SaaS applications – from private customer data to user credentials – are highly sensitive assets, and customers expect SaaS providers to ensure the fullest extent of protection. They demand secure access with data encryption over the network, and rely on SaaS providers to protect underlying infrastructure, and to maintain the latest compliance certifications, including SSAE 16, while respecting industry requirements, such as HIPAA and PCI regulations.
Unfortunately for SaaS providers, security is a major challenge for any Internet-facing service. Data that is accessed and transmitted over the public Internet faces additional vulnerabilities. Once data leaves the confines of the data center, it is exposed to a
variety of elements, some of them threatening. Customer data and infrastructure must be protected at all costs. This includes defending against external threats, such as DDoS attacks, as well as protecting data being transmitted over networks outside the data center.
Scale
Scalability is one of the primary advantages of an effective SaaS platform. Importantly, scale must be considered from a variety of perspectives – not just how many simultaneous users or transactions can be supported. For example, rapid customer onboarding at scale is a critical requirement since it gives customers their first impression of a service. Yet some providers can take days or weeks to provision vanity URLs for new customers. When operating at scale, SaaS providers may manage 2,000 or more vanity domains, and they need to accomplish onboarding processes in hours, not days.
“Customer data and infrastructure must be protected at all costs.”
Providers must be flexible and thorough in how they implement scale. They must ensure performance, availability and security for all their customers – even while meeting spikes in demand. Heavy activity by one customer should never impact the user experience of another, and there should never be a case where scale requirements outpace the resources at hand.
Put the Odds of Success in Your Favor
Many SaaS providers find themselves on the razors edge of success and failure. Fortunately there are a number of steps you can take to increase your odds of success.
Take Ownership, from End to End
Before the SaaS market reached a heightened state of competition, many providers kept their focus on delivering customer experience within the walls of the data center. Now, customers expect an end-to-end solution, and – when performance suffers – they are most likely to blame the SaaS provider. They don’t care why issues occur but whether they are fixed by the provider, and more accurately, whether the provider avoids setbacks in the first place. SaaS providers can’t simply compartmentalize their offering and ignore everything outside their data center. They need application delivery solutions that work even when they don’t control the end-to-end network. Disruptions impact their bottom line regardless of where they occur.
Have an Obsessive Customer Focus
Delivering on customer requirements for performance, availability, security and scale is often the determining factor for whether a provider succeeds or fails. Providers must deliver consistent, engaging, high-performing applications regardless of end user location and device. They must also be proactive, and have an obsessive customer focus. Whether or not a provider intervenes to troubleshoot service issues or assist customers with problems could mean the difference between ongoing business and the loss of a customer. Providers must look for ways to go beyond their primary responsibilities to deliver exceptional support.
Leverage External Application Delivery Services
In order to provide an exceptional user experience, providers need to think outside the data center and focus on end-to-end delivery. Global delivery services can help SaaS providers overcome key challenges in performance,
“Providers need to think outside the data center and focus on
• Performance: Delivery services use custom configurations to control bandwidth consumption for various Internet protocols, speeding time-to-delivery. They can also provide frontend optimizations that accelerate page downloads and prioritize content rendering across different devices, including mobile. Delivery services can make applications resilient to bottlenecks by ensuring they are routed around problems, and that traffic continues to flow to the edges of the network with no single point of failure.
• Availability: Solutions that include traffic management and DNS management features provide a fault-tolerant way for SaaS providers to make intelligent routing decisions based on real-time data center performance and global Internet conditions, ensuring requests are routed to the most appropriate data center. Automatic failover enables SaaS providers to maintain uptime by immediately failing over to an operational service environment. With granular reporting and deep customer visibility, providers can monitor on an individual customer basis and proactively manage issues before they impact user experience.
• Security: Delivery services extend perimeter security outside the data center by detecting, identifying and mitigating attacks before they reach the target. They enable SaaS providers to maintain website availability and performance during attacks by providing a globally distributed architecture for alternative routing. Security rules are adapted to new attack vectors when the landscape changes, protecting SaaS providers from unknown threats.
• Scale: Globally distributed servers optimize application delivery on a massive scale. Solutions that are decoupled from the SaaS provider’s infrastructure eliminate the need for additional points of presence, such as new devices. Caching delivers faster repeat access to popular content by storing it close to the source of request. The scale afforded by delivery services enable SaaS providers to continue accelerating service delivery even as demand grows and new customers are added.
Choose the Best Partners
SaaS providers should generally avoid a complete do-it-yourself approach to architecting and building the systems that support their services. In order to achieve the highest levels of success, SaaS providers should choose the right partners, such as experienced cloud infrastructure providers, SaaS architects and application delivery providers. Even when a SaaS provider chooses to build its owns IT infrastructure rather than using cloud infrastructure, they need to partner for global application delivery services.
Even the largest SaaS providers need access to proven, global delivery infrastructure in order to improve global web and mobile performance and availability. Instead of increasing cost and complexity by continually adding new hosting locations, SaaS providers are using delivery
services to ensure fast response across the globe from existing locations. They also gain the benefits of security protection delivered from the edge of the Internet, rather than hardware-based solutions positioned inside a hosting center.
Beyond delivery services, the right delivery partner can also offer expertise in infrastructure and application architecture. This not only enables seamless integration with their services, it can help SaaS providers think about all the components of their overall platform, and help them design their origin infrastructure to deliver the right levels of performance, availability, security and scale.
Conclusions
There are many opportunities for SaaS providers to thrive in this growing market – but competition is heated, churn is an ongoing challenge, and customers have high and growing expectations. To be successful, providers must deliver uncompromised performance to globally distributed end users, ensure availability on a global scale, and provide end-to-end security – all beyond the walls of the data center.
These requirements can prove challenging and 3rd
Global application delivery services intelligently route SaaS applications to end-users based on real-time network conditions, delivering high-performing user experiences to any device in the world. They also protect applications in motion and mitigate threats at the point of origin. These services give SaaS providers the key capabilities they need to deliver engaging, secure, reliable services. With the right application delivery solution and partner, SaaS providers can overcome barriers to success, achieve faster time-to-value, and deliver an exceptional user experience that reduces churn and encourages new buyers.
party global application delivery solutions are critical for success. Cloud-based application delivery services overcome traditional obstacles by enabling scalable optimization that doesn’t require additional investments in devices and points of presence.
“3rd party global application delivery solutions are critical
About Neovise
Based on independent research and analysis, Neovise delivers essential knowledge and guidance to cloud-related technology vendors, service providers and systems integrators, as well as business and IT organizations that purchase and use cloud-related services and technology. Our offerings include research, advisory and collateral development services that help our customers— and their customers—make optimal decisions and formulate winning strategies. Research. Analyze. Neovise.
