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How Software Companies Can Reap the Rewards When Transitioning to SaaS
Mar 8 2017
Software companies must complete the transition from an on-premises to a SaaS-based business model, but will find both challenges and opportunities in the transition
The move to a digitally-driven, cloud-first economy has captured the popular imagination. It’s a trend that independent software vendors (ISVs) have been watching carefully for years. The majority of new ISV products, in fact, are now some version of SaaS or cloud-based offerings.
Still, the transition has been uneven and challenging for many ISVs. Caught between the rapid acceptance of the cloud-first ethos and a traditional, license-focused business model, many have struggled to complete the transformation of their flagship products into full-fledged SaaS offerings and reshape their underlying business model.
It is becoming clear, however, that they must finish this transition now. But knowing what is happening and what do to about it are different things. And as organizations seek to complete the transformation to a SaaS-focused business model, the unforeseen complications and challenges appear quickly.
Reimagining the ISV Business Model and Architecture
The first thing organizations realize as they make the move to a SaaS-based business model is that they are no longer product companies — they’re now service companies. As a SaaS service provider, ISVs are now responsible for the complete operating infrastructure and, most importantly, for the entirety of the customer experience.
The natural assumption is that they can just scale up their current “recommended infrastructure” to meet the needs of the SaaS environment — “if it was good enough for our customers…,” goes the thinking.
But the implications and demands of multi-tenancy, always-on expectations, on-demand scalability and multi-geo access quickly lead to the realization that creating a SaaS architecture that delivers on the promise of the cloud is something altogether different.
The Silver Lining of the SaaS Transition
While the migration to SaaS brings additional responsibilities and a restructuring of nearly all aspects of the business model, it also offers some surprising benefits — most importantly for ISVs, the ability to control their destiny.
The move to a SaaS model means the end of customers blaming the software for their own inability to execute an implementation or for ineffective technical configurations. ISVs can now design the service and the customer experience exactly as they envisioned it, often providing greater flexibility and scalability than they ever could in an on-premises deployment model.
But achieving those gains requires a re-envisioning of more than just the business model — it demands the re-envisioning of the technology stack that underpins it.
Central to this re-envisioning is the database. As organizations contemplate the move to a SaaS model, they must plan for two important database capabilities that are difficult to achieve in on-premises deployments: elasticity and continuous availability. It is these two capabilities that will be critical in meeting the fast-moving, constantly-changing demands of SaaS.
Delivering Advantage Through Your Database
Making the transition to the cloud and transforming the ISV business model from an on-premises to a SaaS approach is a big undertaking. It will likely involve rewriting elements of the application and redesigning parts of the architecture. The challenge is to determine which elements of this transition ISV’s can leverage to create competitive advantage.
By definition, the migration to a cloud-centric architecture is a move to a commoditized platform. Every ISV will be running on a similar, if not the exact same architectural footprint as its competitors. This commoditization will leave ISVs with only limited opportunities to create competitive advantage beyond the core feature-set of their product.
One such opportunity to create an architecturally-derived advantage, however, is through the adoption of a cloud-native database. A database like NuoDB, designed explicitly for cloud-native applications, improves performance, delivers elasticity and enables continuous availability.
By creating a virtual database instance that appears to the application as a single, logical database, but which is actually distributed among several data centers or cloud availability zones, NuoDB enables ISVs to deliver the elasticity and availability that their customers expect in a SaaS application. It is this architectural shift that enables organizations to enhance the customer experience and deliver on the promise and expectations of the cloud.
The Intellyx Take
When ISVs begin thinking about the migration from a traditional, on-premises approach to a SaaS business model, it is tempting to think solely in terms of virtualized environments and major cloud platforms. Simply running your application in the cloud, however, is not synonymous with delivering a modern, cloud-based SaaS application.
In this period of disruption, the spoils will go to those ISVs who embrace the opportunity that the transformation to a true SaaS business model provides. Those who re-envision the entire technology stack — from the application to the database and everything in between — and who seek to create advantage at every level will be the ones who transform their industries and reap the rewards.
Copyright © Intellyx LLC. NuoDB is an Intellyx client. At the time of writing, none of the other organizations mentioned in this paper are Intellyx clients. Intellyx retains full editorial control over the content of this paper. Disclaimer: Intellyx advises companies on their digital transformation initiatives and helps vendors communicate their agility stories. NuoDB, Inc. is an Intellyx client. Intellyx retains full editorial control over the content of this article.
Charles Araujo is an industry analyst, internationally recognized authority on the Digital Enterprise and author of The Quantum Age of IT: Why Everything You Know About IT is About to Change. As Principal Analyst with Intellyx, he writes, speaks and advises organizations on how to navigate through this time of disruption. He is also the founder of The Institute for Digital Transformation and a sought after keynote speaker. He writes a regular column for IDG and NetworkWorld, has been a regular contributor to both InformationWeek and CIO Insight and has been quoted or published in Time, CIO, Computerworld, USA Today and Forbes.
Charles can be found on Twitter @charlesaraujo