Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Learn more. Sponsor: HP.
Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast series, coming to you from the HP Software Universe 2010 Conference in Barcelona.
We're here in early December, 2010 to explore some major enterprise software and solutions, trends and innovations, making news across HP’s ecosystem of customers, partners, and developers. [See more on HP's new ALM 11 offerings.]
I'm Dana Gardner, Principal Analyst at Interarbor Solutions, and I’ll be your host throughout this series of Software Universe Live discussions. [Disclosure: HP is a sponsor of BriefingsDirect podcasts.]
We are now joined by two executives from HP to discuss the software as a service (SaaS) market. Please welcome Kevin Bury, Vice President and General Manager of HP Software as a Service. Welcome.
Kevin Bury: Dana, it’s great to be here.
Gardner: We are also here with Neil Ashizawa, Manager of Products for HP Software as a Service. Welcome back, Neil.
Neil Ashizawa: Hi. Thanks, Dana.
Gardner: Let’s start with you, Kevin. Tell me a little bit about the market. We’re seeing a lot of interest in SaaS, we are also hearing a lot about cloud. Are people already using cloud? Are they confusing SaaS and cloud? What is, in a sense, the continuum in real world practice now with SaaS and cloud?
Bury: We are seeing a lot of interest in the market today for SaaS and cloud. I think it’s an extension of what we've seen over the last decade, of companies looking at ways that they can drive the most efficiency from their IT budgets. And as they are faced especially in these trying economics times of trying to do as much as they can, they're looking for ways to optimize on their investment.
When you look at what they are doing with SaaS, it gives them the ability to outsource applications, take advantage of the cloud, take advantage of web technologies to be able to deliver those software solutions to their customers or constituents inside of the business, and do it in a way where they can drive speed to value very, very quickly.
They can take advantage of getting more bang for their buck, because they don’t have to have their people focused on those initiatives internally and they're able to do it in a financial model that gives them tremendous value, because they can treat it as an operating expense as opposed to a capital expense. So, as we look to the interest of our customers, we're seeing a lot more interest in, "HP, help us understand what is available as a service."
Various components then include SaaS, infrastructure as a service (IaaS), certainly platform as a service (PaaS), with the ultimate goal of moving more and more into the cloud. SaaS is a stepping stone to get there, and today about half of all of the cloud types of solutions start with SaaS.
Gardner: Neil, how do you see that? Are folks well into this, or is it still in the planning stages?
Somewhere in between
Ashizawa: We're somewhere in between, to be quite honest. About a year, year-and-a-half ago, it was a lot earlier, and people were still trying to get their minds wrapped around this idea of cloud. We're at a stage now where a lot of organizations are actually adopting the cloud as a sourcing strategy or they are building other strategies to adopt it. We're probably past early adopter and more into mainstream. I anticipate it will continue to grow and gain momentum.
Gardner: Neil, is there a confusion in the market between SaaS and cloud? Are some thinking that they are doing cloud computing, and is there something that’s still being done outside the purview of IT? Or, is IT now becoming more involved in perhaps a gatekeeper role with SaaS and/or cloud?
Ashizawa: Now, IT is becoming much more involved. I would say that they are actually becoming more of a broker. Before, when it came to providing services to drive business, they were more focused on build. Now, with this cloud they're acting in a role as a broker, as Kevin said, so that they can build the business benefits of the cloud.
Gardner: Kevin, when we hear that cloud word, a lot falls underneath it. We're hearing, of course, SaaS, PaaS, and IaaS. How do you see the market evolving? Are we going to move in a continuum? Is there overlap? What’s the relationship between companies as they adopt SaaS, as perhaps their development organizations work with PaaS, and ultimately will they be engaging with infrastructure services off the wire?
Bury: That's a question I get asked quite frequently by our customers. Where is this thing going? When is it going to end? Is it going to end? I don’t believe it is. I think it’s an ongoing continuum, to use your word. It’s really an evolution of what services their constituents are trying to consume, and the business is responding by looking for different alternatives to provide those solutions.
For example, if you look at where SaaS got started, it got started because business departments were frustrated, because IT wasn’t responsive enough. They went off and they made decisions to start consuming application service provider (ASP) source solutions, and they implemented them very, very quickly. At first, IT was unaware of this.
Now, as IT has become more aware of this, they recognize that their business users are expecting more. So, they're saying, "Okay, we need to not only embrace it, but we need to bring it in-house, figure out how we can work with them to ensure that we are still driving standardization, and we're still addressing all of the compliance and security issues."
Corporate data is absolutely the most valuable asset that most companies have, and so they have seen now that they have to embrace it. But, as they look down the road, it moves from just SaaS into now looking at a hybrid model, where they're going to embrace IaaS and Platform as a Service, which really formed the foundation of what the cloud is and what we can see of it today. But, it will continue to evolve, mature, and offer new things that we don’t even know about yet.
Gardner: Well, if the past is a prologue and if we learn anything from history, we’ve seen how applications have been adopted in fits and starts over the past decades. Then, integration has had to come in, and it’s often been an issue in terms of cost and complexity. Are there some best practices that organizations should examine and consider now, as they move toward these newer ways of distributing and using SaaS, PaaS, and IaaS?
Where should you be thinking, where should you be going, if you want to head off even more complexity and/or pain down the road?
The promise and the hype
Bury: This topic often gets lost, because organizations can become overwhelmed by the promise and the hype of cloud and what it can offer. My recommendation is usually to start with something small. I go out and spend a lot of time talking to our customers and prospective customers. There are a couple of very common bits of feedback that I hear that CXOs are looking at, when they view where to start with a cloud or as a service type of initiative.
The first of these is, is it core to my business? If a business process is absolutely core to what they are doing, it’s probably not a great place to start. However, if it’s not core, if it’s something that is ancillary or complimentary to that, it’s something that may make some sense to look at outsourcing, or moving to the cloud.
The second is if it’s mission-critical or not. If it’s mission-critical and it’s core, that’s something you want to have your scarce resource, your very highly valued IT resources working on, because that’s what ultimately drives the business value of IT. Going back to what Neil said earlier, IT is becoming a broker. They only have so much bandwidth that they can deliver to those solutions and offerings to their customers. So, if it’s not core and it’s not critical, those are good candidates.
We recommend starting small. Certainly, IT needs to be very involved with that. Then, as you get more-and-more comfortable and you’re seeing more value, you can continue to expand. In addition, we see projects that make a lot of sense, things like testing as a service, where the IT organizations can leverage technology that’s available through their partners, but deliver via a cloud or a SaaS solution, as opposed to bringing it in-house. So, those are a couple of other examples.
Gardner: It sounds like the crawl, walk, run approach to cloud activities, stepping stones, learning as you go pilot projects -- but along the way isn’t there the need for considering integration, security, and governance? I'm thinking too about the need -- not only to allow applications that are from the cloud or SaaS to interoperate -- but also thinking about how those might interoperate with legacy applications and data.
I guess it’s the big integration question. Neil, what should IT be thinking about in terms of trying to get on top of this integration issue sooner rather than later?
Ashizawa: Clearly they should make sure that, if they are going to adopt the SaaS solution, that they vet out the integration possibilities -- to get out in front that. Also, integration doesn’t just stop at the technical level. There are also the business aspects of integration as well. You need to also make sure that the service levels are going to be what your business users' desire and that you can enforce, and also integration from the support model.
If the user needs help, what’s the escalation? What’s the communication point? Who is the person who is actually going to help them, given the fact that now there is a cloud vendor in the mix, as well as the cloud consumer.
Gardner: It sure sounds like this is not something I want to get done at any strategic level without IT being involved. The more you think it through, the more you see that this becomes something that requires all of the usual benefits, governance, and manageability from traditional IT. But, let’s take a step back and look at where SaaS is creeping in, so that we might know where then to head it off in order to protect IT and the organization from future complexity.
Kevin, where do you see the market segmentation for SaaS? Are we seeing it by application, are there breakouts by region around the globe, or is this strictly based on the personality, if you will, of one enterprise versus another?
Bury: In the early stages, it was very much dictated by the personality or the willingness to embrace new technologies of the overall organization or the CIO or the business leaders of a company. But, now a decade into this market trend, we're definitely seeing some patterns start to develop.
I mentioned earlier this movement toward those applications or those areas of the business that are not core and critical that they are looking to move outside of their data center. So that’s certainly something, when we look at things like complementing what IT does around things like testing as a service. Security as a service is a big area that we are seeing growth in. Project portfolio management (PPM), helping those IT organizations manage their business, the day-to-day business, are some of the areas that we are seeing a lot of growth.
When I look geographically, it’s interesting. Some of the early adopters were companies in the more developed nations, the U.S., England, and Germany. Now, what we're seeing is a tremendous amount of interest out of some of the more developing nations, certainly in Asia, Pacific, Japan. Down in the South Pacific, Australia and New Zealand are embracing SaaS as the primary vehicle for newest initiatives inside of IT. When we look at the BRIC countries, we're seeing a lot of interest coming out of those more developing nations more so than the developed nations.
In the developed nations, they have already embraced SaaS and they're starting to embrace cloud more, but they're now starting because of the IT governance requirement. So, to your point earlier, we're looking for much more specialized or vertical types of solutions, where we can come in and add value, because the breadth of our portfolio has offerings for them. When you look at the developing countries, they're saying, "We need to look at this from a more holistic approach," and they want to partner with someone like HP because of all the breadth we can bring in there.
Gardner: So, suffice it to say, Kevin, SaaS is really strategic, very important to HP as a company.
Bury: Absolutely. We see SaaS as one of the key drivers, one of the strategic initiatives for HP to embrace. As I talk with my peers on the leadership team, we recognize SaaS as one of only two consumption model customers have for obtaining software from HP. In the traditional license play, they can consume the license and pay maintenance or, if they want to treat as an operating expense, it will be via the SaaS model.
As we look to what we need to do, we're investing very heavily in making all of our applications SaaS ready, so that customers can stand them up in their own data center and our data center or via a hybrid, where we may involve either a combination of those or even include a third-party.
For example, they may have a managed service provider that is providing some of the testing services. To your point earlier about the integration, HP, because of our breadth and our depth of our applications, can provide the ability to integrate that three-way type of solution whereas other companies don’t have that type of depth to be able to pull that off.
Gardner: It shows that perhaps bigger is better in this regard.
Bury: Absolutely. It’s interesting. I've been in the SaaS space now for about nine years. In the early days, the agility and the ability to being nimble was great for the smaller vendors. But, as SaaS now becomes much more mainstream and much more mature, big customers are now looking to companies like HP, because of the fact that we have the size, the depth, and the breadth of the solutions.
Looking for a relationship
They're looking for that relationship that is going to transcend this solution and is going to be part of the overall relationship between HP and their organization over the long haul. So, size definitely matters when it comes to cloud and SaaS.
Gardner: What’s interesting about the SaaS and cloud services is that there is something new about it, but there’s also something very reminiscent. We’ve been here before. We’ve talked about ASPs for decades plus, and there’s been managed services for even longer.
Neil, tell me a little bit about how this works as a segue, as a progression. For those organizations already deeply involved with ASPs, managed services, or hosting, how do they now best proceed toward the adoption of what we now call cloud?
Ashizawa: It’s very much of an evolution. Ten years ago they started with ASPs, moved into more of a managed service, and now here we are at cloud. Clearly, organizations that did adopt ASP and managed service are probably more comfortable with the jump to cloud.
One of the key differentiators, as it’s evolved, in the way I see it, is really in the economic principles behind cloud versus managed service and ASP. With cloud, as Kevin mentioned earlier, you basically leverage your operation expense budgets and reduce that capitalization that typically you would still need to do in a historic ASP or managed service.
Cloud brings to the table a very compelling economic business model that is very important to large organizations.
Bury: If I could add to that, Dana, Neil makes a couple of great points. The thing that’s important to note here is that this is an evolution or a maturation. It’s interesting, having been in this phase for so long, to see what customers are now looking at. And it’s something where, as I start to look out to the future and speculate about where they want to go next, I'm seeing a lot of indications toward a model where customers will want to consume this idea of everything as a service. We’ve even seen recently customers say, "You're already doing this for us," whatever that as-a-service solution might be.
"Can you also take some of our people, put them back into that, and then just charge us that monthly or annual fee?" Neil and I spent a lot of time contemplating this idea of business process as a service. That’s what we're speculating could be a next generation of SaaS or cloud. It’s the idea of customers who wanted to consume business processes as service, which is just another step toward consuming everything as a service.
Gardner: I was starting to think about that, when we described how you integrate both among and between different types of services that are sourced from cloud or SaaS with your ongoing legacy applications as services. It really does get elevated to the process level, and it’s at the process level where you get the agility and where you could start to get toward your Instant-On Enterprise benefits, regardless of where these were sourced.
Delivering on the promise
Bury: That's one of the big things that we're looking at. How will companies in the future really be able to deliver on the promise of what is and what we are recognizing as the Instant-On type of enterprise? It’s the ability to take in data very, very quickly and then be able to analyze it, make assessments on it, make decisions and to be, in the term you use, very agile in the way that they are reacting to these inputs.
In the past, companies generally have been very siloed. Information would come in and they didn’t have the access nor the visibility into it from another division or another department. When you look at what the instant enterprise is going to, it’s the ability to consume information very, very quickly, analyze it, then make decisions, and make directional changes to what’s going on inside of their environment.
As-a-service and cloud are very much enablers of that, because it gives you the ability to take advantage of technology as an enabler, as opposed to the past when they were just to serve one solution or one business process in the past. Now, they're able to have that stratify the entire organization. So, they have the insight and the agility to make real-time types of decisions.
Gardner: So it sounds like this is going to be a journey for some time, with lots of potential opportunity. But, it also sounds like something you need to do quite carefully. Given that, what are some of the best practices? What are some of the things that you ought to have lined up within IT in order to progress toward some of these larger business process level goals?
Bury: It’s like any IT project. The single-most important thing is not to go into it with expectations, any preconceived expectations that it’s going to be nirvana, or that it’s going to be easy. Moving a difficult business process from in house to out of house, right into the cloud, doesn’t mean that the problem goes away or that the challenges go away from it. You still need to approach it with discipline, rigor, and formal types of processes and methodologies, which is what IT is really good at.
The key is to get engaged early, learn as much as you can about the cloud and about as a service, and then look to companies like HP that have the experience in doing this. We’ve been doing it for more than 10 years. We’ve got a lot of success stories that we can point to on how we can help companies take advantage of the cloud and also what to avoid when you move into the cloud.
Gardner: Neil, any thoughts also on best practices in terms of getting yourself prepared for this new wave?
Ashizawa: I very much agree with what Kevin just said. I think what Kevin was also saying is that you really want to look for trust. If you are going to be outsourcing business processes to a vendor, you really want to have that trust. What we're seeing is that there is a strong linkage between your compliance levels that you have in your organizations and the trust that your cloud vendor can also provide you a solution that can help you maintain your compliance and standards.
So, at the end of the day, you really want to just make sure that you go into this with a trusted vendor that has a proven experience, that can really make sure that they understand your need and your requirements, and they have a SaaS solution that can really fit your organization.
Gardner: Very good. We've been discussing the future of the SaaS market and how to get started responsibly, and move forward from a legacy and a managed services and/or ASP heritage. We’ve been talking with Kevin Bury, Vice President and General Manager for HP SaaS. Thank you, Kevin.
Bury: Thank you, Dana, this has been great.
Gardner: We’ve also been joined by Neil Ashizawa, Manager of Products for HP SaaS. Thank you, Neil.
Ashizawa: Thanks very much, Dana.
Dana Gardner: I want to thank also our listeners for joining the special BriefingsDirect podcast, coming to you from the HP Software Universe 2010 Conference in Barcelona.
Look for other podcasts from this event on the hp.com website, as well as via the BriefingsDirect network.
I'm Dana Gardner, Principal Analyst at Interarbor Solutions, your host for this series of Software Universe Live discussions. Thanks again for listening, and come back next time.
Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Learn more. Sponsor: HP.
Transcript of a sponsored BriefingsDirect podcast, part of a series on application lifecycle management and HP ALM 11 from the HP Software Universe 2010 conference in Barcelona. Copyright Interarbor Solutions, LLC, 2005-2010. All rights reserved.
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