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SaaS Platforms For ISVs and Who Wins?
SaaS development platforms and this market has so far been remarkably closed and proprietary
May. 24, 2008 11:30 AM
McKinsey & Company published a report predicting the market size for Software as a Service (SaaS) will exceed $37B market over the next 5 years. In particular, the report described the need for Independent Software Vendors to SaaS-enable their products using special-purpose SaaS development tools. Matt Asay also wrote recently that the growth of the top 60 software companies is driven by SaaS.
McKinsey claims that traditional J2EE and .NET platforms are poorly suited to building SaaS applications. According to McKinsey, this opens up a $3B market for Platform as a Service (PaaS) products from new entrants like WaveMaker, Coghead and SalesForce. From the article:
Although SaaS development platforms like SalesForce and Coghead have gotten a lot of attention, this market has so far been remarkably closed and proprietary. The Platform as a Service leader, SalesForce, has both a draconian hosting policy (host your apps and data anywhere, as long as it’s with us!) but also a proprietary language (who needs Java when you’ve got Apex!?).
Moving forward, the same trends driving open source adoption everywhere else in the industry will ultimately drive SaaS adoption of open source, particularly by ISVs whose business plan does not include a low multiple sale to their proprietary hosting provider. Future SaaS platforms will converge with traditional tools, offering on-demand development based on traditional programming languages with built-in tools for mash-up based development for basic users.
Development Problems for SaaS
SaaS is highly disruptive for existing hardware and software providers. SaaS platforms are different from traditional computing platforms like J2EE and .NET in three ways:
SaaS Architecture Requirements
McKinsey identified three elements of a SaaS architectures:
1. Development environment: an on-demand development platform for creating SaaS applications. This platform should be able to ship along with the application itself to allow customers to customize their application.
2. Run-time environment: an on-demand infrastructufre to deliver applications. This can be a proprietary hosting environment like SalesForce, or an open hosting environment like Amazon EC2. Ideally, the customer should be able to deploy applications on-demand or on premises depending on their security, data integration and other requirements.
3. Ecosystem for adding new capabilities to applications (e.g., SalesForce AppExchange). This ecosystem should also be able to access enterprise data and services located inside the enterprise firewall.
SaaS Is Make or Break for ISVs
According to McKinsey, SaaS has greatest impact on ISVs, delivering a 50-70% improvement in the level of features that can be delivered for a given investment in development and infrastructure.
For ISVs, SaaS platforms offer low upfront cost, rapid time to market (productive tools + pre-built components like billing) and high quality service delivery. In short, existing ISVs have a limited window to migrate their offerings to the SaaS platform or risk being obliterated by newcomers who get there first.
The lesson of SalesForce versus Siebel Systems is clear: existing ISVs should migrate their presentation layer to SaaS quickly while preserving their existing back end servers. Preserving existing back end logic requires a SaaS platform that supports traditional languages like Java.
Which Platform Will Win the ISV Business?
A battlefield is emerging between established mega-vendors and pure play SaaS vendors. The following factors will separate the winners from the losers in this market:
Although many of the early SaaS platforms are based on proprietary languages and tools, Gartner predicts that 90% of SaaS software will be based on open source within 2 years.
Evaluating SaaS Platforms For ISVs
Here are important criteria for ISVs to consider in evaluating SaaS platforms (sometimes called Platform as a Service, or PaaS):
Table: A Comparison of PaaS Vendors
SaaS Platform Product Review - WaveMaker
WaveMaker is an open source, visual development platform for building Web 2.0 applications. The WaveMaker studio can be installed on a developer workstsation or delivered on-demand. WaveMaker creates standard Java applications based on Spring, Hibernate and Dojo that can be deployed in a SaaS or on premise architecture.
For ISVs, WaveMaker offers several compelling benefits:
1. WaveMaker's visual studio provides a faster and more natural way to build rich internet applications than traditional hand-coding using Java and struts
2. WaveMaker is completely open, making it portable across hosting providers and even enabling applications to be deployed on premise
3. WaveMaker includes a complete development platform based on open source standards such as Spring, Hibernate and Dojo
4. WaveMaker is based on the Java language, making it an ideal choice for ISVs who already develop in Java and don't want to migrate their existing server code.
Summary - What ISVs Need From SaaS
Every ten years there is a dramatic shift in the development tools world: in the 80’s to client/server, in the ‘90s to three tier and now in the 00’s to SaaS. In each of these shifts, the dominant development tools providers have been supplanted by a new generation. This time around, the seismic shift is being driven by the on-demand architecture and the ISVs have the most urgent need to rebuild their solutions to remain competitive.
Over the next five years, we will see the 500 pound gorillas of the development world like Microsoft’s ASP.NET and Sun’s J2EE unseated. In their place will be new software platforms based on traditional languages that are specially designed to enable development of SaaS applications.
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