An article in ZDNet UK documents the reluctance of some businesses to use SaaS as a "core platform." The article describes how some companies, such as Kraft Foods, say they do not want to use SaaS because they wish for an integrated software architecture and believe that SaaS does not necessarily support that goal.

Another company, Telkom Indonesia, says it is reluctant to use SaaS because it wants its core business applications onsite -- although the company executive quoted said he was perfectly willing to look at push-mail or personal web applications through SaaS.

I was curious to see these claims. There are more and more companies choosing to use core applications through SaaS for various reasons, but rarely does it seem to be about using SaaS for SaaS sake so much as the right tool for the job and situation. Most SaaS applications are fairly young and the majority still target the SMB space even though there seems to be an increasing movement toward SaaS in the enterprise.

There was another article along this lines in Ephraim Schwart's Reality Check blog on InfoWorld. In it, Schwartz says that conventional wisdom is that SaaS may be destined to replace on-premise software but that perhaps the truth is that SaaS is just "throwaway software." Companies are using SaaS as an interim solution to problems and then dumping it for something better later on. He then predicts that SaaS might just be a blip on the software screen that won't last.

I can't say I agree on that point. I think that the reasons why companies choose SaaS applications aren't likely to go away. It's really just a delivery mode, after all...and it solves business problems that aren't always solvable through on-premise software. Whether SaaS will ever "replace" on-premise software is anyone's guess but I don't see a future where SaaS would turn out to just be some temporary fad that goes away. I do, however, agree that whether or not a particular piece of software was delivered through SaaS or on-premise may not be a terribly interesting subject someday in the future when SaaS stops being an emerging technology and IT press buzzword du jour.

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After SAP's recent announcement that it would delay the release of Business ByDesign, the media seems to be proclaiming the demise of SAP as a SaaS provider a bit too prematurely, I think.

In an article on ZDNet UK, analysts are quoted as saying that SAP needs additional time to get its on-demand offering right and that it may not totally understand the market for on-demand software.

I tend to agree with the quote at the end that SAP should not be discounted in the SaaS market. Frankly, after years of covering SAP as a tech journalist, I have to say that the people running the company certainly don't strike me as being fools. I'm sure they know fully well that it makes sense to have some sort of on-demand offering and I would bet that they probably do have a fairly good understanding of their market and the needs of prospective customers.

On a purely speculative basis, I tend to wonder if they might have plans to acquire a rival rather than put too many more resources into developing a complete solution from the ground up. After all, as Phil Wainewright points out, SaaS rivals are already starting to play on SAP's playground, with the example of Workday's recent signing of a major contract with Flextronics for which it beat out SAP.

In addition, InformationWeek reports that SAP does have a Microsoft-esque strategy planned in which it will offer components of its software via SaaS for companies that wish to integrate them with on-premise software.

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It seems like people are increasingly talking about PaaS, or platform as a service, as being a major technology for cloud computing and future IT developments, so I caught up with David Abramowski, CEO of Morph Labs, for a conversation about what PaaS is and what it means. Listen to the podcast here or read the transcript below.

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KD: Hi, I'm Krissi Danielsson. Lots of technology is offered "as a service" these days, each type having its own acronym ending in aaS, and one of those acronyms that people are increasingly interested in is PaaS, or platform as a service. Here today to speak with me is David Abramowski, ceo of Morph Labs, a company that focuses on platform as a service.

So my first question is, looking at the concept of platform as a service, people seem to often not know quite what acronyms and new buzzwords mean so you could you talk about the concept of platform as a service and what’s meant by that?

DA: Sure, yeah, platform as a service is really, what’s new about it is it’s, you know, bringing to life a set of technologies and services that have existed for quite some time but in a way that’s now consumable by a lot of people and what I mean by that is when you look at a web application, the web application has to live somewhere.

Typically, we’ve hear of this like hosting and once you have a place to host your application, then the developer has traditionally been required to download software, whether it’s open source software or fee-based software and then they have to install all that software, they have to configure it and then they have to make it available to the internet, they have to do all the work required for all of that and then finally, they can deploy their application to that environment and allow it to run.

What platform as a service is is that we’ve taken all of that, all those difficulties and eliminated them; we’ve created kind of a standardized environment that the developer no longer has to worry about the infrastructure. All they do is they take their application and deploy it into our system and we take care of all the rest for them. So, the platform includes the technologies, like web servers and databases, operating systems, security systems, it includes managed services like automated back up, 24 hour monitoring, system administrators that actually patch the systems and keep them running. So, all of this together makes the platform as a service. So now you can think of it as a complete system end-to-end to run an application.

KD: So, looking specifically at Ruby on Rails, are there some reasons why platform as a service makes sense for Ruby on Rails and how does that differ from alternative means of running it?

DA: Well, we started with Ruby on Rails because it’s kind of on the forefront in term of the Web 2.0 revolution. Ruby on Rails has got a lot of press, actually a lot of adoption in the last couple of years and, I think, the reason we though it was a good target to start with was specifically because, you know, there’s a lot of new applications being built on Ruby on Rails and they don’t have a home.

So, when people have to go to a hosting provider and have to set it up to run Ruby on Rails, they tend to have some difficulties or have kind of a big challenge ahead of them to actually get the Rail application deployed. So, we saw this and we saw some of those difficulties because we have a lot of Rails developers in-house and so they were able to, you know, look at this whole business problem and solve it, kind of as our first step.

KD: So, looking at the media coverage of Morph Labs, an article a few days ago had some comments by Morph comparing its offerings to Google’s App Engine. Can you talk a little more about how Morph’s offerings compare?

DA: I think, you know, the way that it compares is really at the highest level which is, you know, the new realm of running your application in the cloud and so when they talk about the cloud, they’re talking about, you know, servers elsewhere in a fully configured environment, very similar to what I just described around platform as a service. So, in the Google world, you’re able to create and application inside their environment, using their APIs and the languages they support. What we do is a little bit different and it’s the same concept which is we allow you to, kind of, you know, create your application and deploy it into this third-party world but we do it based upon open standards and, you know, industry standard-type applications.

So, we support, you know, this is the main differentiator, which is we allow you to build any application you want to build in the languages we support which today is Ruby on Rails and we also just announced here at Java 1, our Java support and that will also support Rails but, you know, when we look at the comparison with Google, it’s actually a really good thing because the industry is saying it’s time for this type of computing technology, the ability to take your application and run it in the cloud.

KD: OK. Does Morph plan to add additional languages in the future? You mentioned having Rails and Java…

DA: We do. We are going to continue to build out our platform to support the other kind of non-Microsoft languages out there. So, we do not have plans to support .net but we are working on support for, for example, PHP is on our road map as well a Python is on our road map.

KD: All right. Sound good. So, what do you predict overall for the future of platform as a service, there’ve been some analysts saying that the concept of platform as service could be even more important than software as a service? So what are your thoughts on that?

DA: I do think that there’s a very big market ahead of platform as a service. As you think about all of the companies out there that currently run applications to do even the smallest job say within a department. That application has to run somewhere and companies have learned that, you know, buying the hardware, putting in a data center, running the data center is just an extremely expensive proposition so platform as a service allowed even enterprises or even small/medium companies to kind of outsource that, you know, that business.

So, I think there’s a big future ahead for platform as a service specifically, I mean, even if you just look at outsourcing of existing applications or even applications that are on the horizon in the next 12-18 months, I mean, every company has a backlog of hundreds of applications that need to be built and those applications have to run somewhere. So, I think that this is just an industry that’s going to continue to grow, you know, comparing it to software as a service, you know, software as a service is also a very important aspect but that’s typically where you have a third-party that provides an application to a company so platform as a service covers both, let’s just call them internal applications and external applications, so internal would be things that they build and external would be things that, you know, they rent or lease like software as service. So, I think that’s why we look at the market as being a very large opportunity over the next few years.

KD: Great! this has been Krissi Danielsson of ebizQ speaking with David Abramowski, CEO of Morph Labs. Thanks for listening!

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In an IT Business Edge blog, Ann All talks about the challenges SAP is facing in developing its long planned SaaS offering Business ByDesign. In the article, Alll speculates that the reason behind SAP's delays with Business ByDesign are that it is having trouble understanding and tapping into smaller markets.

All also points out that SAP may be having trouble with the idea that SMBs may not want an entire software suite from one vendor and that it might be better to enter the market by purchasing a company like Salesforce.com, but SAP may not be ready to concede defeat in the mid-market quite yet.

Meanwhile, as other companies begin to target the ERP space with SaaS offerings, one wonders whether SAP and other large companies will be left behind. Workday, for example, is putting out statements in the form of viral videos where it pokes fun indirectly at SAP and other giants, as InformationWeek reports. Of course, if Workday and its competition do become the leaders in mid-market ERP, they can always be bought up by SAP and its competition in a few years -- as hisotry has shown is the likely outcome.

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It's Monday but I'm sure the biggest news this week is likely to be Microsoft's abandonment of its bid to buy Yahoo, a move widely believed to have been an attempt by Microsoft to enter new Web and Enterprise 2.0 markets and solidify its standing in the field.

In a letter to Yahoo CEO Jerry Yang, Microsoft CEO Steve Ballmer cited Yahoo's decision to outsource search terms to Google and the ramifications the plan could have for Yahoo's business, suggesting that Yang was taking specific actions to make Yahoo as undesirable to Microsoft as possible. If so, Yang apparently succeeded.

People around the Web have had mixed reactions. Many believed that a Microsoft/Yahoo combination would have made good business sense, while others had been skeptical of the deal. ZDNet's Mary Jo Foley has a poll on what Microsoft should do next. Should it acquire another company? Wait for Yahoo's shares to tank and then buy it anyway? She also points out that some are calling for Ballmer's resignation after the failure of the deal and has a poll on who would replace him should that be the case.

If Microsoft decided to buy a different company, Computerworld has an article speculating on three companies it could buy instead of Yahoo: AOL, LinkedIn, and ValueClick and lists the rationale behind each potential purchase.

Apparently, Yahoo's shares also fell 21 percent after the announcement that the deal had fallen through.

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When companies are developing SaaS applications, billing is a very important consideration but sometimes ends up as an afterthought, says Ed Sullivan, CEO of Aria Systems. Ed joined me for a talk about things to keep in mind on the billing front; listen to the podcast below or read the transcript.

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KD: When a company wants to develop an deploy a software as a service application, one of the many considerations they must think of is billing and according to Ed Sullivan, CEO of Aria Systems, a lot of companies make critical mistakes in billing. Ed is here today to talk to us about software as a service billing and how best to handle it. Thanks for joining us today, Ed. Can you start by telling us how most providers are handling billing right now and what’s wrong with that approach?

ES: Based on what we’re seeing in both our existing customers that have come to us and prospects that we’re talking to, is that they tend to treat billing as an afterthought and cobble together maybe a PayPal account with Quicken or merchant account and don’t really, those solutions don’t really scale for one, secondly they’re not compliant with some of the, you know, the credit card industry stuff, taking personal information and thirdly, they don’t scale, they might scale, you know to a couple hundred or a couple thousand customers and you can do things manually but by treating it as kind of this cobbled-together thing, the thing they don’t automate all of the use cases throughout the customer life-cycle.

KD: All right, that makes sense. So what would you say is a better way to handle billing for SAS applications?

ES: Well, I think one of the other issues that some companies have when they’re billing a SAS application, either from an on-premise application that you’re trying to convert to SAS or a new service is that they’re still thinking in the old software paradigm where it’s kind of a one-time purchase, you either take the credit card or you prove the transaction through a CFO and a PO and then you move on. In software as a service, you’re software is not your business, but your customer experience is your business and all of the use cases throughout the customer life cycle need to be considered when building a SAS application. For instance, when somebody signs up, tracking channels and tracking resellers, integrating with something like Salesforce.com to bring the customers into the service, being able to do more than just take a one-time transaction but manage multiple transactions throughout a customer life-cycle that might extend beyond a one-time purchase, monthly, quarterly, annually for an extended period of time. So, taking the approach of understanding what all of those use cases are in a long subscription based or recurring relationship.

KD: OK, so for companies interested in putting together a SAS offering, such as ISB’s can you give a list of do’s and don’t’s that they should keep in mind when considering the billing issue?

ES: Yes, so we’re kind of seeing a convergence of really two forces, if you will. One of them is the way consumers are buying goods and services on the internet and products on the internet – songs, videos, etc. is leaking into the enterprise so what I mean, even CIOs of large companies are not willing to bear the expense of building out an entire infrastructure and go after compliance, etc. when the number of users they have is not determined yet. So, I would say, the other thing that is happening is the world – I read the book, The World is Flat but it really is, I didn’t appreciate how amazing that phenomenon is until it started happening to us here at Aria and our clients. We built our software to really for North American companies and we kind of were faced with this happy accident of having customers and end-users, in turn, in 236 countries, 16 different currencies, having to deal with not just the rigors of being able to take credit cards and manage personal information in the United States, but understanding things like the European Safe Harbor Act when a software company in the middle of America decides to sell their software over the web and somebody from Europe shows up with a Visa card and if you take that personal information and unbeknownst to that service provider they’re in violation of a treaty between the United States and the European Union when they take the citizen of the EU’s personal and financial information across a border.

There’s a whole bunch of compliance issues out there that small companies tend not to think about and even larger companies are starting a new service don’t think about that really need to be considered if you’re aiming to have a large successful business.

KD: Anything else you’d like to add on the subject of billing and SaaS software?

ES: I guess the three main things I like to talk about are that your software is not your business, making sure that you understand that unlike classical software providers your software is not your business and you’re entering into a relationship as a SaaS provider. There are different use cases throughout that life cycle. You need to consider billing before you enter into beta for your software so that you can have a really good understanding of how you can get all those interactions to scale in business. So we say billing before beta and billing is really treated as an afterthought and it should be well thought out and planned while you’re building out the application, especially for SaaS providers.

KD: Great! We’ve been talking with Ed Sullivan of Aria Systems about software as a service billing concerns. Remember if you want more blogs, white papers, news and more about software as a service and enterprise 2.0, visit www.ebizq.net. Thanks for listening and have a great day!

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Once thought to be the realm of SMBs, SaaS is increasingly becoming more prevalent in the enterprise. CIO Australia has a good article about this today that profiles the rise of SaaS in larger companies.

The article quotes Capgemini's head of SaaS pointing out that SaaS means faster time to market and a more business centric cost model that allows for closer aligning of IT costs to business impact.

A representative from a SaaS CRM firm suggests also that some companies deploy a SaaS solution as an interim solution for a problem and then ultimately end up keeping the SaaS solution after being pleased with the value.

Other points include that what is outsourced in SaaS is merely "grunt work that should have been done by the vendor" and that the CIOs are more and more frequently becoming involved in decisions to deploy SaaS.

The article makes other interesting points as well. I have often wondered why SaaS is so frequently labeled as an SMB issue, and I do suspect that more and more we will hear of larger companies choosing SaaS and that enterprise class SaaS solutions will become more prevalent.

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