INSUBCONTINENT EXCLUSIVE:
Grant Miller
Contributor
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Grant Miller is the co-founder of
Replicated
As we enter the 20th year of Salesforce, there an interesting opportunity to reflect back on the change that Marc Benioff
created with the software-as-a-service (SaaS) model for enterprise software with his launch of Salesforce.com.
This model has been validated
by the annual revenue stream of SaaS companies, which is fast approaching $100 billion by most estimates, and it will likely continue to
transform many slower-moving industries for years to come
However, for the cornerstone market in IT — large enterprise-software deals — SaaS represents less than 25 percent of total revenue,
according to most market estimates
This split is even evident in the most recent high profile &SaaS& acquisition of GitHub by Microsoft, with over 50 percent of GitHub revenue
coming from the sale of their on-prem offering, GitHub Enterprise
Data privacy and security is also becoming a major issue, with Benioff himself even pushing for a U.S
privacy law on par with GDPR in the European Union
While consumer data is often the focus of such discussions, it worth remembering that SaaS providers store and process an incredible amount
of personal data on behalf of their customers, and the content of that data goes well beyond email addresses for sales leads.
It time to
reconsider the SaaS model in a modern context, integrating developments of the last nearly two decades so that enterprise software can reach
More specifically, we need to consider the impact of IaaS and &cloud-native computing& on enterprise software, and how they&re blurring the
lines between SaaS and on-premises applications
As the world around enterprise software shifts and the tools for building it advance, do we really need such stark distinctions about what
can run where
Source: Getty Images/KTSDESIGN/SCIENCE PHOTO LIBRARY
The original cloud software thesis
In his book, Behind the Cloud,
Benioff lays out four primary reasons for the introduction of the cloud-based SaaS model:
Realigning vendor success with customer success by
creating a subscription-based pricing model that grows with each customer usage (providing the opportunity to &land and expand&)
Previously, software licenses often cost millions of dollars and were paid upfront, each year after which the customer was obligated to pay
an additional 20 percent for support fees
This traditional pricing structure created significant financial barriers to adoption and made procurement painful and elongated.
Putting
software in the browser to kill the client-server enterprise software delivery experience
Benioff recognized that consumers were increasingly comfortable using websites to accomplish complex tasks
By utilizing the browser, Salesforce avoided the complex local client installation and allowed its software to be accessed anywhere, anytime
and on any device.
Sharing the cost of expensive compute resources across multiple customers by leveraging a multi-tenant architecture
This ensured that no individual customer needed to invest in expensive computing hardware required to run a given monolithic application
For context, in 1999 a gigabyte of RAM cost about $1,000 and a TB of disk storage was $30,000
Benioff cited a typical enterprise hardware purchase of $385,000 in order to run Siebel CRM product that might serve 200
end-users.
Democratizing the availability of software by removing the installation, maintenance and upgrade challenges
Drawing from his background at Oracle, he cited experiences where it took 6-18 months to complete the installation process
Additionally, upgrades were notorious for their complexity and caused significant downtime for customers
Managing enterprise applications was a very manual process, generally with each IT org becoming the ops team executing a physical run-book
for each application they purchased.
These arguments also happen to be, more or less, that same ones made by infrastructure-as-a-service
(IaaS) providers such as Amazon Web Services during their early days in the mid-late ‘00s
However, IaaS adds value at a layer deeper than SaaS, providing the raw building blocks rather than the end product
The result of their success in renting cloud computing, storage and network capacity has been many more SaaS applications than ever would
have been possible if everybody had to follow the model Salesforce did several years earlier
Suddenly able to access computing resources by the hour—and free from large upfront capital investments or having to manage complex
customer installations—startups forsook software for SaaS in the name of economics, simplicity and much faster user growth.
Source: Getty
Images
It a different IT world in 2018
Fast-forward to today, and in some ways it clear just how prescient Benioff was in pushing the world
Of the four reasons laid out above, Benioff nailed the first two:
Subscription is the right pricing model: The subscription pricing model
for software has proven to be the most effective way to create customer and vendor success
Years ago already, stalwart products like Microsoft Office and the Adobe Suite successfully made the switch from the upfront model to
thriving subscription businesses
Today, subscription pricing is the norm for many flavors of software and services.
Better user experience matters: Software accessed through
the browser or thin, native mobile apps (leveraging the same APIs and delivered seamlessly through app stores) have long since become
The consumerization of IT was a real trend, and it has driven the habits from our personal lives into our business lives.
In other areas,
however, things today look very different than they did back in 1999
In particular, Benioff other two primary reasons for embracing SaaS no longer seem so compelling
Ironically, IaaS economies of scale (especially once Google and Microsoft began competing with AWS in earnest) and software-development
practices developed inside those &web scale& companies played major roles in spurring these changes:
Computing is now cheap: The cost of
compute and storage have been driven down so dramatically that there are limited cost savings in shared resources
Today, a gigabyte of RAM is about $5 and a terabyte of disk storage is about $30 if you buy them directly
Cloud providers give away resources to small users and charge only pennies per hour for standard-sized instances
By comparison, at the same time that Salesforce was founded, Google was running on its first data center—with combined total compute and
RAM comparable to that of a single iPhone X
That is not a joke.
Installing software is now much easier: The process of installing and upgrading modern software has become automated
with the emergence of continuous integration and deployment (CI/CD) and configuration-management tools
With the rapid adoption of containers and microservices, cloud-native infrastructure has become the de facto standard for local development
and is becoming the standard for far more reliable, resilient and scalable cloud deployment
Enterprise software packed as a set of Docker containers orchestrated by Kubernetes or Docker Swarm, for example, can be installed pretty
much anywhere and be live in minutes.
Sourlce: Getty Images/ERHUI1979
What Benioff didn&t foresee
Several other factors have also emerged
in the last few years that beg the question of whether the traditional definition of SaaS can really be the only one going forward
Here, too, there irony in the fact that many of the forces pushing software back toward self-hosting and management can be traced directly
to the success of SaaS itself, and cloud computing in general:
Cloud computing can now be &private&: Virtual private clouds (VPCs) in the
IaaS world allow enterprises to maintain root control of the OS, while outsourcing the physical management of machines to providers like
Google, DigitalOcean, Microsoft, Packet or AWS
This allows enterprises (like Capital One) to relinquish hardware management and the headache it often entails, but retain control over
networks, software and data
It is also far easier for enterprises to get the necessary assurance for the security posture of Amazon, Microsoft and Google than it is to
get the same level of assurance for each of the tens of thousands of possible SaaS vendors in the world.
Regulations can penalize
centralized services: One of the underappreciated consequences of Edward Snowden leaks, as well as an awakening to the sometimes
questionable data-privacy practices of companies like Facebook, is an uptick in governments and enterprises trying to protect themselves and
their citizens from prying eyes
Using applications hosted in another country or managed by a third party exposes enterprises to a litany of legal issues
The European Union GDPR law, for example, exposes SaaS companies to more potential liability with each piece of EU-citizen data they store,
and puts enterprises on the hook for how their SaaS providers manage data
Data breach exposure is higher than ever: A corollary to the point above is the increased exposure to cybercrime that companies face as
they build out their SaaS footprints
All it takes is one employee at a SaaS provider clicking on the wrong link or installing the wrong Chrome extension to expose that provider
customers& data to criminals
If the average large enterprise uses 1,000+ SaaS applications and each of those vendors averages 250 employees, that an additional 250,000
possible points of entry for an attacker
Applications are much more portable: The SaaS revolution has resulted in software vendors developing their applications to be cloud-first,
but they&re now building those applications using technologies (such as containers) that can help replicate the deployment of those
applications onto any infrastructure
This shift to what called cloud-native computing means that the same complex applications you can sign up to use in a multi-tenant cloud
environment can also be deployed into a private data center or VPC much easier than previously possible
Companies like BigID, StackRox, Dashbase and others are taking a private cloud-native instance first approach to their application offerings
Meanwhile SaaS stalwarts like Atlassian, Box, Github and many others are transitioning over to Kubernetes driven, cloud-native architectures
that provide this optionality in the future
The script got flipped on CIOs: Individuals and small teams within large companies now drive software adoption by selecting the tools
(e.g., GitHub, Slack, HipChat, Dropbox), often SaaS, that best meet their needs
Once they learn what being used and how it working, CIOs are faced with the decision to either restrict network access to shadow IT or
pursue an enterprise license—or the nearest thing to one—for those services
This trend has been so impactful that it spawned an entirely new category called cloud access security brokers—another vendor that needs
to be paid, an additional layer of complexity, and another avenue for potential problems
Managing local versions of these applications brings control back to the CIO and CISO.
Source: Getty Images/MIKIEKWOODS
The future of
software is location agnostic
As the pace of technological disruption picks up, the previous generation of SaaS companies is facing a future
similar to the legacy software providers they once displaced
From mainframes up through cloud-native (and even serverless) computing, the goal for CIOs has always been to strike the right balance
between cost, capabilities, control and flexibility
Cloud-native computing, which encompasses a wide variety of IT facets and often emphasizes open source software, is poised to deliver on
these benefits in a manner that can adapt to new trends as they emerge.
The problem for many of today largest SaaS vendors is that they were
founded and scaled out during the pre-cloud-native era, meaning they&re burdened by some serious technical and cultural debt
If they fail to make the necessary transition, they&ll be disrupted by a new generation of SaaS companies (and possibly traditional software
vendors) that are agnostic toward where their applications are deployed and who applies the pre-built automation that simplifies management
This next generation of vendors will more control in the hands of end customers (who crave control), while maintaining what vendors have
come to love about cloud-native development and cloud-based resources.
So, yes, Marc Benioff and Salesforce were absolutely right to
champion the &No Software& movement over the past two decades, because the model of enterprise software they targeted needed to be destroyed
In the process, however, Salesforce helped spur a cloud computing movement that would eventually rewrite the rules on enterprise IT and,
