Clouds on the horizon

Blue sky thinking: The rapidly growing software-as-a-service market sector has been clouded by confusion

Resellers have been under a cloud for some time. However, this cloud offers real opportunities.
Software-as-a-service (SaaS) describes a method of delivering IT-related capabilities as a service via the internet, instead of
physically installing it on hardware.
Recent months have seen the market fogged up by a considerable amount of sturm-und-drang about cloud computing and SaaS, but resellers are finding quieter spots to get good return on investment.

Andrew Peddie, managing director at business software solutions provider First Hosted, said SaaS means that information can be delivered on demand across more than one platform.

“Channel firms should be excited,” he said. “The days of opening laptops in airports, copying files onto organisers and carrying discs and USB sticks are long gone for the SaaS subscriber.”

High altitude
A recent McKinsey report indicated that 61 per cent of chief information officers are considering SaaS.
“SaaS applications are enhanced and developed continuously and the application runs live. No patches required,” said Peddie.

The software solution provides the full range of functionality without having to own and maintain the computer processing and data storage hardware.
“Then we add value by working as a partner and employing our knowledge and experience,” he added. “The benefits are minimal travel, fast deployment, no capital outlay and a strong relationship with the service provider.”

Peter King, Office server group manager at Microsoft UK’s business division, argued that both cloud and on-premise solutions can and will be combined.
The channel therefore should offer end users a hybrid set-up.
“The opportunities that are emerging are diverse,” he said. “For example, the channel may offer services at scale across their current offerings and new solutions.”

Eilert Hanoa, chief executive of financial software provider Mamut, agreed that cloud computing is not ideal for every situation. “The desktop will not die. Instead, the cloud will merge with desktop functionality.”
Hanoa said that software-plus-services, a hybrid model, uses functionality from the cloud, but also uses desktop components – ­ combining the strengths of both, but with none of the weaknesses.

He added that some elements of the internet remain beyond the provider’s control. Applications are not always suited to deployment in the cloud and there are general security concerns.

Murky gains
“Hosted and SaaS providers have promised 99.9 per cent availability of service, often backed up by fail-safe servers and advanced routing technology,” said Hanoa. “Both Amazon and Salesforce.com have experienced downtime with their hosted services. In both cases, users lost access to data and services.”

For Schalk Viljoen, director of mid-market strategy at SAP UK, the real benefit of cloud computing for the channel is in SaaS. While the hosted application model has been through several incarnations in the past, improvements in technology mean the model is now succeeding.

“Vendors are providing specific services that have traditionally been provided up front as a subscription model,” he said. “Yet some people might see [cloud computing] as just Google, for example.”
Real return on investment is not only possible but highly likely for providers that partner with the right SaaS vendors, said Viljoen.

“Organisations are now understanding how to leverage the cloud.”You can extend your offering to current customers or create new services.”
However, Chris Stening at internet service provider EasyNet Connect, said that while the cloud is coming, SMEs are failing to prepare for it.
Easynet Connect recently commissioned Opinion Matters to survey cloud computing adoption among 270 UK SMEs with 10 to 250 employees.

“One in four respondents plan to move to cloud-based services or applications within two years, with about half expected to do so within five years,” said Stening.

However, only 10 to 12 per cent of survey respondents said they planned to re-evaluate their internet connectivity.
Just 13 per cent said they would explore business continuity measures to safeguard their connection and 9.2 per cent said that they would put in place more stringent security measures ­ – suggesting sales opportunities for the channel.

To get maximum benefit from cloud computing and SaaS, users need to be able to upload as much, if not more, information to the internet than they download from it, according to Stening.

David Stanley, EMEA managing director at email security vendor Proofpoint, said: “The SaaS market is growing and lots of end users are moving to the cloud computing model. For many smaller users with one-man IT departments it makes sense to outsource and go for the hosted solution.”

Above the mist
Dan Germain is chief technical
officer at Cobweb Solutions, a provider of Microsoft Hosted Exchange Services. He says the SaaS market worldwide is expected to reach US$19.3b in 2011.
As well as falling margins for hardware and low-end services such as maintenance, resellers now face loss of enterprise software sales, support and integration – ­ all of which could now be sucked into the cloud, he notes.

The silver lining is that SaaS opportunities themselves are on the up. “Gartner predicts we will see 80 per cent of businesses using cloud computing in the next three to four years,” said Germain.
He also believes that small providers can have an edge over the SAPs and Microsofts of the world when it comes to the cloud. A smaller firm can base its offering on partnering a larger vendor, but specialise in providing tailored options for its customers while giving around-the-clock service and personalised attention, he said.

“There is a bit of a technology bandwagon going on, but there are real opportunities,” said Germain.
When the fog clears from the marketing messages, what SaaS boils down to is savings from not having to own, maintain and upgrade software. Resellers really can fly higher in the cloud.