Business advisory: Know SaaS issues before they impact operations

Uncovering the benefits of Software-as-a-Service, or SaaS, requires understanding the terms and technologies involved so everyone can ask the right questions. Corporate IT, discrete manufacturing, and continuous process operations all have unique considerations when it comes to deciding when and how to adopt SaaS applications, or move into the service-based world.

06/01/2008


Uncovering the benefits of Software-as-a-Service, or SaaS, requires understanding the terms and technologies involved so everyone can ask the right questions. Corporate IT, discrete manufacturing, and continuous process operations all have unique considerations when it comes to deciding when and how to adopt SaaS applications, or move into the service-based world.

Benefits typically attributed to SaaS include easier deployment, maintenance, and upgrades; flexible licensing; and better application life-cycle management. How these benefits are realized will depend on users' readiness to externalize their infrastructure and data. Companies may have to reconsider the way they think about security, data centers, managed service offerings, legacy applications, or desktop support—and of course, accessing the Web in general.

Distributed supply chains and various economic factors have driven discrete manufacturers to become more agile to stay competitive. Their cousins over in the continuous-process industries may not be under the same pressure to examine SaaS on the operations side.

“Manufacturers that need a great deal of flexibility to tie together their supply chain may find SaaS offerings fit their requirements,” says Alison Smith, a director with Boston-based AMR Research . “For both continuous process and discrete manufacturing, operations intelligence will be a more obvious fit. Once you get closer to the process, data volume may become more of a consideration.”

Thus, many process and manufacturing software vendors have worked hard to re-architect their software into “service-enabled” applications that can help customers better integrate disparate systems that might span platforms, product lines, divisions, companies, or other wide IT chasms.

On-premise and on-demand

To deliver their software as a service, vendors need a secure, highly available data-center infrastructure ready to support their customers. For example, Plexus Systems established its own data center and hosting infrastructure when it completely reinvented its manufacturing software solution to be delivered entirely over the Web in 2001.

“When customers tour our data center and see the measures we have in place to protect their data, we find they are much more comfortable keeping their data off-premise,” says Mark Symonds, CEO, Plexus Systems.

Security is paramount for any hosted application. For Plexus Systems, passing a SAS-70 audit demonstrates that it has established the appropriate controls and safeguards for its customers' data. This is a critical consideration for manufacturers that maintain a Sarbanes-Oxley compliance program.

Because building data centers is a significant undertaking, some SaaS vendors may elect to become customers of another vendor's “data center as a service” offering to host and maintain their SaaS application infrastructure. Similarly, manufacturers may want to consider using a data center as a service to move critical but noncore IT functions off-premise safely and securely.

Software licensing programs and practices are among the most contentious points in any vendor/customer relationship. Customers need to consume the software in a way that fits the business. Vendors need to license their software in a way that minimizes their support costs and preserves their development flexibility. Traditionally, the customer is either asked to pay for portions of the product they won't use, or the customer limits the scope, use, or deployment of the application to minimize license costs.

Managed service offerings can offer an alternative to customers that want to keep some resources on-premise, but keep their license structure flexible. Vendors establish a service-level agreement, or SLA, to guarantee important aspects of their software performs to customer expectations.

One company that has started to focus on a managed service offering is data historian vendor OSIsoft . Customers retain the software on site, but OSIsoft manages and maintains the software installations within their own off-premise network operating center, or NOC. Upgrades still have to be rolled out to each installation individually, but are done by experts working inside the NOC, which helps customers stay up-to-date.

Consider the cloud

Clearly though, the pure Software-as-a-Service model is about “the cloud,” or off-premise offerings. SaaS customers can subscribe to what they need—when they need it—while SaaS vendors increase their development and support efficacy.

To get there, an established vendor may offer an entirely new application as a service. This is the idea behind SAP 's Business ByDesign. It's not SAP as you've seen it before, and not just because it doesn't live on-premise. SAP started from a targeted set of functionality that addresses the small-business market segment and plans to evolve it over time.

Other vendors are completely service-based already, so the benefits SAP intends to deliver with Business ByDesign already are being experienced by, for example, the customers of Plexus Systems and Carbonetworks , a vendor of carbon emissions-management solutions. Potential benefits aside, industry acceptance of SaaS can be a hurdle because customers must relinquish some degree of control.

“Initially we were strongly encouraged to deliver our software suite as a solely on-premise offering,” says Michael Meehan, CEO of Carbonetworks. “However, with our business model, it made much more sense to keep it entirely off-premise, and now our customers don't even think twice about it being an off-premise offering.”

Carbonetworks software allows users to include site operations, partners, and suppliers into their carbon footprint management strategy. Upgrades happen out in the cloud seamlessly, and adoption of the software by new customers is expedited because they've obviated a significant amount of the IT resources needed to install and maintain a new business system.

As would be expected, new or “breakthrough” applications are easier to offer as a service. There are no legacy customers, no migration concerns, and a clean slate from which to start a vendor/customer relationship. This is partly why an established software vendor will nearly reinvent even a well-known application as a service. Simply slapping a set of Web services on top of an application doesn't make it a winning proposition for the customer or vendor.

As is the case with SAP, which is first targeting small businesses with Business ByDesign, vendors may identify a different customer demographic with their new application because every feature or function from the flagship application isn't yet available as a service.

Getting into the cloud

Operations IT may not be the first place your company looks when it comes to investigating SaaS. Common IT infrastructure may in fact be the primary consideration.

Subscribing to email and collaboration software offerings as a service seems a logical first step. Many companies also subscribe to certain HR systems as services for functions like payroll and expenses. Vendors will try to extend this trust beyond these basic utilitarian offerings and into new application areas.

Of course, most process industry and manufacturing companies depend upon at least one specialized or custom application. What if these can't be replaced with a vendor's off-the-shelf or SaaS application? Infrastructure providers like Microsoft have been working hard to bring those applications that can't be left behind into the service world one way or another.

Realistically, most companies will require a blend of both on- and off-premise applications. Microsoft's service strategy calls this Software plus Services—or S+S—which is executed from an infrastructure, hosted services, and applications perspective.

Microsoft offers tools that enable partners and customers to migrate or create applications that work both on-premise and in the cloud. Microsoft also has a suite of online services to support partners and customers that need hosted resources like email (Microsoft Exchange); collaboration (SharePoint); and entire data centers. The vendor uses its infrastructure and service offerings to enable applications like Microsoft Office System to work in both the on- and off-premise world, allowing a partner application to seamlessly move from one to another.

“Microsoft thinks there is tremendous benefit in offering certain manufacturing and operations systems as a service,” says Chris Colyer, worldwide director, manufacturing operations strategy, Microsoft. “If you think of it from an ISA S95 information architecture model, Level 3 and Level 4 systems such as MES, genealogy tracking, or quality systems can be managed or offered as a service.”

It goes beyond that as well: Microsoft has a way to move that critical legacy application into a manageable desktop environment, or even into the cloud.

“Virtualization can help you move a critical application into a more robust environment,” says Colyer. “Legacy desktop applications also can be virtualized and centrally managed as a service to run on today's hardware.”

Starting points

Where should the SaaS adventure begin? A narrow scope can help weed out the field of candidates while establishing a foothold in the software as a service world.



When IT applications are "service-enabled"—whether created in-house or leveraging vendors’ service-oriented architecture (SOA) support—infrastructure upgrades can be accomplished without necessarily touching every single piece of integration work previously accomplished. In theory, a SaaS ERP provider can offer services from other vendors.

One of the promises of Software-as- a-Service is “low switching costs.” If objectives change or a vendor doesn't deliver, switching providers should be less expensive than ripping and replacing on-premise software. This is one reason the SLA established with a vendor is important. Look for evidence the provider can meet your demands. To do so, it's imperative to understand what your demands actually are.

As with any application, consider how it will affect the user base. The security integration of any off-premise service—even if it is within your own control, but outside the firewall—with pre-existing security topology and practices can make or break its adoption. Just consider how many user names and passwords employees manage today—and how they manage them. The more seamless the integration, the more users will accept it.

The introduction of any external software or services will change a company's risk profile. It is important to assess and understand the current situation so one can ask the right questions of a services or SaaS vendor prior to engagement. This will help identify any unintended security risks beyond the obvious concerns regarding the vendor's security experience and your data's safety outside the firewall.

“You have to build a secure relationship and partnership with a vendor, and this will develop over time,” says Colyer—a sentiment echoed by Carbonetworks and Plexus Systems. An open dialog with any vendor helps address concerns, and bring to light the vendor's readiness, as well as your own.



Central to the Firepond solution is its Product Data Manager, which serves as a
central data repository for all product descriptions, pricing, and configuration rules—in addition to necessary workflows.

Integration with off-premise offerings can be done many different ways, but first consider how long certain critical custom applications will remain live. While virtualization technology helps move an application onto a more modern, easier-to-maintain platform with increased uptime, consider the parasitic effect this may have on IT operations. Integrating legacy applications with a more modern infrastructure can still be an exercise that leaves brittle, hard-coded links between systems, yet minimal business disruption may be more important than being completely service-based on day one.

If possible, a service-oriented integration approach that isolates a legacy application's functions may deliver the best of both worlds. If that blend of functions can be recreated from several vendor applications, then it isn't necessary to find an exact replacement for the legacy application.

These trade-offs can and must be evaluated. Truly understanding an application's role in operations helps identify the right strategy. Certainly there are examples where the work to maintain that application or develop a more modern replacement will be an acceptable strategy. When that list of applications is known and its impact on operations understood, the alternatives will become clearer.

Embracing services of all kinds can offer many benefits. Taking advantage of those benefits may require leveraging all the options available, and that calls for an understanding of your IT landscape and objectives. Just remember: you're in the driver's seat and your unique strategy won't come in a box, hosted or otherwise.


Author Information

F5Direct is focused on communicating how technology can be used to solve real problems in a direct, refreshing way. Recently Gregg Le Blanc served as director of technical strategy at OSIsoft. Contact Le Blanc online at


Customer-facing SaaS applications find favor with users

One of the most promising areas for Software-as-a-Service (SaaS), as clearly evidenced by the success of Salesforce.com , is that of customer-facing applications.

Yet Salesforce.com isn't capable of supplying the complex configuration, pricing, and quotation functionality needed by industrial goods makers and other manufacturers.

Managing the configuration and quoting process for the sale of complex products has always been a cumbersome task. If nothing else, frequent updates to product features and pricing make it difficult to ensure all interested parties have the most current product specifications and price books.

This challenge is compounded by the need for detailed data—typically dispersed among a variety of sources—to augment customer proposals.

Sonitrol Corp. —a security and system manufacturer headquartered in Berwyn, Pa.—once faced problems common to many engineer- and configure-to-order manufacturers. The process used to quote proposals for prospective customers had become too cumbersome and time-consuming, resulting in a growing proposal backlog, even as Sonitrol expanded and new sales representatives were hired. Plus, as security system features of Sonitrol products were enhanced, the manufacturer faced challenges of distributing product feature and pricing updates in a timely manner.

Today, Sonitrol generates close to 2,000 proposals a month using Firepond 's CPQ OnDemand. “We've seen the time it takes to configure, price, and quote our products reduced by at least 50 percent,” says Ken Teifer, regional VP of sales at Sonitrol.

The Firepond solution is an on-demand, multi-tenant solution that automates and simplifies product pricing and configuration while seamlessly integrating with customer relationship management solutions, including Saleforce.com.

Says Carol Ferrari, a company VP with Firepond, “Our user interface and database are both multi-tenant, unlike other systems that use a hybrid model in which the user interface is single tenant hosted, and the database is multi-tenant. The significance is that with pure multi-tenant, upgrades and enhancements are seamless, while ongoing costs are less.”

What about SaaS for “real manufacturing”?

In early April, Plexus Systems announced an agreement under which Wescast Industries , a supplier of vehicle exhaust manifolds, will use Plexus Online on-demand software for the manufacturing enterprise.

Implementation will begin at the Wescast Asian Business Unit centered in Wuhan, China; as well as one North American facility.

“Plexus brought a deep understanding of the automotive industry, core competency in manufacturing, and the flexibility to meet both local and global requirements,” says Ed Frackowiak, chairman and CEO, Wescast Industries. “Through the unique Software-as- a-Service [SaaS] deployment model, Plexus demonstrated the ability to deploy system changes to meet our requirements in a matter of days.”

One of the few SaaS-based systems boasting manufacturing functionality—another being Glovia Services —Plexus CEO Mark Symonds recently outlined key points he says define a true SaaS application:

Accessed over the Internet—anywhere, anytime;

Hosted and supported directly by a software vendor that guarantees availability and response time;

Multi-tenant system with many companies using one copy of the software on a big infrastructure;

Software changes, and hardware and software upgrades completed and available rapidly, avoiding new version releases, training, and customer downtime for upgrades;

100 percent of screens accessible via the browser; and

Bandwidth-friendly because it was written for the Web.

The automotive domain expertise embedded in Plexus Online that Wescast cites began with the application's earliest development as an internal project at an automotive parts manufacturer, with Plexus Systems being spun out as an independent company in 1995. The vendor says it began converting its software architecture from client/server to on-demand as far back as 2001.

Embracing ERP, manufacturing execution, and supply chain, the system also includes Lean modalities, process inspection, and traceability tracking.

Plexus says its software is used in 1,200 plants, including users in the food processing, medical device, and electronics industries.

Equipment maintenance, spare parts sit well with SaaS

If a company says it will fix any product that needs repair in two to four hours, it must have a well-managed aftermarket supply chain. When managing spare parts inventory, companies need forecasting and demand-planning functionality to know what to stock in each location.

Applications from MCA Solutions manage the spare parts process. “Many companies are just discovering that aftermarket service can be very profitable,” says Tim Andreae, a company VP for MCA.

Traditionally serving very large companies such as Boeing and Lockheed Martin , MCA is attracting interest from the midmarket. Its MCA OnDemand is a Software-as-a-Service (SaaS) solution that lends itself to the needs of companies that lack the IT resources, infrastructure, and working capital to invest in a traditional onsite implementation.

Tellabs , a Naperville, Ill.-based telecommunications provider, was MCA's first SaaS site. The company works with DHL for logistics planning, inventory optimization, and advanced forecasting.

Intermittent demand makes planning particularly challenging for Tellabs.

“There is no way to know which switch is going to break and when,” says Andreae. “It is a delicate balance of deciding where the company should store parts to maximize service to meet inventory levels without overstocking.”

MCA has offered a hosted version of its system for some time, but is rolling out its SaaS version more aggressively this year. A 24-hour data center hosts the system, and users pay a monthly fee to lease the system, which includes maintenance, support, and training.


Supply chain applications that cross enterprise boundaries and support formation of ad hoc collaborative groups are well suited for SaaS. The MCA OnDemand Solution prioritizes tasks and optimizes stocking levels at all locations and echelons.

By offering SaaS as a deployment option, users can start off with lower total implementation costs “because they are sharing a server with as many as a million other users,” says Brian Anderson, a company VP for remote service technology provider Axeda . While only 10 percent of Axeda's customer base is hosting its applications, Anderson says interest in SaaS is growing.

“Companies are getting more comfortable with having data sit outside the four walls of the organization,” says Anderson. “They are familiar with annual revenue and maintenance contracts, so it makes sense to pay a subscription fee on an annual basis.”

The SaaS delivery model makes the most sense for Axeda's remote equipment maintenance and repair, which presents a challenging scalability issue for users. “It is a much more complex IT challenge than setting up a sales force automation system,” says Anderson. “There are times when we can have 10,000 agents all talking together, 24/7.”

Pain points: No problem too large or small for SaaS model

When Michael Fitzgerald thinks about the Software-as-as-Service (SaaS) market, he thinks about pain—and pain equals value. Founder and managing general partner of Boston-based Commonwealth Capital Ventures , Fitzgerald says that's what he wants to hear from principals of fledging SaaS firms seeking early funding.

A seasoned veteran of the software wars going back to big systems running on big mainframes, Fitzgerald is bullish on SaaS, which he says is especially well suited to “smaller applications needed around the margins of an enterprise. They're easier to fund, and you can drop one into a specific department and get benefits in days rather than weeks or months.”

EDI is challenging case-in-point, particularly for smaller companies without a deep IT bench. Such was the case for Garland, Texas-based Arena Brand .

“We wanted to expand into bigger stores where EDI is a standard means of conducting business,” says Keith Ritchie, corporate IT director for the company best known for Stetson hats and Lucchese boots. “I have a small IT staff and have to be selective in what we take on.”

Ritchie opted for SPS Commerce , which offers SaaS-ready EDI. “We went from completely manual to fully automated, with SPS linked directly into our enterprise system,” says Ritchie.

According to Jim Frome, an SPS company VP, “We essentially serve as our customers' EDI department,” says. “Designing, building, and testing an EDI network is a fair amount of work. With the technology of the Internet and SaaS, it doesn't make sense for them to do it themselves.”

EDI is but one example where pain equals opportunity. IQNavigator provides comprehensive SaaS applications supporting temporary labor services procurement, while SpringCM provides on-demand content management functionality. FirePond also offers invaluable configure-price-quote functionality for complex product manufacturers.

“In every way save one, perhaps, SaaS is the future of the software industry,” Fitzgerald asserts. “For ERP that's core to your business, it might be better to invest in an enterprise system and bring it in-house.”

Yet even on the enterprise systems front, Glovia International created Glovia Services in 2006 to deliver on-demand ERP, targeting small and midsize companies. There are others, including NetSuite , which recently announced a partnership with SPS Commerce for pre-integrated ERP/EDI.



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