News from the Cloud: Don't make assumptions about SaaS, says Gartner
A round-up of stories about web-based applications from our new sister site, BusinessCloud9.com.
Critics of Software as a Service (SaaS) sometimes play the FUD (fear, uncertainty, and doubt) card of asking what happens if your SaaS provider goes bust? Do you lose your applications, your service, your data? Well, we're about to see what happens in this sort of situation following the collapse of Coghead, a Cloud vendor whose passing might also raise questions about the Platform as a Service (PaaS) concept.
Coghead was one of the more visible and more favored Cloud Computing start-ups in Silicon Valley. It went live in October 2006, offering customers an online application development and hosting platform, a service which runs on Amazon's Elastic Compute Cloud. A few years on and it's a very different story....
The company attributes its closing to the dire economic situation, although some observers have also pointed to a perceived lack of portability standards in Cloud Computing as a potential contributor to its woes. With more established firms such as Google and Salesforce.com also preaching the PaaS gospel, the smaller Coghead might have been seen as not such a safe bet for those about to make a commitment to the cause of The Cloud.
Recession or no recession, Salesforce.com has become the first billion dollar cloud company.
"We have become the first enterprise Cloud Computing company to report more than $1 billion in revenue in a single fiscal year," declares Marc Benioff, CEO and co-founder of Salesforce.com. "That's a remarkable achievement in any environment, let alone the one that we're currently facing."
Benioff has some considerable reason to feel pleased. He made public his intention to see Salesforce.com top the billion dollar mark some time ago, but there were those in the market who predicted that the collapse of the global economy might have put paid to that notion this year. Had that happened, the cries of glee from many would have been heard, but in the event, Salesforce.com has delivered. Maybe, just maybe, SaaS is the recession-friendly option that many of its evangelists would claim.
"We're winning deals in companies of all sizes in virtually every industry - technology, media, pharmaceuticals, consumer retail, chemicals, education, and financial services. We're selling to a wide variety of industries and a broader mix of products," says Benioff. "We added roughly 3,600 net customers during the fourth quarter to bring our total net paying customer count to more than 55,400. That's an increase of roughly 14,000 customers for the year, more customers than we added in our first six years of business."
SaaS is cheaper than on premise, right? Well, up to a point. Research firm Gartner Group has issued a warning to CIOs not to assume that SaaS will in fact turn out cheaper in the long term.
"In recent years there has been a great deal of hype around SaaS," stated Robert DeSisto, VP and distinguished analyst at Gartner. "As a result, a great number of assumptions have been made by users, some positive, some negative, and some more accurate than others. The concern is that some companies are actually deploying SaaS solutions, based on these false assumptions."
SaaS is cheaper during its first two years of use, Gartner finds, but the total cost of ownership over five years would be lower for on-premises software. It also warned that while most users will assume that they will be paying on a 'pay as you go' basis, there are still likely to be contractual considerations. In "the vast majority of cases," Gartner says that companies are pushed to sign predetermined contracts with fixed fees.
In its report Fact-Checking: The Five Most-Common SaaS Assumptions, Gartner also warned that SaaS is not necessarily faster to implement. While vendors quote 30 days as the normal implementation time, some software can still take up to seven months to set up.