Larry Ellison, Oracle CEO once famously ranted: "What the hell is Cloud Computing?!"
In fact, if you were to run a Google Search for "Larry Ellison Cloud" - it will be the first result returned, from almost 6 years ago.
However, we should not be mistaken as his rant was not due to dumbfounded unfamiliarity, it was due to the fact the term "Cloud Computing" was starting to become the latest buzz word, used by many software companies, and ultimately its definition had become fuzzy.
This caused multiple definitions of the word: "Cloud" in computing terms. Ask five people to define "Cloud", you receive six different answers.
This post aims to dissect the term as it pertains to Public Cloud Applications or SaaS Applications, and highlight the reasons as to why the market is being driven towards the Cloud.
Three Key Terms
There are three key terms to remember as it relates to the Public Cloud: 'Cloud' itself, 'SaaS' and 'Multi-Tenancy'. Let's cover each aspect:
1 - Cloud
“Cloud computing is a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction”
This is a fair statement. However has this model of application delivery not been in practice for many years, decades in-fact? Client-Server applications, Application Service Providers (ASPs) and Browser-based applications have been around for a long time - are they not Cloud also? According to the definition above, yes they can be deemed as so.
Of course, the Cloud deployment models add complexity to the definition. Terms such as Hybrid Cloud, Private or Managed Cloud will be covered in future posts.
2 - Software-as-a-Service (SaaS)
"Software as a service is a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted."
Applications that can be subscribed are in use in our every day lives and are not uncommon. The SaaS model represents a significant shift in the way companies acquire and consume software applications.
Applications that traditionally may have only been available to large Enterprise companies are now consumable by small-medium businesses. Rather than paying up-front for large enterprise licenses, companies can effectively subscribe to software on a monthly, quarterly or annual basis for a contracted period of time - on an operating budget as opposed to a depreciated capital budget.
This allows the Line of Business to gain significant value in obtaining applications that add strategic execution value - delivered efficiently as described within a previous post: Moving to the Cloud - What Changes with Consulting?
With that said, this is still nothing new. What is the true game-changing nature of Cloud? Read on:
3 - Multi-Tenancy - Game Changer
Whereas the software architecture used by most ASPs mandated maintaining a separate instance of the application (including application and database layers) for each company, a true Cloud, SaaS application should utilise a multi-tenant architecture, in which the application serves multiple companies and users from a single code-line and database structure, and partitions its data and logic accordingly.
To clearly define Multi-Tenancy, we can use the analogy of a block of apartments:
It is a simple comparitive analogy however very effective, especially when we consider the benefits of the Apartment Block Tenant, the Multi-Tenant SaaS Application Customer and Software Vendor:
Key Benefits for the Apartment Block Tenant
Predictable Fees and Expenses
One moving in fee, and one recurring rental fee
Total Cost of Ownership and Time to Relaxation
It is cheaper, quicker and more efficient to rent an apartment, as opposed to buying or building their own house.
It increases the tenant's flexibility to move as and when their circumstances change - increasing size, decreasing size or moving to a new location.
Key Benefits for the Multi-Tenant SaaS Customer
Predictable Fees and Expenses
One initial implementation fee and one recurring subscription fee
Lower Total Cost of Ownership and Faster Time to Value
It is cheaper, quicker and more efficient to subscribe to a SaaS application, as opposed to buying, installing and deploying or building their own software, whilst delivering time-to-value. No IT hardware, hosting, perpetual licenses, or resourcing issues.
It increases the customer's business agility - to scale and change based on their circumstances and requirements. This is a key driver towards the adoption of Cloud.
Faster and Frequent Innovation
Always on the latest version of the application, benefiting from frequent and rapid innovations and keeping up-to-date with the latest technology, features and functions - typically all included within one recurring subscription fee.
Despite these benefits, companies may still have concerns about moving to the Cloud. We address the key concerns in this post, as part of the Moving to the Cloud series.
Key Benefits for the Multi-Tenant SaaS Application Vendor
Economies of Scale
As the SaaS Vendor does not have to build, maintain and support multiple application instances for every single customer (potentially thousands), a proportionate saving in costs is gained. Upgrades of every single customer tenant can take place in one day.
Research & Development
Due to the significant reduction in costs, the SaaS Vendor is able to divert investment into application R&D, delivering rapid and frequent innovation to their customers. In addition, customers can contribute towards future innovation by providing feedback and ideas towards product strategy. Should these ideas be applied, they would not only benefit the customer suggesting it, but every customer within the vendor's subscription base.
True Multi-Tenant Architectures and Data Centers are built in order to scale. Due to significant redundancy, the acquisition of a customer with hundreds, or thousands of users does not impact performance. Simply by increasing hardware provisions (storage, memory, processing power, bandwidth etc), further scale can be applied to accommodate an expanding cloud user-base.
Barriers to Purchasing
With lower, predictable and transparent and financial commitment from the customer, less IT dependency and shorter time to value, typical customer purchasing bottlenecks and barriers are reduced.
Companies typically ask me how they can be sure an application adopts true multi-tenancy, in order to reap the benefits described: The question to ask a software vendor is:
"What % of your customers are on the latest version of your software?".
If the answer is less than 100%, it is not multi-tenant.
Combining the three key terms: Cloud (Remote computing delivery model), SaaS (subscription model), and Multi-Tenancy (economies of scale) provides significant differentiators against traditional on-premise applications and brings a multitude of benefits that is driving an entire industry towards the Cloud.
The next post of this series will delve further into why market momentum is shifting towards Cloud.
Kunal Pandya is a Senior Director at SAP, responsible for the Global Cloud Solution Center, enabling and evangelising Cloud to SAP's Partner Ecosystem.