Software as a Service - like having a chauffeur?

What I hear from more and more Clients in the Small and Medium Business space, and even from prospective Clients, is that they would like to just know what their cost of technology is going to be for the year. Then they can budget for it (whatever it is that they agree to - which is not saying that it is as much as what some firms would like to charge them) and then get back to running and growing their own business. After all they have Customers to look after themselves.

Now maybe the best that these Clients have ever had it in the past, is that they would have a fixed monthly support contract for a year or more. This would involve the support firm actually doing work on a weekly or monthly basis in the form of troubleshooting systems that were deteriorating in some way (running out of disk space, or losing available memory through a server application's memory leak, or a failing backup attempt) and ensure that the Client's network and systems stayed running. Note, that this is not a "retainer". This works well and ensures that the Client has taken some responsibility for the effort it takes to keep a modern network of average complexity up and running and stable over a lengthy perdiod of time. They also get to spend their money in a preventative fashion rather than reactively when they are going under for the third time ...when it always costs much more (ever had to call a plumber out at 3:00am for a burst pipe?).

But, when a piece of hardware actually fails (beyond the control of the support company) then it would cost the Client extra to have the support company come out, diagnose it and then ensure that either they, or a break-fix company, took care of it.

Then there were the recommendations for additional purchases (hardware and software to solve tricky little problems that either came up as part of the business or else when somethign else got to the end of its useful lifespan). Not as regular as clockwork, but if a Client hadn't had one for a while then they learned to start looking for your caller ID or the account managers car in the parking lot... This could often be softened if the support company spent the time with the Client's decision makers to help them analyse their spending patterns and then assisted them is setting an IT budget for the years to come.

Increasingly I am seeing and hearing the decision makers of companies (150-200 users and all the way down to 5 users) take a look at their options for paying for their Software as a Service (SaaS). This entails them running all of their applications, including their desktop productivity applications on the servers in a hosting company's datacenter.

The financial benefits are multiple. If the Client moves to all thin clients then they can pay a single fixed fee per user (according to the software that they are renting) and then a small custom application fee per user for the resources used by the Line of Business applications that they are already own (and want to maximize their ROI from) and that they have moved onto the servers in the datacenter also. The thin clients mean that they have virtually no on-site end user support requirements - especially if the support company monitors their network switches, routers, firewall and network printers remotely. Sure they need to spring for high bandwidth internet access, but then most companies are doing that anyway these days. The only bandwidth hit is the keyboard and mouse data for each user, going from the user to the server, and the screen data coming back. All in all about 20kbps, or less, on average.

Some hosting companies will even go so far as to rent the thin clients and other devices to a Customer, meaning that there is little actual capital expenditure required to transition to this model of IT infrastructure and support.

Other hosting companies will even do the same (owning and renting out the hardware) when it comes to Clients that need to have PCs and laptops (due to user mobility requirements or else due to the need to work offline if the internet connection goes down for some bizarre reason - increasingly rare these days).

The benefit to the Client is that they only pay for what they use and this now becomes a predictable monthly fee according to the exact role of each person that is using the system (i.e. how many specialist applications they use). This provides a much enhanced ability to financially forecast for the Client - like what happens when they hire more people in this office, or shut down that remote location. The focus returns to the business at hand ...the costs of support, hardware and software can become predictable and directly scalable again. The technology fades into the background.

No more IT staff to hire, retain, keep stimulated and train on new things. No more health benefits and wondering what to do when they are sick or on vacation. No more "how do I get them to support the network , research a new CRM system for the sales force and upgrade the Accounting Package with the outside vendor - all at the same time?" No more "who the heck do I turn to if this person walks out tomorrow and never comes back?" (kiss goodbye to your career).

If you add a new server system, server application or do a significant upgrade then by all means expect to pay for the project - but at least in such a stable and controlled environment it should cost less than it would have if you has stayed with what you had before.

In my experience the average size of company (in Revenues or in # users) that is actively considering such a move, is quickly rising. The costs of increasing complexity required for a modern Client-Server network with communications, security and line-of-business applications are making it prohibitive for even medium sized businesses to go it alone. An excellent generalist internal resource is no longer enough, they are finding that they have to also bring in external consultants more frequently. The Software as a Service approach (often called Utility Computing too) is a way to reduce the costs to the end Client by allowing the hosting company (with application and business process expertise) to offset their own costs of infrastructure and experienced headcount across many Clients. Something to think about, if you just want to get back to your own business once more.

The rise of Google and salesforce.com

They came amid great clamor and fanfare. Those great big data centers in the Rocky mountains and the sunshine of the California. The venture capital funded. The dot.com dependent.
Then they whimpered and wilted. The silence has been anything other than golden ever since. The silence of mothballed data centers. Collecting dust.

Once. Not any more. Technology has moved on in the last 4 years. Data growth, requirements, availability and protection needs have exploded. Blade technologies have matured. The total investment required to play at the serious level has increased again. The dusty caverns have been brought out of retirement and repurposed - significantly increased power capabilities, and antarctic cooling capacities for the latest, denser blade enclosures. Redundant power supplies and backups and geographically redundant Internet connections with almost unlimited data capacity (no drooling, boys).

High speed connectivity has penetrated far beyond the domestic USA since 2000. America has long since dropped out of even the top 10 nations for high bandwidth penetration within the global society.

Whilst all of this is good, or even great, news for mega corporations that have both the budget and the annual spending intent to seduce the owners of such LED lit caverns - driven by the need to reduce uptime and productivity, whilst reducing internal costs and complexities and almost as importantly whilst outsourcing their risk of data loss and hence financial catastrophe. What does it mean for the smaller organizations?

Can a smaller organization afford to spend the time and money to jet around North America to select a the ideal remote hosting environment? Especially when they may only be spending a few thousand dollars per month and actually will get very little attention from the giant data center owners - either before or after the sale? Especially where they will be charged for the capital and operational costs of having a $100 Million data center - it is a privilege, really.

Well, whilst we have all heard the phrase that you get what you pay for, sometimes you do not even need what you are being asked to pay for. There is a breed of Application Service Provider (ASP) that has survived the mass extinction. These include the Googles and salesforce.coms of the world that serve the small and mid-market business en-masse as well as the smaller number of large enterprises. There are also the small and mid-market data center providers, usually located in sensible areas of North America, such as the mid-west (far away from coastal disaster regions, high rent, high salaries and high air temperatures - translation = much lower risks and appreciably lower costs of doing business).

So if you run or own a company, here is a scenario that may not be that far from your reality:
You have held off investing all of the capital that it takes to update the aging servers, desktops and other vital network infrastructure. Don't forget to add in the software licenses. Also remember to purchase the warranties and on-site support for 3 years. Oh, and also remember the most expensive part ...the onsite IT person/people that you hired and are now worried that they spend all of their time running around and fixing things, but that it never seems to be enough to keep it all functioning smoothly? Yes, the daily support and maintenance for how the whole complex system is configured and optimized.

Every time you have calculated how much it will cost to purchase, install and maintain that lot you have broken out into a cold sweat, harassed the sales force to work harder, and harangued the controller for not knowing the balance sheet from the cashflow statement. So much for making a profit - unless we can put it off for another year (praying that nothing breaks meanwhile) , after all, we still don't know if we are going to downsize and it would be silly to spend more than we have to. Maybe we could lease it and pay it off over 3 or 4 years? We could conserve our capital, but it will increase our debt and cost more in the long run and then we would still have to pay for the ever needed support and maintenance for the administration of the network, communications and security equipment, productivity and line of business applications and... well, we could outsource it to a provider - at least then the guys we hired 5 years ago cannot cost us big the next time they screw up because they are chronically overworked or out of their depth with all of the new areas of speciality!

STOP! You could probably go on like this for hours. There are other alternatives too. What about moving all of your data and servers to a data center? They then buy and maintain all of the hardware, the software tools and ensure that the staff are both experienced and up to date in their knowledge and skills. They hire and staff the centralized helpdesk. They will even be paying their insurance company for a policy to protect both them and their clients against most mistakes that couls cost money.

Maybe the only refreshing you need to do is in obtaining Thin Client devices to replace the aging PCs - zero moving parts. long life span and very little if any on-site support required. Sweet.

Picture life now: no more backups failing, or software upgrades to make for the latest version to make your IT peoples' lifes easier. No worries about anti-virus and anti-spam. No more threatening calls from the Business Software Alliance (BSA) because a disgruntled current or past employee knows that your IT people have cut corners and pirated software when they didn't have the budget to get what they wanted, or else they have lost the license proof of ownership and it is now the equivalent of pirating the whole lot anyway. just pay for what software you need on a monthly basis - yes, even the Microsoft Office stuff - and run it all remotely (safety in case your office building burns down), and you are always entitled to the latest versions (no more paying out for upgrades very few years).

Maybe it is time to get on with growing and strengthening your core business?!