Wednesday, March 5, 2008

On the Gathering Clouds of Software as a Service (SaaS)

Recently, Becky Nagel at broke a story about the next step in Microsoft's Software as a Service (SaaS) strategy: Microsoft Online Services.

For those of us building solutions in the Business Intelligence space, and haven't already spared a thought about SaaS, it is important to be consider of the mid-to-long term implications of a hosted system-of-record (S-OR) application.

Think about the major ERP vendors moving their product to a hosted, SaaS offering (like the SAP BusinessOne trials in India in 2007). In this business model, one customer may leverage a hosted ERP, for example, paying a monthly or annual fee to use only CRM and Financials services, whilst another may prefer to use additional services for managing Suppliers, Inventory, Employees (etc.). Quickly, the third-party hosted provider is able to leverage (potentially) incredible economies of scale.

Basically we are talking about a web-based “data-in” proposition, where a business collectively enters transactional data securely via the browser for one or more key business functions. On the opposite side of the fence, BI fundamentally is a “data-out” paradigm where business data is refined and exposed as information for decision making (either strategic, operational or even individual).

Now, some of you may recall the famous book and articles by Nicholas Garr (Does IT Matter, Harvard Business School Press, 2004), who discusses the commoditisation of IT into a utility of services (aka. utility computing). Naturally there was something of a backlash from IT Managers/Directors, CTOs, and CIOs (three guesses as to why). This is what SaaS is all about and where many in the IT industry (Gartner, Forrester, IDC, and obviously the major vendors) believe the trend is heading.

From a BI Practitioner perspective, there is certainly food for thought:

First, consider the S-OR application to be, in general, the ideal data source for our BI solutions since such systems typically encompass multiple business functions or domains (again, Customers, Financials, Suppliers, Employees, Inventory, etc.). The S-OR is the end goal of a Master Data Management effort, and (as I'm sure must may currently/historically agree) often the oasis of many data integration (ETL) efforts.

Next, consider our accessibility to S-OR applications should they become hosted (or “in the cloud”). Suddenly, it seems building a BI infrastructure on-site for a customer becomes somewhat less of an issue. Right? "Cool", you might say, "web-based BI" or "hosted BI".

Now consider the shifting burden of information from a customer environment to a third-party hosting provider. Do you think it will be easier or more difficult to access data and build those lovely BI solutions for customers?

Finally, consider this: if utility computing takes root, and the hosted system of record becomes a feasible and sustainable model for business, guess where BI is going next? More profoundly, who do you suppose will be in the most likely position to deliver this likely "new form" of BI?

What are your thoughts?

- Adrian Downes


Darren Neimke said...

Nice post Adrian... are you based in Adelaide?

Adrian Downes said...

Thanks Darren... and yes, I am Adelaide based.