By Raj Narayanaswamy

The cloud services model for delivering software has become wildly popular over the last few years because it offers benefits that legacy, on-premise software can’t match. Its consistent, hassle-free updates, economies of scale derived from centralized maintenance, and predictable cost models have all contributed to the global rush for businesses to move many of their enterprise applications to the cloud. By 2017, enterprise spending on cloud computing will amount to a projected $235.1 billion, triple the $78.2 billion spent in 2011, according to the market research firm IHS. Spending for infrastructure and services related to the cloud will reach an estimated $174.2 billion this year, up 20% from the amount spent in 2013, the firm reported.

However, the rising popularity of the cloud delivery model, also known by the acronym SaaS (Software-as-a-Service), has led many vendors to try to cash in on the trend without really changing their products enough to provide the true value of the cloud. In fact, many software vendors are simply modifying their applications so they can be accessed online and host the software themselves. But this is not the same as a “real” SaaS; without the right architecture, these vendors cannot deliver on the real promises of cloud computing.

The key that unlocks the benefits of true SaaS models is multi-tenant architecture, which enables multiple customers to share one infrastructure in a highly secure environment. The collective investment of all the customers ensures that everyone shares a world-class global data center that is fully redundant, scalable, and secure, and is monitored at all times for high availability. The cost distribution also allows SaaS vendors to charge customers a lower rate, returning the cost savings back to the customers.

However, there are many vendors that claim to provide a true SaaS model, but are actually just maintaining separate applications for each customer on their own servers, which is known as a single-tenant or “fake cloud” model. When an application is deployed in a single-tenant model, it’s usually because the core product was not built to support multi-tenancy, and the vendor doesn’t want to take the time to re-architect the product. They end up hosting thousands of single-tenant customer implementations, and the cost sharing benefits of true SaaS disappear because each customer has to be managed separately.

True SaaS models also provide the benefit of faster innovation than “fake cloud” solutions. Unlike traditional or hosted software vendors, real SaaS vendors only have to maintain one version of the software and can upgrade all customers at the same time, often several times a year. With a real SaaS vendor, customers get updates every week and new capabilities are rolled out on a periodic basis, typically every few months. This faster pace of innovation ensures the application is constantly improving so customers can be confident they have the latest features at their disposal that will drive the most value for their business.

Because single-tenant solutions host thousands of different implementations for each customer, the upgrade process is not so simple. Instead of updating one software version, the vendor has to go through and upgrade each implementation separately, which takes a lot more time (and money). For this reason, “fake cloud” vendors will often delay upgrades, or charge customers separate upgrade fees to use the latest version of their software. On the other hand, real SaaS customers are always able to access the latest version, without having to worry about upgrade fees.

This brings up another important benefit of true SaaS solutions that “fake cloud” providers can’t match: predictable pricing. True SaaS vendors provide their services and enterprise-class software for a low monthly subscription fee, which is generally pay-as- you-go and requires no upfront investment. However, single-tenant solutions often charge extra fees for upgrades, customizations, or integrations with other solutions. There is also often a large upfront cost for deployment, which discourages customers from switching, even if they aren’t satisfied with the service. The “pay-as-you-go” model with no hidden fees lets the vendor earn the customers’ trust; customers should be able to unsubscribe from the service at any time if they are not happy.

With a flat monthly subscription fee, customers can easily manage their IT budget and clearly calculate the return on their investment. Along with the savings brought through cost sharing, customers using true SaaS solutions don’t have to spend time and energy on the non-strategic tasks of software maintenance and operations. This frees them up to do what they do best, which is to focus on strategic work and innovations, and find ways to enhance business value. It’s no wonder that companies have rushed to embrace the cloud, but they should also take time to ensure they capture the full potential of the cloud revolution, from real SaaS vendors.

Raj Narayanaswamy is the co-founder and co-CEO of Replicon, a leading provider of cloud time-tracking applications.

Original Source: Business 2 Community

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