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Which applications shall I own, and which shall I SaaS?

The business loves SaaS

Forrester estimates that by the end of the century, the SaaS market will be worth $250b. That’s up from $27b this year (Forrester Cloud Conference, November, 2011).  That’s a huge growth.


Why such large growth predictions? Because the business loves SaaS applications.   For the first time, they can choose where they get their applications from.  In fact, Gartner predicts that by 2014, CIOs will have lost effective control of 25% of their organizations' IT spending


The problem is that if the business is allowed to choose its own SaaS applications without involvement from IT, we could well end up with a “zoo” of applications with little understanding of the business risk they pose and with unmanaged availability, performance and security. Thus, it is important that IT “plays in the application portfolio decision processes”. 


Which applications should we SaaS?

Yes, the world is “moving to SaaS”, but surely not for all applications. How do we decide which applications we will SaaS and which we will keep in house?


Geoffrey Moore, IT consulting guru, and inventor of “Crossing the Chasm”, has a model that is very helpful here. Moore says that applications break down into two types:


  1. There are core applications. Core applications differentiate us. They allow us to generate margin against out competitors.
  2. And there are context applications. Context applications don’t differentiate us. Provided certain requirements on the application are met, it makes little difference how much better our context applications are then our competitors. For example, if your travel application is “good enough”, your competitor having a better travel application will not give them a competitive advantage. The list of context applications is large. It varies by industry, but typically the list includes travel, payroll, expenses, purchasing, service desk, HR platform, training systems, social media platform, email, file sharing and other collaboration tools.

Moore contends that we should focus solely on our core applications. We should let someone else do the context applications, if at all possible. Why? Because creating margin, and thus sustained profit, is all about focus.


We learnt this lesson with things like catering, physical security and maintenance many years ago – few firms provide these services using their own employees today. Moore argues that SaaS offers us an opportunity to focus on what generates margin and to let others do the things that don’t.


Top-down cloud decision hierarchy

So, we have a kind of “top-down cloud decision hierarchy” that goes something like this:


  1. Which applications do I SaaS, or will I probably SaaS in the next few years?  Answer : as many context ones as I can
  2. For the applications that I keep (mainly, the core ones), how will I develop them? Will I use cloud? (the answer is probably, “yes” because of the speed with which cloud can stand-up dev, test, staging and production systems)
  3. If I do decide to use cloud for developing my core applications, what shall I use, private or public cloud?  This is a tough question. We have to take into consideration security of public cloud, geo-positioning of data in the cloud, how quickly we believe public cloud providers will bring back up our key applications should they have an outage, and how reliable is the performance of the cloud provider. The answer to these questions varies by industry and by geography.  And public cloud providers are getting more numerous, more “geo-present” and more reliable all the time.
  4. Finally, if I decide to use private cloud in way, who will provide it for me?  “Managed Private Clouds” (a private cloud run by an outsourcer) are looking increasingly popular as a choice. 

Author : Mike Shaw

Cloud decision hiearchy

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About the Author
Mike has been with HP for 30 years. Half of that time was in R&D, mainly as an architect. The other 15 years has been spent in product manag...

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