Platform-as-a-Service Evolves in SaaS by SMARTLINE SYSTEMS

RESEARCH ALERT RA-454 APRIL 16, 2008 M. WEST, M. KOENIG Title

Platform-as-a-Service Evolves, Setting the Stage for Cloud Computing

What is Happening?

In the last week, two announcements from Google have directed a spotlight onto an area that Saugatuck believes will have a significant impact on the long-term evolution of the IT industry: the emerging importance of SaaS development and SaaS enablement platforms, collectively Platform-as-aService (PaaS).

The authors invite your comments and inquiries on this Quick Take. Please contact Mike West at mike.west@saugatech.com or Mark Koenig at mark.koenig@saugatech.com

Browse Related Research: • IT Platforms/Infrastructure • Software-as-a-Service (SaaS) • Web 2.0

In the first announcement, early last week, Google introduced the Google App Engine. The App Engine is a developer tool that enables a developer to create scalable web applications run them on Google’s infrastructure – and Google promises 500MB of persistent storage and bandwidth and CPU for 5 million monthly page views. True to form with Google, it is a “preview release,” open only to the first 10,000 developers who sign up. According to Google, the preview release of the development environment includes: • • • • •

Dynamic web serving, with full support of common web technologies Persistent storage with queries, sorting, etc. Automatic scaling and load balancing Google APIs for authenticating users and sending email A fully featured local development environment.

During the preview period, applications are “limited” as follows: 500MB of storage, 200M megacycles of CPU per day, and 10GB bandwidth per day. Over time, these quotas will remain free, and developers will be able to purchase additional resources as needed. In the second announcement, earlier this week, came the long-awaited news that Google Apps and salesforce.com would be integrated. This ability, which is provided to existing customers at no charge, gives Salesforce customers the option to link in Google’s productivity tools such as Gmail, Calendar and GoogleTalk as part of their cloud workspace. Customers that want telephone support for end users, unified billing and provisioning and additional APIs may access those features for an additional $10 per user per month. Why is it Happening?

Most analysis of these new offerings has focused on Google as an emerging force in enterprise computing, and its multi-front war with Microsoft, and whether a Google-Salesforce merger is on the horizon. Speculation aside, Saugatuck believes the burgeoning Platform-as-a-Service (PaaS) movement will have a more disruptive impact in the long term. Meanwhile, the synergy between Google and Salesforce in redefining the computing environment is, we agree, a serious threat to the Microsoft hegemony. Saugatuck has been among the forefront of analysts arguing that Google has enterprise computing square in its sights, writing as far back as September 2006 that user executives can expect Google “to continue to deliver new SaaS solutions aimed at the business market” (see Challenge and Response: Saugatuck Principals Debate Google’s Impact, MKT-270, 13Sep06) and as recently as March 2008 that “for those doubting that Google has enterprise computing ambitions – doubt no longer” (see OpenSocial

SAUGATUCK RESEARCH ALERT

Note 1 rd

Foundation - Next Step on Road to Enterprise-Grade Web 2.0, RA-446, 26Mar08). And we believe that talk of a GOOG-CRM merger is an effective red herring for the competitors of both companies to chase while each company seeks to put distance between themselves and their competition in the segment that really matters to both: Platform-as-a-Service.

Saugatuck 3 Annual SaaS Research Program Saugatuck is planning to publish its newest 30-page research report on Software-as-a-Service before the end of April, 2008. The report is based on a worldwide web survey of over 400 senior business and IT executives, 30+ briefings with leading SaaS providers, and 15 deep-dive interviews with SaaS users. The report will update our “Three Wave” adoption model th with a 4 Wave, and explore drivers of SaaS customer satisfaction. For more information about this report, including single-user and multi-user licensing plans and/or to pre-order a copy, please contact Chris MacGregor, Analyst and Media Liaison, at 203-454-3900, or at chris.macgregor@saugatech.com.

Market Impact

In recent presentations of the results of our 3rd annual Software-as-a-Service program we have predicted both a proliferation and an evolution of SaaS platforms through 2010 as they evolve to embrace user development and runtimes (see Notes 1 and 3rd Annual SaaScon Shifts the SaaS Industry Spotlight to IT Executives, RA-451, 02Apr08). Our research lead us to develop the following two Saugatuck Strategic Planning Positions: •

Through 2010, SaaS Platforms will evolve beyond ecosystem-driven integration in support of customers, complementary long-tail offerings and other business partners to embrace development and runtime services. • By 2010 robust SaaS platforms continue to evolve, going beyond providing critically important integration, application sharing, delivery and management services to include cloud-based development and runtime capabilities that are viable alternatives to on-premise application development and data center services. Saugatuck believes that it is this evolution in platforms, more than any other advancement related to SaaS, which will drive the rise of cloud computing and usher in the post-SaaS era of measured, monitored and managed business processes. The two announcements noted above represent two important examples of the type of robust cloud-based software development platforms and run-time environments that are emerging with a diverse set of supporting service offerings that make them viable alternatives to traditional on-premise development. More importantly, each PaaS example is predicated on a different strategic purpose, a distinction which we believe should not be overlooked in attempting to understand how this PaaS will develop over the next three years. We refer to these different types of PaaS as SaaS Development and SaaS Enablement platforms. SaaS Enablement Platforms are built for one of two purposes: • to enable ISVs to build and deliver SaaS applications (e.g., OpSource’s On-demand or BEA Systems’ Genesis or IT Factory’s PaaS offering) or • to enable solution partners of SaaS vendors to integrate and extend the SaaS solutions for their customers (e.g., Cisco’s WebEx Connect, NetSuite’s NS-BOS, Salesforce.com’s Apex and force.com). These SaaS enablement platforms host and administer SaaS solutions in support of these strategic objectives, and in fact, were it not for force.com, the Salesforce for Google Apps offering would not have been feasible. Thus far, only the force.com platform from Salesforce has attracted cloud development that can be considered independent of its SaaS solution. This brings us to SaaS Development Platforms. SaaS Development Platforms typically target cloud developers with technical languages like Ruby on Rails or Python and either offer runtime services

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SAUGATUCK RESEARCH ALERT themselves or resell those offered by partners in the cloud. With the App Engine preview, Google joins Bungee Lab’s Bungee Connect (also in beta), Coghead and Morph Labs in targeting cloud developers. Other SaaS Development platforms include Facebook’s platform targeting social networking developers that can be run either on Joyent or on Amazon’s AWS (EC2, SQS and S3) -- as well as Engine Yard which specializes providing execution services for Ruby on Rails. ISVs and other IT vendors looking to leverage the SaaS phenomenon (and that is about everyone these days) must understand the difference between these SaaS enablement and development platforms. They must also understand that the selection of a platform is an investment in a particular ecosystem that may in the future become a limiting factor to growth, even if it is a short-term accelerant. Careful consideration should be given to the underlying technology, technology standards and projected adoption curves for each. In addition to the vendors mentioned above, we should take note of the other traditional IT Master Brands waiting in the wings. • IBM with its Bluehouse project, appears to have a coherent plan, as well as all the partners, tools and other capabilities required to provide a PaaS offering. We expect to hear more from IBM about Bluehouse and how it will contribute to cloud computing in the very near future. • Similarly, were Oracle to combine BEA Systems’ Genesis with Oracle Tools, the result would be a comprehensive SaaS Platform environment offering both enablement and development for cloud-based applications. • Although Microsoft has its Connected Services Framework and Dynamics CRM environments in support of “software+services,” the Redmondbased giant has yet to articulate a clear story around how it will enable the development of next-generation, cloud-based applications. The more time that passes without Microsoft making it clear that they are seriously in the PaaS game, the dimmer Microsoft’s prospects as an enterprise SaaS player going forward appear to be. Both SaaS Enablement and SaaS Development Platforms – regardless of the targeted developer community – reduce the capital required for an ISV to remold an existing application or launch a new application while at the same time expanding access to skilled developers who can help build the applications. This will only serve to accelerate a nascent trend toward the micro-vertical focus in applications that will soon move to the core of SaaS success and is one reason why we believe PaaS will be such a disruptive influence in the software industry over the next two years and beyond.

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