At an analyst meeting last week I met Andrew Beechener of DataScape Online (DSO), a Managed Services provider in the UK. He had some very interesting things to say about the development of what he calls ‘Modest Computing’, which are relevant to the Cloud Computing theme I’m developing – so I thought I’d catch up with him this week and investigate his views in more detail. Our interview was loosely structured around a number of questions.
How does DSO define Cloud Computing And Software-as-a-Service?
Andrew says that analysts tend to point to trends and themes before being commercialised, taking a broad non-specific view. He believes the term Cloud Computing is currently over-exposed and confusing for many. ‘Cloud’ as a catchword is well known, but its benefits and efficiency savings are unknown quantities. If we need a definition he suggests ‘The delivery of a service over the Internet’, however he prefers not to talk about Cloud to customers. Rather he tends to start conversations on subjects such as Managed Services, Managed Back-Up and SaaS. SaaS is a better subject by far.
What are the opportunities of running these services to Small and Medium, as opposed to Large companies?
This depends upon the type of service DSO offers – back-up services are for all sizes. As for SaaS, it’s still too early to work out what the ‘business as usual’ will be, but he thinks that Small and Medium Enterprises (SMEs) will probably be the early adopters. The Return On Investment (ROI) is easier to calculate in comparison with buying, deploying and managing internal servers.
ITC is more about business than technology in SMEs and many lack trained IT staff. For many of these the thought of adopting virtual desktops including Microsoft Office without having to maintain them is logical. In addition Micro and Small businesses tend to know and use Google apps, making SaaS easier to understand.
For larger companies effectively running their own internal Clouds, outsourcing to a public Cloud is not really an option. There are opportunities to get SaaS into an existing infrastructure, but the boundaries between private and public Clouds could prove difficult.
Large companies already depend on Wide Area Networks (WANs) and the Internet – so they also understand SaaS, but from a different angle to the SMEs. Improved reliability is a strong reason for adoption, but there are barriers around security. For many however Andrew believes that understanding the ROI of renting software will overcome these.
SaaS removes administrative tasks such as setting up Microsoft Active Directories for each user, allowing the addition of multiple users within minutes and offering greater flexibility. In the traditional world configuring desktops and laptops often involve many hours work and disruption to the business.
While SaaS may be threatening to defensive minded IT managers, there are huge benefits for companies to do without operational support. The benefits of SaaS are perhaps more compelling for Finance Directors and Human Resource (HR) managers.
What hurdles are there in software licensing? Are there important packages whose owners refuse to be flexible?
Andrew believes that while the technical delivery of multi-vendor applications is very easy, commercialising them is very difficult. In his experience Microsoft and Symantec have been the most forward-looking, allowing their products to be sold on a Pay-Per-User/Pay-Per-Month basis on a minimum contract of a single month. He thinks other Independent Software Vendors (ISVs) will catch up as Cloud Computing and SaaS become the norm – especially as the new delivery model will open up new customers and markets. He gave examples of the possibilities of SMEs adopting sophisticated applications:
- DSO can now sell Enterprise-level products such as Microsoft Dynamics CRM4 and Project to mid-sized companies as a result – companies who would find it difficult to pay for (and technically challenging to deploy) these solutions if deployed in-house.
- The same is true of Symantec’s MessageLabs and Brightmail applications, which Andrew described as ‘technically mind-blowing and expensive’ to deploy internally. A company can get identical protection with a similar service level through a monthly payment.
The benefits of virtual desktop solutions can include the availability of non-optimised applications. For instance Sage (which Andrew considers a great application) is not yet available in an online version. As DSO’s virtual desktop solutions are based on Microsoft Terminal Services, all it has to do is to add Sage as an option, giving users the opportunity to select it through self-provisioning. ISVs like Sage therefore can offer SaaS version without need to invest in SaaS itself. In this new world DSO isn’t replicating the current corporate environment, it’s offering an electronic shop-window where the choice of an application through self-provisioning is the purchasing decision.
What unique advantages does DSO have?
As a small, relatively new company, the biggest question for the company is ‘Who is DSO?’ – so the issue of unique selling points doesn’t often come up. He does think that the company can deliver innovative solutions and is in the forefront of those trying to commercialise SaaS. As a player in the wholesale market the company’s connections with resellers gives it advantages, as does its relationship with NTT, which provides DSO with a global infrastructure based on 35 Data Centres. He is very complimentary of its service and claims that it just takes a single phone call to his account manager to deploy a new node quickly with a consistent service level and price. It’s a great infrastructure to deliver services to his end-users and has already allowed DSO to expand its coverage from the UK to the rest of EMEA and will allow it to extend it reach to North America and the Asia Pacific region in future.
What relevance do Online Services have in a recession?
The biggest advantage of SaaS is that it allows users to shift from capital to operational expenditure. Andrew thinks that the credit market is unlikely to return to the way it was before the crunch, even if things are better now than they were when the banks were in crisis. He believes that the days when IT managers replace ‘a blue SAN with a red SAN 2 years later’ are long gone, even once the downturn is over. The fact that the server market ‘has fallen off a cliff’ and will take 2-3 years to recover (see my analysis) to anything like current levels opens up the door for SaaS models during this period. 2010 and 2011 will prove important years for DSO as business IT users will not be able to defer their purchases any longer, with their decisions driven by new technologies such as Microsoft’s Windows 7. By then he believes the delivery of SaaS will be viable as a strong alternative to traditional purchasing.
Although Amazon EC2 is a phenomenal concept Andrew believes it makes less sense economically, especially when you try to calculate how much applications built there will cost to deploy on a 24 x 7, 365 day basis. He is also unsure of how anyone can budget for ‘per million I/O requests’ charges. The hiring of virtual servers is in his view better economically and will appeal more to businesses with project work and/or widely fluctuating workloads.
How big is the threat from Software companies going direct with SaaS?
DSO is agnostic when it comes to 3rd Party applications, which Andrew believes has lots of advantages for end-users. Big suppliers’ public Clouds will become prisons for some, as it’s unlikely that Microsoft will support anything other than its own applications – and the same will be true of Google. The advantage of an independent supplier is that it won’t force users to drop applications such as Adobe Reader or WinZip in favour of their equivalents from their chosen public Cloud provider. As far as other ISVs are concerned it is unlikely that they will spend a lot of energy optimising their applications for SaaS delivery. Salesforce.com for instance has a strong application service provision, but users have a hard time building ROI on a single application.
We also talked about the week-end story in the Sunday Times which claimed the Conservatives might turn over the National Health Service (NHS) centralised database to Microsoft or Google. Andrew thinks it unlikely to be acceptable on security reasons – after all Google’s AdWords are everywhere. In comparison he claims that DSO can deliver a level of security for some at least comparable to (and for most better than) if they were running their systems on premises.
What does DSO think the future will bring?
Andrew believes the most dynamic theme and catalyst for change is the Internet – an issue largely overlooked by most hardware and software companies, but not the Telecoms suppliers. When DSO went into business in 2002 most of its customers used dial-up connections; now companies such as Virgin Media and BT are delivering 50Mb broadband over fibre-optic cables. This allows computing resource to be delivered like a TV broadcast, which in turn means that demanding applications no longer have to be matched by equally powerful computers at the end-users location. His concept of ‘Modest Computing’ is that you just have the resource you need – you don’t need a 24-core processor on the desktop. It’s not a co-incidence that Netbook (small form factor laptops) sales are up. He sees a strong trend towards higher density Data Centres as nodes. He also sees the Internet as a great leveller, quoting the Google Marketplace and Apple Appstore as places where single-person bedroom software developers can compete one-to-one with major ISVs.
The biggest challenge for DSO is to build a range of alternatives to traditional software and hardware solutions in the 2010-2011 timeframe delivered as (SaaS) a range of managed services which leverage “cloud”-like technologies, coinciding with the return to spending.
My Conclusions – DataScape Online Is A SaaS Pioneer For SMEs and Relevant To Cloud Computing
When I introduced my Cloud Computing theme I did so in the knowledge that there was no single logical definition, making it a typical (and attractive) ITC marketing term. Suppliers and analysts are driving the discussion, with users getting involved further down the line. I believe I’m getting closer to understanding the practical development of associated issues now.
DSO is one of a number of pioneers – in this case developing relationships with Symantec, CA, NTT and others to set itself up as a wholesaler to reseller partners. While it’s decided to discuss these mainly as SaaS services, there’s no doubt in my mind that these kinds of services can and will be subsumed under the broader Cloud Computing theme in future. It is also clear that the adoption of SaaS is easier for SMEs than for Large organisations at present, since they don’t have so much of a challenge in balancing external and internal ITC developments and understand the concept as Internet service users.
Finally I think I understand better the attraction for users of moving from capital to operational spending – a trend which is being accelerated by the difficulty of raising credit in the current downturn. While I disagree with the vehemence of Andrew’s view about the change in capital expenditure purchasing once the recession is over, his company’s approach has a good chance of succeeding by exploiting the current hiatus in capital spending which is likely to last for another 18 months for many end-user companies.
Thanks for sharing… 🙂