Pinching Pennies with SaaS

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As companies layoff employees and look to cut expenses in response to the economic downturn, a growing tactic embraced by IT departments is to explore the software-as-a-service (SaaS) model. “More customers are open to SaaS in today’s economic climate,” acknowledges Timothy Eades, CEO of Everyone.net. “It becomes a no-brainer once the customer is satisfied that a SaaS solution is as good or better than an in-house solution. Products such as Microsoft Exchange that are high priced and sometimes complicated to maintain are crying out to be replaced by a SaaS company.”

Marc Briceno, director of business development for PGP Corporation observes, “PGP Corporation and our resellers have seen clear signs over the last 18 months that the SaaS delivery model is becoming increasingly adopted by both SMB and enterprise customers.” Briceno notes that SaaS offers lower up-front investment in both capital expenditures and staff time. “The SaaS delivery model provides a faster path to deployment, which has been a key driver with our SaaS customers to reduce capital expenditures and provide cost-saving with their technology investments. We expect to see more SaaS deployments and the pay-as-you-go models, if the current macroeconomic climate continues.”

While the SaaS model is certainly not new, this trend is gaining momentum as a means to save money during these unprecedented times. Mary Kay Roberto, senior vice president and general manager of Mimecast U.S. discloses, “We have clients that have seen reductions of costs in some cases between 60 and 80 percent in what they had anticipated expending on an alternative on premise solution. We definitely are seeing economic conditions driving people to a SaaS model/approach. It is very attractive in the current economic climate.”

What Exactly Is SaaS?

There is a lot of talk about “cloud” computing often being used interchangeably with the term SaaS. It is interesting to note that these terms mean different things to different people. According to IDC, cloud-based software, as well as SaaS and hosted messaging security are “essentially variations of the same thing; such software is characterized by the software, services, and support offerings that are specifically built and designed for one-to-many delivery over the Internet.”

Briceno explains the differences in this way, “SaaS generally implies a contractual relationship between the enterprise and an external SaaS provider for a specific application. PGP Corporation’s applications delivered to the end-user through partner members of the PGP Managed Service Provider Network (MSPN) are such an example of a SaaS offering. Cloud computing focuses more on infrastructure and data rather than application delivery. Cloud computing can be hosted both internally and externally for an enterprise. For example, with the rise of virtualization some enterprises are providing rapid desktop and workstation provisioning using an internal computing cloud.”

Another definition is offered by Eades, who says “Everyone.net defines SaaS as a multi-tenant, unit of use product model and ‘cloud computing’ as a paradigm in which data is stored permanently on the Internet, but temporarily cached on local clients such as a Web browser.”

While there is no pinpoint agreement, what is for sure is the growth of this segment. According to IDC, the market for hosted messaging services will increase from $443 million USD in 2007 to nearly $1.750 billion USD in 2012, representing a compound annual growth rate of 31.6 percent. “It does seems that terms are being used very interchangeably,” agrees Roberto. “There is a whole range of how people are using the term SaaS and cloud computing. From our perspective, we look at the distinction based on whether you are utilizing an application and licensing a service to run certain applications vs. just having a platform available to you.”

Key Drivers

Ferris Research recently produced a commission paper for Mimecast entitled: Email Archiving: SaaS Strengths vs. On-Premise Solutions. In the paper, David Ferris writes, “The costs of installing a SaaS solution are very low compared with those of on-premise solutions. A SaaS solution does not require large up-front expenditures for software licenses, storage, dedicated servers, and backup systems for the archive. Nor does it incur the extra costs of training for IT staff or the associated planning and installation time. The implementation costs for a SaaS solution are predictable and relatively fixed.”

As previously noted cost, while a key attraction for SaaS, is not the only reason organizations are trending toward the model. To Eades there are many reasons to consider SaaS saying it is “a service that is accessible anytime, anywhere through a Web browser via laptop, desktop, or mobile device.” He also says SaaS is “an application that is simple and easy to use, where all services are integrated into a single intuitive user interface. SaaS also offers the ability to customize and self-configure your service. That is, allowing the customer to quickly purchase and begin using new services immediately and take advantage of new technology and applications more quickly.” Even more, Eades notes that SaaS frees internal resources so that focus can be centered on core business. Support is also an important aspect, as he notes that Everyone.net offers quality support by real people.

Briceno sees “End-user customers of the PGP MSPN program gain cost-effective access to enterprise-strength encryption technology without infrastructure, datacenter and helpdesk investments. Customers have access to quick and easy deployments with a pay-as-you-go model with no annual commitments. Customers have choice, flexibility and cost-savings to fulfill their business needs and protect their key data assets.” Briceno, like Eades, notes that ultimately SaaS “allows customers to remain focused on their core competency—be it healthcare, legal services or accounting assistance—while the PGP partner assists them with their security and encryption needs.”

To Miles & Stockbridge law firm CIO Ken Adams, when asked if cost was the primary driver in deciding on Mimecast, he comments, “Support was number one for me; cost came second. These guys and gals have their support nailed-down.” He also notes that “the storage limit of Mimecast is far greater than any other solution and the business continuance component of Mimecast did not exist with the others we looked at.”

IDC believes that “For customers in both the SMB and enterprise markets, cloud-based email management and messaging solutions offer significant benefits over on-premises solutions. Typically, SaaS-based solutions require low administrative overhead, and can result in ‘green’ benefits such as reduced power consumption, floor space, etc. With SaaS-based approach, there is also a reduced need for training internal IT staff, particularly in terms of 3S skills—the convergence of security, storage, and systems management. In addition, solutions available in a SaaS model are more rapidly deployed and often more flexible than on-premise solutions. SaaS services also focus on the business deliverables, abstracting from the organization the day-to-day management of the underlying technology.”

Other trends are also pushing SaaS acceptability. Eades observes the following that will impact SaaS: 

• Interaction through email, IM, SMS, and fax with customers, partners, etc. continues to lead the way for SMB SaaS adoption.
• Sharing will be adopted as collaboration takes hold for document management, workspaces, and calendars.
• Sync of connections through social networks, Outlook, and other contact managers will add real-time dynamic value.
• Security: protections of data and content through archiving, AS/AV, and filtering all done in the cloud will be the base ticket to the game by 2010.

Addressing Concerns

The obvious SaaS hurtle to overcome, for a customer, is to have faith and trust in the SaaS provider. With messaging so critical to a company, in many ways the SaaS provider becomes a business partner. “This is true,” acknowledges Roberto. “We designed our system to be built for the SaaS platform right from the beginning, and we have dealt with all of the aspects relative to security. We are not a converted platform. It is not unusual for someone who is not familiar with technology like ours to have questions around security in the SaaS model, but we have addressed anything that would be a concern to a client. So we can make them very comfortable by explaining our technology approach and ensure their data is absolutely secure and protected.”

SaaS providers seem to understand well the role they play in their customer’s businesses. “Absolutely,” says Eades. “We go after this from multiple angles: we highlight our successful 10-year history of providing critical messaging solutions; we provide live phone support from 5am to 5pm for all customers, as well as 24x7 support for higher tiers; we offer live salespeople; no purchase obligation periods; customer education and thousands of customer references.” 

Confidence in the SaaS provider is perhaps more important than any of the benefits listed thus far. “PGP Corporation vets the members of the PGP MSPN program from our existing pool of long-time partners,” explains Briceno. “Only partners that meet our expectations in product knowledge, experience, and quality-of-service are accepted into the PGP MSPN program. To date, 94 percent of the Fortune 100, 68 percent of the FTSE 100 Index (UK) and 93 percent of the DAX 30 Index (Germany) have chosen to trust PGP Corporation with their security needs, be that for in-house or SaaS deployments.” Briceno goes on to say, “the partner members of the PGP MSPN program provide our SaaS customers with the same award-winning encryption security solutions that enterprise customers can license from PGP Corporation directly. SaaS customers that start out with a SaaS deployment may choose to later migrate the applications and management infrastructure in-house without re-deployment or downtime. The information exchanged between the customer and MSP is encrypted using our award-winning encryption products.”

Concerns, beyond trust, can vary by SaaS provider and the technology that’s being offered. Commonly cited are security and interoperability. According to Eades, for interoperability Everyone.net “provides Web services and an API structure that allows us to integrate with applications, and billing and provisioning systems.” He also says, “Security is a key differentiator for Everyone.net. Leveraging security management and control in the cloud creates a more protected SMB.”

As SaaS providers become an extension of their customer’s businesses, a team approach is the reward. Following the selection of Mimecast’s service, Adams discovered another added value—a responsive support team. Mimecast’s customer case study offers this example: Adams had been accustomed to getting an email summary of the spam that was blocked each day. Since email is considered as documentation in discovery, the control of email in the queue is critical. The audit trail has to be scrubbed clean in order for email to be useful as evidence, which means that some mail is blocked. A daily digest brings this list to the attention of users, so if material information is blocked in the queue, users can catch it and retrieve it in real-time. Once Adams brought this up, Mimecast adapted its reporting structures. “I rely on all my vendors to respond quickly to my needs. Ease of use is paramount. Bar none, Mimecast support has been tremendous,” exclaims Adams.

SaaS Appeal 

Michael Osterman, principal analyst of Osterman Research, mentioned earlier this year that messaging could be likened to a utility service saying, “you do not generate your own electricity, why then manage your own messaging?” Eades tends to agree with Osterman, saying, “Same applies over time to other areas, such as email archiving, online file storage, security posture and other business services.”

Briceno responds, saying, “PGP Corporation offers encryption solutions for both in-house and externally-hosted email messaging systems. We are seeing a modest uptake in externally-hosted email services at the low end of SMB, in particular small professional offices. Large enterprise customers in many cases have long outsourced their messaging and other computing infrastructure to systems integrators such as IBM Global Services and our partner ACS. From the perspective of the enterprise, the systems integrator acts as the utility providing messaging services albeit the systems are located in-house. We are not yet seeing larger SMB customers or enterprises trending towards externally-hosted mailbox services.”

While SaaS is attractive to many, Eades concedes that it “may not be ideal for very large enterprises that have layers upon layers of legacy infrastructure.” Briceno agrees that it may not be right for everyone stating, “Our enterprise and governmental customers continue to express a clear preference for an on premises messaging infrastructure.” But he notes, “SaaS deployment models have enabled PGP Corporation to reach even deeper into the SMB space through our PGP Managed Service Provider Network while expanding geographic reach. The majority of our SaaS deployments are incremental rather than competitive with our traditional license sales.”

Even though today’s economy might be pushing organizations to reach a comfort zone with outsourcing, the model has been increasingly tested by organizations in recent years. “I would say better than 50 percent of our customers have had previous experience with SaaS on a limited basis,” says Roberto. “We may have a client who has been doing part of their security functions in a SaaS model, but they are doing their continuity or email in house. We often replace other SaaS security components because of our unified platform that offers all of the continuity and archiving.”

Asked his advice for a company that had not had experience with SaaS, Adams offers, “We use a few SaaS solutions and we did spend a lot of time investigating how the data is protected and who might have access and what our risk is. My advice to others, as far as budget and cost, is to not look at the initial cost of the product because we have seen huge savings on all our moves so far. This model allows us to focus more on supporting our users.”