SaaS and ITSM – a Marriage Made in Acronym Heaven?

In the last two years, both Software-as-a-Service (SaaS) and Cloud Computing have gained much publicity and vendor backing, and a growing corporate acceptance with SaaS, in particular, viewed as an immediate opportunity to quickly, and flexibly, deliver business-enabling IT services at lower cost. The drivers around speed, flexibility, and cost have similarly focused CIOs on the use of IT Service Management (ITSM) processes and IT Infrastructure Library (ITIL) best practice in the pursuance of IT service delivery optimisation. However, the question now being asked is ‘Can SaaS and ITSM be used in tandem to deliver even greater business value?’

Whilst a definitive definition of SaaS is still elusive given that, as with Cloud Computing, everyone has their own particular take on what SaaS is and the term is used somewhat excessively, most readers will hopefully recognise the SaaS-delivery model as one that involves applications hosted, maintained, and updated by a provider which are accessed (as a service) by subscription-paying customers via the Internet; and in this context, the ITSM tool market is rapidly filling with SaaS-delivered solutions from SaaS-only vendors, traditional ITSM vendors with SaaS-versions of existing ITSM offerings, and new dual-play vendors.

This lack of clarity of definition has caused some confusion between SaaS and its logical precursor, the Application Service Provider (ASP)-delivery model – the remote provision of an application through a traditional licensing and annual maintenance payment model. The distinction between the two models is important, however, when understanding how SaaS can deliver substantial benefits over on-premise tools but also how it avoids the pitfalls that ultimately led to the downfall of the ASP model.

The confusion between SaaS and ASPs is understandable, with the ASPs of the late 1990s essentially offering what SaaS vendors do today: the provision of hosted applications delivered over the Internet. However, the ASP model equated to little more than the transfer of application purchase and support costs, activities, and risks from the client organisation to the ASP, for a price, with the ASP burdened with the legacy costs of maintenance, support, and upgrades. The applications themselves were not designed for Internet-based delivery and often precluded the economies of scale necessary for ASPs to operate in a cost-effective manner. The loss of venture capital availability after the dot-com bubble had burst just sealed their fate financially. However, post ASPs, the success of SaaS Customer Relationship Management (CRM) vendors, such as Salesforce.com and RightNow Technologies, has demonstrated both the possibilities and the benefits of the SaaS-delivery model within the corporate arena.

This article does not dive down into the complexity of SaaS-variants such as SaaS 1.0, 2.0, and 3.0, or the single-tenancy versus multi-tenancy debate, or terminology such as Hybrid SaaS. It does, however, assume a perspective that views enterprise interest in SaaS-delivered ITSM solutions in the context of replacing already deployed on-premise ITSM applications – a viewpoint that is also used by many vendors to calculate the Return On Investment. Moving from on-premise Product A to SaaS Product B rather than determining the underlying benefits an organisation would realise from utilising their technology to support ITSM processes and procedures.

The market penetration of SaaS ITSM tools is still extremely low compared with on-premise tools; it is, however, a rapidly growing market segment both in terms of customer interest and vendor entry (or re-entry for traditional vendors offering a SaaS-version of existing tools). No reputable market size information is available, but Butler Group has watched with interest as Service-now.com, the largest SaaS-only ITSM vendor, has grown its annual subscription revenue from US$6m in 2007, to US$14m in 2008, to close its 2009 financial year at US$28m – US$3m ahead of expectations in spite of the current financial climate (although some would argue that it is because of the current financial climate). Vendor confidentiality prevents like-for-like comparison with sales of traditionally sold (and delivered) ITSM software, but Butler Group believes on-premise ITSM tool revenues to be stable at best.

However, SaaS vendors are not just riding on the back of the global recession. An oft-quoted industry figure is that, on average, organisations change their ITSM tool every five years, and whilst the effect of the current financial climate on this statistic is unknown, Butler Group is seeing greater attention placed on the overall cost of providing ITSM-related services and increased consideration made before an organisation will commit to the cost and inconvenience of upgrading an existing ITSM tool. Vendors are also reporting that customers are still readily switching between ITSM tools – archiving rather than porting historical transactional data across – with some clients viewing SaaS a low-risk, potentially tactical solution in the knowledge that they can readily return to an on-premise solution (with the existing or an alternative vendor) if needed.

In Butler Group’s opinion, after the functionality and capability additions necessitated by the move from ITIL v2 to v3 in 2007, the SaaS-delivery of ITSM-enabling capabilities is the biggest shift in the ITSM product landscape in the last five years. Of the many benefits to be realised (from the adoption of a SaaS-delivered ITSM tool), a critical one is aimed directly at the heart of the now common overstretched IT function – given that a SaaS-delivered ITSM tool should only require a Web browser and an Internet connection to function – no client to install, no hardware to support, and nothing to upgrade locally – scarce IT resources can be redirected away from IT-internal systems to focus on the delivery of business-critical IT services.

For many organisations, however, the key benefit of SaaS is its simple, subscription-based pricing model – usually a cost per month (or year) per user that covers everything needed to operate including support and maintenance – that provides a lower and consistent level of expenditure which is OPEX rather than a CAPEX investment. This simplicity of pricing can also be viewed from a value-for-money perspective, in that a per-seat subscription will usually cover access to capabilities across multiple ITIL (or ITSM) processes rather than the traditional need for organisations to buy multiple licences across multiple ITSM products (or modules), giving an organisation the freedom to continue its adoption of the ITIL framework over time without additional cost.

The third main benefit is also cost-related – the effort and associated costs required to achieve ready-to-use status for the tool. Whether it is the time to initially deploy (and thus to start to realise value from what is a significant IT investment) or the upheaval involved in upgrading to the next release of the application. Along with the potential to reduce the Total Cost of Ownership (TCO), SaaS tools also promise a significantly quicker time to deploy (and to value) and effortless upgrades (at least on the customer’s part).

It is worth noting at this point that the lack of clarity over the meaning of SaaS can cause problems for procuring organisations. Whilst the transferral of the application, hardware, and support and maintenance activity to the vendor and a better TCO scenario are relatively ‘black or white’ issues, there is an area of greyness to traverse related to the technology that sits behind the ‘vendor curtain’. In Butler Group’s opinion, a SaaS solution must be architected such that the customer is able to self-customise its ‘application instance’ (to reflect in-house processes), with these customisations preserved through what should truly be an effortless upgrade process. Without these facilities, the SaaS business case is not so compelling.

SaaS-delivered ITSM tools should also offer high levels of scalability and security, with the latter a key area of SaaS vendor focus, along with availability, given their standing as two of the early barriers to SaaS-adoption. Two additional areas require customer scrutiny – an ITSM tool’s ability to integrate with existing ITSM and IT Management tools and the level of vendor stability (given that not all vendors are experiencing the 100% per annum revenue growth of Service-now.com).

Jumping back to the ITSM side of the equation for a moment, the ITSM tool marketplace has somewhat levelled-off in terms of the functionality and capabilities delivered in support of individual ITSM processes, driven by the direct matching of the technology to ITIL-based requirements (although different vendor products continue to support different sets of ITIL-based processes). Whilst this is good in that differing vendor products are comparative on a process-by-process basis, it has also moved much of the business thinking around tool adoption away from direct functionality to indirect functionality (such as security), ease of implementation and associated time to value, the quality of professional services, the upfront and ongoing cost of ownership, the ability to customise, integration facilities, analytics capabilities, and the complexity of product upgrades. This is by no means a bad thing, but be aware that it can potentially lead to a technology rather than a process-driven ITSM tool deployment. Ultimately, SaaS-delivery should never be the primary reason for procuring a particular ITSM tool.

Butler Group recognises that SaaS-based ITSM tools will not be suitable for all organisations, for a variety of reasons, and that the difficulty of integration between a new ITSM tool and existing ITSM and IT Management tools is not confined to SaaS solutions; but there is another potential downside to consider. A SaaS subscription provides access to a wealth of ITSM functionality and capabilities. However, if viewed as an ‘all you can eat buffet’ it could prevent organisations limiting themselves, at least initially, to a few of the modules that address immediate business pain points, resulting in a ‘rushed’ approach to ITIL adoption that is potentially ill-fitting with the organisation’s level of ITSM maturity and capabilities.

In conclusion, Butler Group believes SaaS-delivery to be a good fit for ITSM tools; especially given that, with a phased implementation, it can be a relatively low risk environment for introducing both SaaS and ITSM into an organisation. Enterprises are now far more aware of the benefits and risks of SaaS and, with the continuing influx of SaaS-delivered solutions from SaaS-only vendors, traditionally on-premise ITSM vendors, and new dual-play vendors, Butler Group expects SaaS-delivered ITSM tools to continue to erode the market dominance of their on-premise siblings.

This article was previously published on http://www.ovumkc.com

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2 thoughts on “SaaS and ITSM – a Marriage Made in Acronym Heaven?

  1. Pingback: uberVU - social comments

  2. Pingback: SaaS and ITSM « Not Just ITSM

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