November 29, 2013

SaaS appliances, SaaS data centers, and customer-premises SaaS


I think that most sufficiently large enterprise SaaS vendors should offer an appliance option, as an alternative to the core multi-tenant service. In particular:

How I reached them

Core reasons for selling or using SaaS (Software as a Service) as opposed to licensed software start:

Conceptually, then, customer-premises SaaS is not impossible, even though one of the standard Big Three SaaS benefits is lost. Indeed:

But from an enterprise standpoint, that’s all (relatively) simple stuff. So we’re left with a more challenging question — does customer-premises SaaS make sense in the case of enterprise applications or other server software?

Why would a customer actually want on-premises SaaS, as opposed to the standard remote version? The first ideas that come to mind are:

And, um — that’s about all I’ve got.

*Yes, I know Cloudant is DBaaS — but to me that’s a kind of SaaS, in which the S just happens to center around a DBMS.

Confusing matters further, there’s a middle option as well. and HP just announced that apps will, for the first time, run on dedicated customer-specific racks. But this will only be within the same data centers and operation groups that handle the rest of’s system. Notes on what’s being called a “pod” strategy start:

Notwithstanding ever-increasing levels of comfort with SaaS and cloud computing, I’d guess that a number of enterprises will find the cost of single-tenant SaaS more palatable than the queasiness they feel about multi-tenant alternatives. And so I think there’s a place for single-customer enterprise SaaS stacks somewhere; the main remaining question is where they will be located.

Ducking that question a bit longer, let me note that:

And that finally brings us to the opinions I copied up top.

I think that most sufficiently large enterprise SaaS vendors should offer an appliance option, as an alternative to the core multi-tenant service. In particular:

Related link


6 Responses to “SaaS appliances, SaaS data centers, and customer-premises SaaS”

  1. Robert Hodges on November 29th, 2013 12:08 pm

    If you are talking appliances for enterprise software, the only way to go is software appliances based on VMWare or emerging private cloud standards like OpenStack. Add phone-home and other “appliance” features and this model is a real winner.

    My own experience selling in the DBaaS market is that only a small fraction of customers is willing to pay the extra $$$ for a hardware appliance that pops into the rack rather than using their favorite commodity hardware–by small fraction I mean 1-2% of the prospects I have encountered over the last 5 years. The hardware-appliance business model has worked out poorly for vendors in the MySQL market, where most of its proponents have ended up roadkill or shifted to the cloud, like Clustrix.

    Hardware appliances currently seem to make sense only at the low end (e.g., consumer or small-business devices) or the high end, such as Exadata. It would be interesting if you could come up with an example that really works for enterprise software.

  2. Thoughts on SaaS | DBMS 2 : DataBase Management System Services on December 2nd, 2013 4:09 pm

    […] In theory and occasionally in practice, certain SaaS benefits, namely the outsourcing of software maintenance and updates, could be enjoyed on-premises as well. Whether I think that could be a bigger deal going forward will be explored in future posts. […]

  3. Foobarista on December 6th, 2013 1:01 am

    When our company shifted from on-premise software deployment, we explored the appliance approach as it would have been easier for us (at least initially) than full-on SaaS. In our initial exploration of the idea, we found that it was actually harder to sell than SaaS itself, as customers didn’t like the idea that they wouldn’t be administrating the box, we’d need firewall tunnels and remote shell access to it, we’d broadcast upgrades to it (which seemed scarier than us doing it in our SaaS datacenter), the need for site visits to upgrade the hardware occasionally, etc.

    We ultimately went full-bore SaaS with a multi-tenant datacenter, and now that we’re established that we can do SaaS, we’ve seen no reason to revisit the appliance approach. Other vendors may have different requirements where on-prem appliances make sense, but not for us, at least for now.

  4. Jay Jakosky on December 20th, 2013 2:34 am

    This is a good competitive differentiator. But this assumes that the infrastructure is reducible, that an appliance (or private cloud) provides the same quality of service, that it still can meet minimum SLAs, that the peak resource needs are predictable, and that the customer can scale to the peak. It therefore loses the cloud advantages of pay-as-you-go scaling. It restricts vendor and customer to predictable activity. It restricts the vendor from relying on geographically redundant sub-systems, or from switching to a more performant or scalable sub-system as they see fit: decisions that then may force the vendor to choose whether to split its customer base.

    We need to deal with lock-in and data security. We need revised legal frameworks. But an appliance takes away too many advantages. If there’s a market among customers that cannot find their way to a public cloud, then an appliance will be competitive.

  5. Jay Jakosky on December 21st, 2013 2:15 am

    I’d be reluctant to take the level of resistance to SaaS as measures of a market for appliances. While there are reasons (control, security, regulation, etc) not to move to SaaS, they are not all good reasons. And for the good reasons, an appliance is a significant compromise.

    So some companies truly can’t take advantage of a SaaS model. If it’s a worthwhile competitive move to support an appliance, then an upstart SaaS vendor can leverage this niche. Until that happens and a large SaaS vendor is threatened, I say it’s not worth the effort, risk, complexity or the compromise to large established SaaS vendors.

  6. clive boulton on May 18th, 2014 1:05 pm

    Google’s Enterprise Search Appliance option looks like a proof case.

    SAP HANA appliance option looks more like a hobby.

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