The realist's guide to cloud services and what they're good for

SaaS, PaaS, IaaS -- cloud computing comes in many flavors. Here's how to tell which one best fits your business

Hot technology chatter, like most other business discussions, assumes business success comes from brilliant concepts, careful planning, and disciplined execution. I wonder if what actually happens is more of the million-monkeys-at-a-million-keyboards situation: If enough companies throw enough products and services into the marketplace, some will stick, even if the products and services are the result of random tossing, not superior thinking.

Way back in 1999 I proposed a simple set of criteria to bring order to the randomness when it comes to new information technology. According to the proposed model, three filters predict the success or failure of any new technology product:

  1. Are the customer and consumer the same people? For clarity: "Customers" are those who make or influence the buying decision. Consumers are those who actually use the product or service.
  2. Is the product or service affordable? The third "customer" role is the wallet -- the person or committee who approves spending. Products are affordable to the extent the wallet doesn't care about the cost increment. The wallet impact is a separate factor whether or not the wallet is also the customer or consumer.
  3. How much disruption it causes in the enterprise it's brought into, as opposed to "the marketplace," which doesn't matter a bit.

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So here we are, with a new year in front of us, after lots of hype about the three big IT trends: The cloud, BYOD (bring your own device), and big data. It's past time to apply this model to them and see where it takes us. This week we'll see how the cloud stacks up. We'll look at BYOD and big data next week.

Assessing cloud success

The cloud, just to make sure we're on the same page, is any technology that's bundled into services and made available through the Internet. SaaS, PaaS, and IaaS (software, platform, and infrastructure as a service, respectively) are the most important. One at a time:

Software as a service
SaaS has been tremendously successful, assuming you think press releases and exponential growth forecasts constitute success. Hard data on SaaS market penetration by software category is remarkably difficult to find -- and that's what matters. In case the point isn't clear, has penetrated the CRM/SFA (sales force automation) category quite successfully. TeamDynamix has done well in the project management category.

But ERP, supply chain management, warehouse management, point-of-sale, business intelligence, or even basics like office suites? Extravagant growth projections are easy to find. On the other hand, accurate reports of current market share are not. In any event, here's the analysis for SaaS, according to our three criteria:

Customer vs. consumer: Business executives and managers are the customer. Business managers and staff are the consumers. Organizationally, they're the same.

Affordability: For SaaS solutions, the customer is the wallet. For installed software, the capex committee is the wallet. This makes SaaS much more politically affordable, even though it's generally less economical than its installation-based competition.

SaaS flies in under the CFO's radar because buying SaaS licenses doesn't involve the capital approval process -- they arrive divided into 12 hard-to-spot installments per year. Installed software, in contrast, requires capex funding. It shows up in one big bite that requires capex committee approval.

SaaS isn't actually economical, though. Take the ever-popular The last I looked, licenses cost $780 per year, per user. Compare that to Act Pro's one-time $550 per-license cost, and it's clear actually costs more -- a lot more.

But that doesn't matter. When dealing with the CFO and capex committee, maintaining ignorance (or plausible deniability) is blissful.

Disruption: It's all about integration with other systems., the highest-profile SaaS success story, is usually an "automation island." Most software categories require extensive integration, though, and SaaS integration is significantly more complicated (and consequently disruptive) than what IT has to do to with software installed in the data center.

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