Consider the Source

Software as a Service: Caveat Emptor

By Stanton Jones, Chief Information Officer, TPI; and Bobby Neil, Director, TPI

Here’s a challenge: Go to any enterprise software vendor’s Web site and try not to find a reference to the terms “Cloud” or “Software as a Service” (SaaS). These terms have become so pervasive that they are almost indistinguishable from the software itself.

A surprising number of applications are marketed and sold as Software as a Service, but in reality, they are hosted or “on-demand” versions of an application that may have been built many years ago. How can you decipher whether the product is truly SaaS? And, more importantly, why should you care?

Here are the TPI Top 5 ways to determine if you are buying authentic Software as a Service:

1.  New features are included and are delivered often: SaaS is designed and built on a “multi-tenant” architecture, which means you share the application software and hardware with other customers. Given that the vendor only has one code base to manage, they can enhance that code base often; think weeks and months rather than quarters and years. Why you should care: The vendor can focus its efforts on improving the product as opposed to planning and executing numerous custom implementations. This means you benefit from enhanced features and functionality delivered faster and more often. 

2.  Access it from anywhere, including your smartphone or tablet: Most SaaS applications were built recently; therefore, they were architected for the Web with mobility in mind. Why you should care: given the exponential growth in the mobile computing industry and rising expectations from a global, virtual workforce, SaaS applications are ready to take advantage of this explosive mega-trend.

3.  Pay for what you use: SaaS pricing is typically focused on unit-based pricing, e.g., users, bandwidth and storage — not software, hardware or maintenance costs. Why you should care: while a less capital-intensive approach to software is inviting to many CIOs and CFOs, it’s important to plan for the unexpected. If you acquire a company or triple your storage requirements, your price may increase substantially. On the other hand, if you divest or the business moves in a different direction, you may have the ability to rapidly scale down your costs.

4.  Configure, don’t customize: Generally speaking, when you change a SaaS application to meet your needs, you’ll do so through vendor-provided customization screens accessed via a Web browser rather than via code. This is because the underlying system is shared by all customers, so it cannot be changed unless the vendor changes it. Why you should care: Given the standardized nature of SaaS applications, it’s important to make sure your requirements can be met via available configuration options rather than deep customization. Otherwise, you may be saddled with an application that does not meet your specific needs.

5.  The price is flexible, but the service level agreements are not: Given that all customers share the same infrastructure, and that the vendor’s business is built on economies of scale, SaaS suppliers are usually hesitant to negotiate on “customizations,” which can include custom service levels. Why you should care: If highly specific and transparent service levels are important to you, you may have difficulty getting what you need from a SaaS vendor. However, remember that the vendor’s unit cost goes down with each new customer they add, so adding more users may allow you to negotiate a lower price.

TPI CIO Services experts can help you separate fact from fiction through objective advice, knowledge of your industry and experience with arrangements from simple to complex. Need help evaluating the myriad of IT options and their potential benefits or pitfalls? Contact Stanton Jones or Bobby Neil to learn more.

New AskTPI and DynamicRFI Services Put the Power of Information in Clients’ Hands

by Debora Card, Partner, TPI; and Kimberly Fey, Director, Sourcing Industry Relations, TPI

A busy February at TPI saw the welcoming of our new sister companies Compass and STA Consulting followed by the announcements of two new services to help clients and service providers make smart, strategically powerful sourcing decisions.

We’re excited to bring to market the new AskTPI information service, which offers clients fact-based answers to all types of sourcing questions with one click of the mouse. This subscription-based inquiry service combines the expertise of TPI advisors with our market-leading research capabilities to offer a wealth of TPI knowledge, including data from the TPI Index, Contract KnowledgeBase, Mark-to-Market® and Prevalence Database®.

AskTPI members can submit questions anytime — from on-the-fly general inquiries to detailed queries requiring our experts to mine TPI databases — or choose direct access to TPI industry and service line experts. Got a sourcing question, or want more information on this new service? Put us to the test — AskTPI today.

We recently announced our second new service, DynamicRFI, in response to the growing need for speed, cost efficiency and accuracy in researching best-fit service providers. On-demand access to the DynamicRFI data repository will help clients make more informed provider qualification decisions without the labor-intensive process of distributing and analyzing their own request-for-information (“RFI”). Service providers benefit, too, by being able to present their company information in real time through a secure and auditable Web portal, which is an equitable and effective way to communicate their capabilities and reduce the costs that are often incurred fulfilling multiple data requests.

We plan to pilot DynamicRFI in the Business Process Services (BPS) market and expand across all our service lines throughout 2011, so watch for further information on this new tool shortly.

For more information about AskTPI, contact Debora Card, Partner. To learn more about DynamicRFI, e-mail Kimberly Fey, Director, Sourcing Industry Relations.

TPI is committed to the success of our clients and to the global sourcing industry as a whole. Whether you’re a client, service provider or industry observer, let us know what you think about AskTPI and DynamicRFI. Also, what other services you could use to enhance your sourcing initiatives?

Considerations for Emerging Technologies in Your Sourcing Strategy

by Fred Croxton, Director, TPI

There are a number of commonly accepted models for the adoption of emerging technologies and the most effective manner for the organization to consider, test and deploy them. Generally there is a “trigger event” followed by building expectations, then disappointment and eventually a period of more pragmatic expectations and realizable productivity. Here are the TPI Top 5 considerations for how the technology adoption cycle may impact your sourcing strategy:

1. Rationalize technology adoption with your service provider integration strategy. More enterprises these days are employing smaller, more segmented sourcing transactions (along “tower,” region or business units), and hence managing three, four or more outsourcing relationships versus one large one. While there are clear advantages to such a strategy, there are also inherent governance challenges. Make sure you consider expectations for your sourcing partner(s) for their role in adopting and deploying new technologies and have contractual mechanisms in place to enforce these expectations.

2. Leverage SOA investments to rapidly integrate new services. Although service-oriented architecture (SOA) is one example of technologies featured in most views of emerging technologies, it is well along the “slope of enlightenment” and is already embedded inside many organizations. For those with a reasonably developed SOA strategy in place, you would do well to consider how to leverage this architecture to more quickly plug in selected technologies and how to deploy them in the form of services for a quick return. This is, after all, one of the reasons for embarking on the SOA journey.

3. Take a long-term view toward innovation. Clients frequently have inflated expectations of provider-driven innovation as they enter a new sourcing relationship. After all, “they do this all the time, so they should be the experts.” As a practical matter, innovation is difficult, and service providers may be much more consumed with driving down delivery costs than identifying opportunities for real innovation. Look at your governance mechanisms and how you will manage expectations for your sourcing partners to identify, test and introduce new technologies into your organization. Be realistic, and don’t give away the “family jewels” as far as business-driven opportunities for innovation. Consider an “innovation steering committee” comprised of a cross-section of business/user representatives that emphasizes “influential and visionary” contributors as much or more than seniority.

4. Don’t forget “end of life” strategies. Nearly as important as your adoption strategy of emerging technologies is having a clear strategy on retiring “end of life” technologies. For example, cathode ray tube (CRT) monitors are expected to reach end of life within a year or two. Such an installed base may represent a significant investment in physical retirement and disposal of the asset (especially considering today’s “green” movement) as well as replacement cost. Make sure you have practical alternatives baked into your sourcing strategy for end of life strategies. Schedule timely reviews with suppliers of technology assets and build deployment and retirement plans into your agreements.

5. Consider the impact of “transformational” technologies on your sourcing relationships. Emerging technologies may be viewed as “transformational” or “modestly impactful.” “Transformation” itself could arguably be considered a form of “hype,” but in the best of sourcing relationships it can have a real and measurable impact on resource consumption and spending (e.g., server consolidation). Be sure your sourcing relationships have appropriate safeguards built in to protect against punitive revenue commitments.

TPI’s experts can help you achieve an objective assessment of your strategy for managing technology change. We provide objective, risk-balanced, and forward-oriented strategies for sourcing relationships. Contact Fred Croxton, Director, TPI.