“Cloud Killed the (SaaS) Rock Star”…
… well, not literally, but definitely in a figurative sense.
The press release below is the all-points-bulletin heralding the cloud has “won.” Why do I say this? Because LiveOffice, a non-cloud SaaS start-up, couldn’t compete against the new generation of SaaS start-ups powered by true public cloud computing like Sonian.
LiveOffice was the rock star of SaaS archiving. Ten years in business and they deserve the credit as one of the pioneers to legitimize the SaaS market. When LiveOffice launched a decade ago, they had to operate their own data centers. (This is called “Co-located Powered SaaS.”) But during the past five years, the world changed underneath them. Usually, market dynamics cause this kind of disruption, but the SaaS archiving market size didn’t get smaller, rather it’s bigger than ever. What changed starting in 2007? The advent of the public cloud. Suddenly, any SaaS company running their own data center became vulnerable to competitors able to harness the cloud. This is the beginning of the cloud-powered SaaS era.
Seriously, I wish all the best to the LiveOffice team. Sonian and LiveOffice competed vigorously from 2008 to 2011. Symantec acquired a great team, and the fit between LiveOffice and Symantec makes a ton of sense, and it’s understandable why Symantec made the acquisition.
Although LiveOffice called themselves a “cloud archiving” company, that was stretching the truth. The cloud moniker is so overused at this point, the public is deceived into believing they are using a cloud service, when in fact, it’s really just re-packaging the same old SaaS with a new label.
Why did this Happen?
Operating a SaaS infrastructure on a pure cloud environment is vastly different compared to a co-located system; it’s the reason we’re going to see more of old-world SaaS companies change control or fade away. It will be exceedingly difficult to re-tool a co-located hosted SaaS business to use the cloud. Not impossible, but very difficult. The whole architecture would need to change. I say this having lived in both worlds — with the cloud battle-scars to prove it.
The cloud isn’t a panacea for every enterprise workload. I have written about this in the past in “Have the Right Use-Case for the Cloud.” Though for archiving, the cloud as we know it today, is a great fit.
When enterprise IT decision makers consider outsourcing an internal function such as archiving to a SaaS vendor, they confront two primal fears: security and cost. There are many vendor-independent studies proving SaaS can be more secure and less expensive than an on-premises archive. And when comparing one SaaS solution to another, the cloud-powered offering has even more to offer the customer. It’s more than a nuanced distinction.
Looking at a cloud versus a co-located solution, they offer the same level of security, but there are two reasons to choose a cloud vendor: Economic advantage and business agility.
Cloud Creates Economic Advantage
When I started Sonian five years ago, we had to prove that the cloud could be a credible IT supplier. What I was attracted to was a different way to buy my raw materials. I could see how a SaaS company could flourish if it could “play the cloud” economics game. This means setting aside all pre-cloud conventional thinking and embrace a different way to design, develop, and operate a reference architecture at scale.
Sonian accesses several public cloud infrastructures. We’re just at the beginning of being able to seek best pricing from multiple vendors for our compute and storage. We’re not going to be locked into one supplier, and that benefits customers and the whole eco-system. The cloud has ushered the whole IT industry to a world with unprecedented transparency in cost and reliability. Public-facing dashboards from cloud vendors show current pricing and system reliability. This means any company using the cloud inherits this transparency, and needs to amplify to their end customer. Before “cloud” became the commonplace term, the industry used the phrase “utility computing.” In a sense, we’re making steady progress toward that future world where compute and storage can be purchased like we buy our electricity; multiple suppliers, with varying levels of service, offering a commodity “product.”
Cloud Allows Business Agility
We often half-joke, half faux-complain, how fast life seems to be going by. At “Internet speed” is a common refrain. But it is true that there is more enterprise IT innovation occurring faster, which means market opportunities are coming and going at an accelerated rate.
Anchoring a SaaS business to the cloud allows that business to react quickly to customer’s changing buying attitudes. If new features are needed, the cloud-powered SaaS company can deliver those much faster than non-cloud competitors. Also, cloud companies are able to experiment and innovate much easier.
Conversely, a SaaS business tethered to a co-located facility has too many impediments in the form of physical hardware, and this creeping paralysis will eventually consume all non-cloud SaaS companies.
Take Away Thoughts
Despite the “tongue and cheek” title, this post highlights important trends within the SaaS market. SaaS companies that use the cloud, which is not easy, gain a competitive advantage in their product space. Mastering the cloud for SaaS requires different skills than co-located SaaS. But that learning curve investment will pay back in spades with lower operating costs and increased agility.
Image from “The Buggles: Video Killed the Radio Star”