Earlier this week, I attended a social event for SaaS business leaders in London, hosted by European SaaS industry conference SaaStock. As I chatted to attendees, it occured to me that many in this young industry take it for granted that what they do is mainstream behavior. The inexorable spread of connected digital technology is bringing the as-a-service model to all industries, making the idea of hosting your own IT seem distinctly old-fashioned.
And yet two decades ago, when I started championing the SaaS model and founded a website called ASPnews.com, even the notion of delivering software itself over the Internet was regarded as risky and subversive. I met a few people who remember those days, but most have no idea how different things were back in 1997. So in the interests of historical perspective, here is a potted history of SaaS in twelve brief chapters.
1. We haz Internet
When the web got going, everyone got access to the Internet by signing up to an Internet service provider — an ISP. In early 1998, a small group of Citrix partners saw an opportunity to use the Internet in combination with a technology called Windows terminal services to become application service providers — ASPs. And thus the earliest version of the SaaS model was born.
2. And then there was Ajax
ASPs soared and burned in the dotcom crash. An alternative branch of the ASP model — including early pioneers such as Salesforce, NetSuite, Concur and WebEx — chose to stay web-native, delivering their applications in the web browser rather than relying on Windows. But the functionality they could deliver was crude, until a ‘rich browser’ technology called Ajax came along, based on a Microsoft browser function that was harnessed by the precursors of Yahoo! Mail among others. Suddenly — if your developers were creative enough — browser-based applications could rival the functionality of Windows and Mac applications.
3. ADSL was a lifeline
The trouble with running this kind of functionality in the browser was that it didn’t perform that well over a dial-up line. In fact, come to think of it, millennials don’t even know what it’s like to have to wait 20 seconds while your modem connects before your web session starts — and then slows to a crawl because it starts downloading an oversized image file. ADSL, the technology that brought broadband web access to homes and small businesses, gave early SaaS vendors the lifeline they needed to deliver highly functional web-native applications to a mass market.
4. No servers, no offices
The other side-effect of broadband and the early SaaS industry was that it started to become possible to run a small business without an office or a corporate network. It made remote working viable, even for a start-up. One of the people I met on Wednesday evening is Bridget Harris, CEO of youcanbook.me, a cashflow positive, bootstrapped, multi-million turnover meeting scheduling service that runs entirely virtually and can recruit the staff it needs wherever they happen to be based. We take this for granted today, but SaaS businesses made it possible, and pioneered it.
5. Open source begets DevOps
The other thing that SaaS vendors worked out very early was that they could build powerful application stacks on open-source software such as mySQL, rather than having to pay vast license fees to the likes of Oracle — though some continued to do that nevertheless. And as web-native businesses like Yahoo! and Google began to scale, they began to share recipes and templates for how to run a high-volume web-native software infrastructure. That begat the practice of continuous delivery in an agile software development environment, which became DevOps. And SaaS companies needed to operate that way because part of the bargain they offered their customers was continuous refresh of the functionality in their applications.
6. Multi-tenancy becomes mainstream
In the early days of SaaS there was a huge struggle between the ASP model and the web-native model. Essentially, there was a school of thought that believed customers were best served by client-server software delivered as SaaS. Whereas the people who got it right realized that a new architecture was required, which they called multi-tenancy. The entire argument has become somewhat redundant in the era of microservices, but it’s one to which I’ve devoted acres of column inches over the years, most notably From client-server to cloud: SaaS evolution in 2014, Multi-tenant, multi-instance: the SaaS spectrum in 2013, Taking false cloud comfort from multi-tenancy in 2012, Multi-tenancy: why you should care in 2010 and Many degrees of multi-tenancy in 2008. Talk about angels on a pinhead!
7. PaaS and IaaS to the fore
While all this was going on, various vendors were looking to position themselves as platforms. Salesforce launched its AppExchange, giving the likes of Apptus, Conga, Fairsail and FinancialForce and many others after them an opportunity to become multi-million dollar application vendors without having to build a scrap of their own server infrastructure. And of course Amazon launched AWS, which made it possible to launch a software business essentially on spec, without having to invest any more than a few cents in servers, paying only to the extent they were used. There were a lot of other PaaS and IaaS pioneers who didn’t make it, but they all helped promote the model.
8. Subscription business takes hold
In the era of AWS, Airbnb and Zipcar, we all take the notion of pay-as-you-go for granted. Interestingly, the sponsors of this week’s SaaStock social event were Chargebee and GoCardless, both offering services to help with subscription billing. But there was a time when subscription billing was an esoteric art. Salesforce CEO Marc Benioff once told me that the biggest mistake he made was allowing customers to pay a monthly subscription. In part that’s because it was just too difficult to manage. Which is why in 2008, Salesforce’s 11th employee and former chief strategy officer Tien Tzuo left to launch Zuora, now one of the giants of subscription billing. Today we talk glibly about the subscription economy, but the SaaS industry has been instrumental in providing the tools that enable it.
9. Big data gains gravity
As SaaS became more mainstream, and as new NoSQL database platforms began to emerge, the ability to analyze huge volumes of data has become a massive selling point for the SaaS model. Being in the cloud makes it far easier to handle these large volumes of data, while the ability to benchmark across an entire customer base is an important differentiation. The advent of new artifical intelligence techniques adds to the value of large data stores.
10. The rise of microservices
On-demand movie provider Netflix has been an important pioneer of the microservices model, but now everyone seems to be moving to these API-based architectures. Nowadays it’s even possible to build a SaaS application without having to rent on-demand server instances — instead, serverless computing is coming to the fore and adoption seems to be racing ahead. This can only increase the resilience, flexibility and cost-effectiveness of the SaaS model.
11. Now everyone’s multi-cloud
One of the most interesting developments in the past year or so has been the trend among leading SaaS vendors to team up with public cloud infrastructure vendors to extend their geographic footprint. Even Salesforce has formed an alliance with Amazon to operate in some of its data centers. Others are working with Microsoft Azure or IBM. We even saw Apttus porting its Salesforce-native app to Microsoft Azure, and now we learn that it is supplementing the Force.com platform with a performance-boosting proprietary platform running on Azure. FinancialForce is looking at a similar arrangement hosted on Salesforce heroku. We’re clearly in a multicloud era.
12. AI accelerates into the future
The final chapter is still being written. Recent advances in deep learning technology have really put a rocket under artificial intelligence. Coupled with the ready availability of huge data stores and the ability to rapidly iterate algorithms, the potential for rapid advances in AI is huge, provided the limits of AI are also acknowledged. SaaS businesses are best placed to benefit because they’re already in the cloud and they have access to consolidated stores of data. It’s a huge new area of competitive differentiation for the SaaS industry.
The bigger story is that every business is becoming a SaaS business, and thus all the technology and business model learnings of SaaS vendors are now invaluable to every other organization that has to adapt to the as-a-service model. This industry, and all who work in it, hold the keys to the future of business.
Image credit - Businessman holding book with lightbulb imposed © ra2 studio - Fotolia.com
Disclosure - FinancialForce, NetSuite, Salesforce and SAP (parent of Concur) are diginomica premier partners at time of writing. The author was a guest at SaaStock's social event in London this week.