If you sell your ASP as SaaS you do something basically wrong!

Despite the continuing spread of the cloud and the software-as-a-service (SaaS) model, you always meet again and again people, who are anchored in the firm belief to offer cloud computing since 20 years. Because ASP (Application Service Providing) was finally nothing else. The situation is similar with traditional outsourcers, whose pre-sales team will gladly agreed for an appointment after a call to model the customers ‘tailored’ cloud computing server infrastructure locally, which may be paid by the customer in advance. In this post it’s only about why ASP has nothing to do with SaaS and cloud.

ASP: 50 customers and 50 applications

Let’s be honest. A company that wants to distribute an application will come sooner or later to the idea that it somehow wants to maximize its profits. In this context, economies of scale have an important role to place an efficient solution on the market that is designed that it remains profitable in spite of its own growth. Unfortunately, an ASP model can not prove exactly that. Because ASP has one problem. It does not scale dynamically. But is only as fast as the administrator must ensure that another server is purchased, installed in the server room, equipped with the operating system and other basic software plus the actual client software.

Furthermore, in the typical ASP model, for each customer an instance of the respective software is needed. In the worst case (depending on performance) at least even a separate (physical) server for each customer is required. This means in numbers, that for 50 customers who want to use exactly the same application but separated from each other, 50 installations of the application and 50 servers are required. Topics such as databases should not be forgotten, where in many cases, up to three times as many databases must be used as applications are provided to customers.

Just consider yourself the effort (cost) that an ASP provider operates to integrate and manage the hosted systems, to service new customers and beyond that to provide them with patches and upgrades. This is unprofitable!

SaaS: 50 customers and 1 application

Compared to ASP SaaS sets on a much more efficient and more profitable model. Instead of running one application for each customer, only one instance of an application for all customers is used. This means that for 50 customers only one instance of the application is required, that all together are using but isolated from each other. Thus, the expenses for the operation and management of the application is reduced in particular. Where an administrator at the ASP model had to update each of the 50 software installation, it is sufficient for SaaS, if a single instance is updated. If new customers want to take advantage to access the application, it is automatically set up, without an administrator needs to install a new server and set up the application for them. This saves both time and capital. This means that the application grows profitable with the requirements of new customers.

Multi-tenancy is the key to success

The concept behind SaaS, which accounts for a significant difference between ASP and SaaS, is called multi-tenancy. Here are several mandates, ie customers, hosted on the same server or software system, without beeing able to look in the data, settings, etc. of each other. This means that only a customer can see and edit its data. A single mandate within the system forms a related to the data and organizationally closed unity.

As noted above, the benefits of a multitenancy system is to centrally install the application, to maintain and optimize memory requirements for data storage. This is due to the fact that data and objects are held across clients and just need to be stored for an installed system and not per mandate. In this context, it must be stressed again that a software system is not multitenant by giving each client its own instance of software. Within the multi-tenancy method all clients using one instance of an application that is centrally managed.

If you still have the question why not to sell ASP as SaaS, read “Software-as-a-Service: Why your application belongs to the cloud as well“.

By Rene Buest

Rene Buest is Gartner Analyst covering Infrastructure Services & Digital Operations. Prior to that he was Director of Technology Research at Arago, Senior Analyst and Cloud Practice Lead at Crisp Research, Principal Analyst at New Age Disruption and member of the worldwide Gigaom Research Analyst Network. Rene is considered as top cloud computing analyst in Germany and one of the worldwide top analysts in this area. In addition, he is one of the world’s top cloud computing influencers and belongs to the top 100 cloud computing experts on Twitter and Google+. Since the mid-90s he is focused on the strategic use of information technology in businesses and the IT impact on our society as well as disruptive technologies.

Rene Buest is the author of numerous professional technology articles. He regularly writes for well-known IT publications like Computerwoche, CIO Magazin, LANline as well as and is cited in German and international media – including New York Times, Forbes Magazin, Handelsblatt, Frankfurter Allgemeine Zeitung, Wirtschaftswoche, Computerwoche, CIO, Manager Magazin and Harvard Business Manager. Furthermore Rene Buest is speaker and participant of experts rounds. He is founder of and writes about cloud computing, IT infrastructure, technologies, management and strategies. He holds a diploma in computer engineering from the Hochschule Bremen (Dipl.-Informatiker (FH)) as well as a M.Sc. in IT-Management and Information Systems from the FHDW Paderborn.

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