Getting Saatisfaction from SaaS (News - Alert)

By Brendan B (News - Alert). Read
Senior Contributing Editor, Customer Interaction Solutions

Software as a Service (SaaS) also known as hosted solutions or cloud computing is fast becoming a very popular method of delivering an increasingly wider range of contact center applications, as an alternative to premises licenses and thin-clients. We approached a wide several leading firms on the benefits and issues with SaaS in the contact center and posed key questions to them. These are:

1. What are the key benefits of buying a SaaS-based solution as opposed to those delivered through software licenses on premises equipment or thin-client applications?

2. Which software applications work best for SaaS and which ones are best provided through other methods and why?

3. Has there been growth in SaaS-suitable solutions and if so in which areas and what has been the drivers?

4. Do you see more suppliers opting in for SaaS delivery? Are any of them choosing to dispense with premises or thin-client altogether? Do you see all solutions eventually being delivered by SaaS and if so in what timeframe?

5. What challenges are there in deploying SaaS and how can they be best overcome? Have these challenges lessened or increased and why?

6. SaaS has been compared with leasing versus buying a car. Is there a point and if so what is it that it becomes less expensive to buy licenses that to contract for SaaS?

Here are the answers, in whole and excerpted.

Enkata (www.enkata.com)

Liz Amaral, Senior Director of Product Marketing

There are a couple of reasons that customers are becoming fans of Software-as-a-Service (SaaS) solutions. For Enkata's customers, the choice was made because it involved minimal IT involvement, faster implementation and the ability to incrementally scale. Enkata’s customers also preferred the lower up-front outlay of an annual subscription versus the traditional license/maintenance model. Additionally, the lower total cost of ownership is also a big plus.

The lines are blurred every day. It used to be that companies wouldn't consider any mission-critical applications in a SaaS model, but applications like Salesforce.com (News - Alert) really broke that barrier. Today, Enkata see customers choosing to adopt SaaS offerings even for core infrastructure, such as telephony. The only applications that would not work as a SaaS offering are those that are completely proprietary to a company or require unusual customization. However, flexible, user-oriented applications like contact center performance management and analytics are a perfect fit for SaaS, because they take the burden off the overworked IT departments while helping customers solve challenging business problems.

SaaS-suitable solutions are definitely a growth area in the software arena. Technology, hosting and security standards have evolved to the point that all types of applications are being offered in a SaaS model.

Almost everyone (with one or two notable exceptions) is now offering a SaaS alternative. We wouldn't expect traditional premises-based solutions to disappear completely, but whole product lines are now being offered exclusively as SaaS solutions, like Enkata's Strategic Service Suite. As long as customers want a choice, the two will co-exist.

One of the biggest objections to deploying SaaS solutions used to be security. Yet those fears have been laid to rest through countless audits of SaaS offerings.

That's a perfect analogy: SaaS is like leasing versus buying a car. It used to be that “leasing” was a less favorable economic choice but now that the technology is changing so rapidly, it can be the right choice for many organizations. If you think your business will be completely stable for the next five to ten years, then traditional premise-based licenses make sense. However, if you expect your business to evolve in the face of fast-paced market conditions, then a SaaS offering is far more flexible and adaptable. The main difference between leasing a car and SaaS is that in the software world the vendor is constantly upgrading the applications because they have to earn your business everyday.

Genesys Telecommunications Laboratories (an Alcatel-Lucent (News - Alert) company) www.genesyslabs.com Chris Morley, Program Director, Professional Services

Before we get into the benefits of a SaaS solution, let’s first define how we look at SaaS. At Genesys (News - Alert), we view SaaS as a kind of continuum. Imagine a continuum where the y-axis is degree of customer complexity and the X-axis is degree of dedication to a given customer. The further north on the y-axis you go, the more complex the customer interaction. The further east on the x-axis, the more that given solution has to use dedicated components to meet the customer need.

So, the (0,0) point would be a true SaaS solution – requiring no customization and on a truly multi-tenant platform. As you move toward the upper right in the quadrant, you get more complex and more dedicated. You need to maintain some shared components to fit within the SaaS definition but the customized needs drive a higher level of customer dedication. At Genesys, we have traditionally called these “managed solutions.” Along the continuum in this hosted space that ranges from “SaaS” (bottom left) to “Managed Solutions” (top right) there are varying degrees of customization and dedication that differentiate the various partners’ solutions.

We’re starting to see our partners and competitors trying to fill in the intermediate points and competing on the differentiated value they provide for the market that best fits that point on the continuum. They are leveraging multi-tenancy, trying to keep their costs low and thereby yielding a lower per-unit price than is possible in a dedicated solution. Some will compete on customization: of a SaaS solution that is better integrated into the customer environment and requires less process re-engineering by the end-customer. We think the winners will be the people who strike the right balance given their market segment.

There are some applications that fit easily the SaaS model and others that are much more customized. For example, we have a set of G-Plus adapters to allow Genesys to plug into leading CRM systems, or into call-recording systems. Those adapters never fit easily into a “pure” SaaS model because they are heavily customized and integrated into the customer’s environment.

Other features really do fit the SaaS model. Our recent acquisition of Software Development Engineering highlights the importance of the Genesys Customer Interaction Portal (GCIP). GCIP is actually SaaS enablement software that allows end-user customers to configure their environment, build voice and routing strategies, etc, and do real time administration of their contact center resources. This is our premiere offering in the SaaS space. This approach reduces the cost and overhead to the partner of ongoing monitoring and maintenance because customers can do self-provisioning and self reporting.

Yes, in the contact center space, I’ve seen some very interesting things coming to market, even for low-end contact centers. When starting in a greenfield environment with modest or no pre-existing contact center applications, customers of the SaaS offers have to be able to bring up “virtual” contact centers in days or weeks with no real dependence on an existing PBX (News - Alert) or ACD infrastructures. This seems to be the lion-share of the base of tens of thousands of hosted seat that have come on-line over the last couple of years.

I’ll start with the last question because I think it answers the first. The simple answer is “no”. For regulatory reasons, for customer intimacy reasons, there will always be a model for CPE based solutions. Having said that, will those CPE-based solutions eventually go from being their current blend of hardware and software based solutions to all software based solutions? The answer is yes. All of our competitors want to move to a software based solution. I don’t believe everything will go to SaaS. But I do believe, contrary to common wisdom, that the SaaS model will expand beyond the small and medium business market. There will be lots of large companies who are and will be planning to buy a SaaS-based solution. And these are the companies that will drive the integration and customization requirements.

Let me be very specific. The first is customer transparency and control. The platform has to be transparent to the customer, even though they’re keenly aware that it’s multi-tenanted. They obviously can’t see and don’t want to see any other tenant’s information. And you need to give them effective control so they don’t have to come in and do a professional service engagement if they want to change a routing strategy or add one-hundred new agents, etc. The second thing is customer information security. In a multi-tenant platform, you need to not only assure the customers that their proprietary information is secure and not being sent inappropriately over open internet or telephone lines, you also have to be able to—and this is going to be a battleground for the future—tailor information and security methods on a vertical basis.

I’m not sure this is a great analogy because there are different factors on considers in the car purchase. But one thing they have in common is that one of the main financial factors is Total Cost of Ownership or TCO. While most models can easily do a break-even analysis of the capital outlay for licenses vs. the pay-per-use price, there are many, many more advantages that a SaaS model affords that aren’t quite so easy to quantify. A good list of some of these benefits would include future proofing the technology, disaster recovery planning, peak utilization handling, and management of the end-to-end solution.

Interactive Intelligence (News - Alert) (www.inin.com) Roe Jones, Product Manager

SaaS has these benefits: the customer has a lower initial capital investment compared to premises-based solutions, predictable monthly expenses instead of a large up-front payment, a service provider is responsible for the technology, enabling the customer to focus on its core business objectives, and customers can easily expand or contract services as business needs require.

Assuming the desired applications are available from SaaS vendors, and most today are (such as CRM, help desk, and contact center automation), the following are criteria that make a SaaS deployment particularly worth considering:

• The customer operates in an environment with minimal industry regulations/compliance, especially those related to off-site data storage

• The customer does not require highly customized applications

• Integration to existing systems is minimal, and the SaaS vendor has this integration expertise

• Developing the application is either not a core competency, or the customer does not have the IT resources to do so

We’re seeing increased interest in both our SaaS-based contact center offering and our notification services. The migration to voice over IP and server virtualization has fueled growth in our new Communications as a Service (CaaS) offerings. By extending an MPLS link from the customer site to our data center, along with deploying VoIP gateways and IP phones at the customer location, we can deliver sophisticated contact center functionality such as IVR, multi-channel routing, call recording and outbound dialing to any number of locations, as well as to work-at-home employees.

Another driver for SaaS is the economy. Customers are limiting capital expenditures, focusing on their core competencies, and looking for creative ways to deliver new technology without having to hire additional staff to manage these systems.

More vendors are launching SaaS solutions but we don’t believe that premises-based solutions are dying out. The majority of our business is, and will likely remain, premises-based. Given customers’ diverse business models and requirements, there will continue to be both a market for SaaS and premises-based solutions.

SaaS has several challenges. These include:

• Security and ownership of data. Compliance issues with managing, securing and auditing sensitive information that may be stored at the service provider. The party responsible for securing the data may not be the same party that owns the data

• Multi-tenancy: keeping authorized users from seeing one another’s data. Upgrades are rolled out to everyone regardless if a particular customer requires them. A multi-tenancy deployment (or analogous architecture, such as our CaaS multi-processor server with virtualization approach) can be necessary to optimize a limited set of system resources

• Scalability, namely an application’s ability to service requests without response lag time. Given that SaaS applications are typically delivered via the Internet or an MPLS network, the amount of bandwidth greatly affects performance and costs. Applications delivered via a Web browser are typically plagued with slow response time

• Integration i.e. integrating SaaS applications with back-office systems is often challenging due to previously mentioned security and networking issues

It ultimately depends on SaaS application costs and what the customer is including as an expense. For instance, is the customer including the additional staff needed to manage a premises-based solution? How about data center costs, such as power, cooling, rack space, back-ups? We find that the average total cost of ownership over a three-year period to be just slightly lower for our CaaS offerings compared to a premises-based solution.

Sitel (www.sitel.com) David Eckert, Chief Information Officer

From a financial perspective, SaaS solutions are usually priced as an operating expense versus a capital expense which is attractive to many companies working to reduce capital expenditures or even pilot new offerings to validate business cases.

For many companies, a SaaS solution can alleviate the need for a specific technical expertise outside of their in-house skills; perhaps opening the benefits of an Open Source Linux solution to a mainframe or Windows development shop. Lastly, a SaaS solution can also provide solution access to remote users for a company without a vast network infrastructure.

I believe any application that is not part of your company’s competitive advantage is good candidate for SaaS. Your competitive applications will most likely need continual enhancement to meet the changing aspects of your business or of your clients, so you would need resources and capabilities to provide these enhancements.

The fact that many SaaS solutions have become ‘best-in-class’ surpassing the capabilities of an in-house or competitive purchased solution has contributed to growth in this space. Also the increase in virtual employees and broadband access has helped to foster environments favorable to a SaaS solution.

The SaaS delivery model is too attractive for many functions and organizational needs making it a near certainty of significant growth with SaaS solutions in the years to come. As key IT solutions create competitive advantage in the marketplace, I believe there will always be solutions developed specifically for use within a company; therefore, not necessarily suited to a SaaS model.

The greatest challenges revolve around data security and the SaaS provider’s ability to unequivocally meet all client requirements, government regulation and/or industry standards. The service provider’s solution must be of the highest standard of design, process management and internal policing. The SaaS consumer must frequently review processes, controls, intrusion logs and breach indicators through audit. In the event of a breach, all parties will suffer in the marketplace. These challenges will continue to increase in the never ending battle between those who wish to gain through ill-gotten means and those who wish to prevent them.

Most likely yes, there will be a point where it is less expensive to buy the licenses, but make sure the analysis takes into account the true total cost of ownership; the supporting team, hardware procurement and maintenance, operating system and software procurement and maintenance, network, network security, third-party certifications and overall service delivery.

Verizon (News - Alert) Business (www.verizonbusiness.com) Jeffrey Deacon, Product Marketing Manager

The main benefits of a buying SaaS-based solution as opposed to those delivered through software licenses on premises equipment or thin-client applications include: low- to no-capital expenditures, quicker time to market, lower maintenance and operational costs, and minimal upgrade fees. The unique "pay as you go" cost structure avoids the long term costs of multiple licenses that need to cover peak volumes even when usage declines and licenses stand idle.

Applications that are not core to a company's success and not highly customized to their business processes are the best candidates for SaaS. Historically, this has meant applications such as e-mail, collaboration, Web properties, and communications applications. On the contrary, applications that are highly customized and tied to multiple back office systems tend not to be good candidates for SaaS because of multiple integration points. Many complex applications that must be customized do not work in a SaaS model due to the standardization that is required for a SaaS application to be commercially viable.

Like the rest of the market, Verizon Business (News - Alert) has seen tremendous growth in SaaS-suitable solutions, particularly in communication applications such as email and collaboration, as well as in remote monitoring and backup solutions. Increased availability and reduced costs are key drivers behind the growth of SaaS.

Verizon Business sees more and more suppliers delivering solutions via a SaaS delivery model, driven by customer desire for the flexibility that the SaaS model brings. While we anticipate seeing many solutions transition to the SaaS mode, not all will.

Customization is probably the largest challenge facing SaaS applications. Service providers rely heavily on ISVs for software that can be deployed in a SaaS model. The ability to customize SaaS applications has become easier as configurations for customers can be customized on a per user or company basis.

Software vendors continue to refine their licensing models, but in general, even for software that is purchased in the traditional model, there are maintenance costs each year for updates, including patches and security. Many other factors affect the total cost of ownership for a solution, including deployment, customization, operational costs, hardware fees, datacenter fees, power, cooling, and security-those are all part of the equation. SaaS provides businesses with unparalleled agility, allowing them to employ computing resources exactly and only when needed via an agile and affordable infrastructure.

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