Vendor Selection & Technology

The Software as a Service (SaaS) model of enterprise application delivery is a big story as we start 2006. Microsoft announced plans to offer Microsoft Office and Windows products as on demand services at the end of 2005. In a departure from its traditional licensing fees, Microsoft will offer Windows Live and Office Live services by subscription similar, for instance, to some existing offerings by Writely.

 

We see this as a major technology turn as it reaches a point of no return, and most importantly because of increasing inter-functionality as a result of the birth of an “appli-sphere” of SaaS applications.

 

Is the software giant Microsoft breaking new ground, or choosing a software application delivery methodology that has been both in development and in practical use for many years? Let’s first look back – and then to the future, and understand how it impacts our world of talent management.

 

In 1996, Oracle’s Larry Ellison and Sun Microsystems’s Scott McNealy championed the concept of NCs, or network computers that ran software over a network. They were designed to lower costs and reduce maintenance and upgrade demands on corporate users (sound familiar?). These “lean clients” raised much discussion about the future of network administration. NCs were conceived before the Internet became ubiquitous. NCs were designed to be hard-wired to a central server. As the Internet emerged, it provided another delivery platform. The late 1990s and early years of the new millennium saw the emergence of Application Service Providers (ASPs), and on demand services. Here the concentration is focused on accessing the software application, rather than on the hardware configuration.

 

The on demand model has been proven by innovators such as Salesforce.com, and endorsed by the largest technology companies including IBM. The technology has also proven its robustness, as evident by Taleo’s more than 300 corporate customers with approximately 475,000 registered users who use our services to fill positions in almost 100 countries.

 

According to analysts, on demand is a significant force. The growth for on demand software for the next four years will be 21 percent vs. 4 percent CAGR for the on-premise model, as described in a THINKstrategies paper.

 

Clearly, this type of technology is here to stay, but what of the names and acronyms used to describe it? Are the terms Software as a Service (SaaS), ASP, and on demand interchangeable?

 

 

On demand has been called a business model that is agile, fast to react, and that leverages a shared infrastructure and a subscription model as described by AMR.

 

ASP stands for application service provider. This model has recently shrunk in scope. At best, it is now merely synonymous with Hosted Application Management. ASP is limited to hosting applications for companies that were bought and web-enabled. This is a halfway alternative to traditional on premise license, packaged software and an evolutionary step towards total outsourcing. The limitation is that it is single tenant: it is not the same line of code supporting all clients.

SaaS stands for software as a service. Many define the concept as a software solution that is designed specifically for a web delivery and supported by a vendor as a service. It is multi-tenant: all clients are supported by the same line of code. That is a great benefit since true economies of scale can be leveraged.

 

Regardless of the nuances of the terms used, the on demand model of software delivery has important benefits. The first benefit is mainly in the cost-effectiveness to a company for the service – especially in comparison to the Total Cost of Ownership (TCO), the true costs of owning enterprise-hosted software.

 

The on demand model reduces the IT resource allotment for implementation and maintenance, and avoids the pain of needed upgrades. It takes all the weight off of the customer and allows the vendor to manage all the complexity and take ownership. IT resources are freed up to manage other projects, rather than hosting a talent management application.

 

A Yankee Group study reviewing CRM solutions concluded: “…we estimate a fully loaded premises-based system will have a TCO of $4.1 million; a hosted solution will come in at $2.2 million over 5 years.”

 

Software delivered on demand fits our mobile and global society. Since service is delivered through a Web browser, users can access the application from an Internet-connected computer anywhere. Interestingly, according to an Aberdeen survey, Asia-Pacific leads the on demand rush. “Nearly two-thirds of Asian-company respondents report using OnDemand solutions. By contrast OnDemand penetration in North America and Europe is currently below 50%.” Perhaps this mirrors cell phone adoption patterns in which locations that are now emerging and growing quickly leap ahead to leading technologies, bypassing earlier generation technology developments. And there’s more to come, as described by IDC research: “Current software on demand adoption is just the tip of the iceberg.”

 

With on demand, new users can be added with ease, which is especially important for companies involved in mergers and acquisitions. Built-in features such as security and expanded abilities to integrate with other applications are prevalent. Additionally, contracting for on demand business software results in faster implementations and lower risk.

 

Computing platforms and methods of software application delivery have perennially evolved along with major technology and infrastructure developments. Storage and memory have become cheaper, chip speed and processing is faster, and applications have become larger, more complex and more functional. What is interesting – beyond the geek appeal of computer science history – is the impact these technology advances bring to today’s organizations.

 

On demand overturns much of the conventional thinking concerning the licensing and installation of software. Current leading on demand solutions leverage multi-tenant application architecture and a shared services delivery model to support multiple customers from a single platform.

 

The graphic below summarizes the three key options of delivering a service supported by a software solution.

 

What, more specifically, does this mean for talent management? SaaS technology can be the foundation for a number of variations in the structure and operation of an HR department. The most important is the increased focus on results and outcome, versus on technology. In the past many HR departments were consumed by the eternal upgrade cycles. With SaaS, they can ignore those. Indeed, much energy was wasted in configuring a software solution once and re-doing it again a few years later, while upgrading.

 

The second consequence is the ability to offer far more flexibility in the delivery model, along with the ubiquity of the interface between candidates, managers and HR. The Internet and the SaaS act as glue and connector. The third outcome is that today —thanks to the SaaS platform—performance can be benchmarked in real time with other companies.

 

We believe that SaaS is a revolution for the delivery of software services globally. SaaS effectively democratizes application software, providing easier, quicker and broader access. Get ready for increased adoption in 2006 and beyond.