The History Series 3 – The rise of SaaS

It was in the year 1859 that Charles Darwin came under severe flak when he put forward his theory of evolution in the Origin of Species. His magisterial thesis, arguably one of the most influential and important scientific treatises ever written, included the concept of the survival of the fittest. His entire theory rested on this idea, that the species which were better adapted to the environment around them would survive, and the rest, unable to compete with the better-equipped species, would die out.

Survival of the fittest

Which is exactly what’s happening in the SaaS/On-premise space. On-premise is not necessarily losing because it’s the inferior technology, it’s losing because SaaS is the better suited to the modern business.

But first, how did the SaaS revolution begin?

The evolution

Turns out, it was always there. Just in another name. What SaaS brings to the modern business is almost exactly what ASPs had promised to do a decade ago, which was to bring to businesses software at low cost, with fast & easy deployment, and upgrades that didn’t make a mess of ongoing processes. Just that the ASPs had a tough time actually delivering it, and SaaS has been able to. As technology journalist Steven J Vaughan-Nichols points out, SaaS was able to use the advantages of virtualization and cloud-based scalability to deliver what ASPs couldn’t. This was facilitated by the rise of companies like VMWare in the 2000s. In a way, ASPs were ahead of their time; SaaS was its natural progression – evolution, we could call it.

Successes

And Salesforce did just that when in 1999, it became the first real SaaS company. Arguably the first company to realize SaaS’s full potential, Salesforce rose slowly to become a giant that dominated the software landscape for small and medium businesses before moving up to the enterprise, in several spaces of which it now dominates.
Following Salesforce’s success and anticipating the market that opened up in the wake of enterprise customers changing their attitudes towards SaaS, a lot of companies entered the space, resulting in the revolution of sorts that you see now.

The advantages

SaaS cost less than its on-premise counterpart, mainly because its model meant that businesses did not demand a lot of customizability, which in turn meant that sales cycles were shorter and businesses could make decisions faster. Easy deployment and remote upgrades meant that effectively, businesses only needed to use the product and upgrades & maintenance would happen automatically on the backend. Again, SaaS seems to be a development uniquely of its time. With discussions around net neutrality, freedom of the web and the artisan economy in vogue, the flexibility of the SaaS product, with its empowering of the SMB segment is a key factor in its growth.

Challenges

But still, there were misgivings about how SaaS would weather the three main issues that any software sellers would face at the time – security, service levels and accessibility across multiple platforms. As Salesforce proved even in the early days, security was an easy nut to crack, and only enterprises had to be actually convinced that their data was sometimes even safer than on legacy solutions.; for smaller companies and startups, the low costs trumped everything. Uptime remains an issue that arises sporadically (which is why you have to choose your service carefully) but most trustworthy SaaS companies maintain uptimes in the three nines. With the rise of apps, the platform problem is on the way to being solved as well. With native apps for iOS & Android phones/tablets, SaaS companies are making it easier for users to access and use their offerings.

The future

SaaS companies are now ruling the roost, with enterprises large and small likely to spend over $118 billion on cloud computing in the next year, according to a December report from IDC. These are incredible numbers, which suggest only that SaaS has garnered for itself a foothold in software spending that will take another technology of a similar innovative ambitiousness to eclipse. The report also points out the proliferation of PaaS (Platform as a Service), IaaS (Infrastructure as a Service) and the most exciting DaaS (Data as a Service) models, the last of which, in aiming to deliver big data analytics to companies, seems like an exciting innovation in itself.

In brief, these are heady days. The major part of this story is yet to be written, and we (as in, all of us working in this space right now) are going to do so. As Kevin Kelly points out in this post on Medium, we are not late.