Data breaches not only embarrass an organization and damage its customers’ confidence; they are costly as well – according to the 2016 Cost of Data Breach Study: Global Analysis published by IBM and Ponemon Institute in June, the average total cost of a data breach globally increased from $3.79 million in 2015 to $4 million in 2016.
The average total organizational cost of a data breach in the US this year is $7.01 million (2015: $6.53 million), in Germany, $5.01 million (2015: $4.89 million), and in the UK, $3.95 million (2015: $3.70 million). And those numbers don’t include the potential reputation damage an organization can suffer in the marketplace once word of the breach spreads.
LMS Security Matters
Not surprisingly, protecting important data stored on organizational IT systems is a key concern of many executives. In addressing application security management it is critical that organizations should not overlook their Learning Management Systems (LMSs).
In part 1 of this post we analyzed SaaS as a “disruptive innovation” and what that may entail in terms of value to clients and SaaS providers.
Although SaaS is a well-understood model today, there are differences on how SaaS providers define SaaS (or their preferred flavor of SaaS). A number of leading SaaS vendors have claimed multi-tenancy as a necessary component of any SaaS offering. There is a fair amount of controversy here, but is multi-tenancy what defines SaaS?
As a quick backgrounder, multi-tenancy refers to a software architecture where a single instance of the software runs on a server, serving multiple tenants, where tenants are separate companies, or in a broader sense, any application – either inside or outside the enterprise – that needs its own secure and exclusive virtual computing environment. So how does multi-tenancy come to play?
SaaS is, according to Clayton Christensen, Harvard professor and author of “The Innovator’s Dilemma”, a “disruptive technology or “disruptive innovation.” In a very basic way, it is disruptive to the way software has been traditionally marketed, sold, delivered, and maintained.
As a “disruptive innovation,” there are some fundamental truths that we can’t shy away from:
- Like every new “disruptive technology,” SaaS is probably not as good a solution all-around as an on-premise deployment. In a lot of cases, SaaS is still challenged in terms of interactivity, flexibility to customize, ease of integration, and security. However, what matters is not whether SaaS is as good a solution as on-premise deployments (or whether it will ever be), but whether SaaS is good enough to meet the needs of most companies – and this is really the tipping point.
- SaaS was built on the premise of delivery of software over the internet. Five years ago, this was challenging in terms of available web application technologies, enterprise integration points, and network bandwidth. Today, this is not the case as internet bandwidth and web services have rapidly progressed. Another tipping point.
- SaaS offers a cost advantage over on-premise, license-based software delivery models. This cost advantage is based on virtualization and resource sharing on the vendors’ side, but it also translates into more flexible, usage-based or pay-as-you-grow models for buyers. And this advantage is not relevant to just small companies anymore, but to enterprise and global organizations as well. Yet again, another tipping point.
- As with every “disruptive technology,” the leading vendors of the prior generation of the technology, which is software here (see Oracle, SAP) are not likely to lead in the new generation, and new leaders are likely to emerge (see Salesforce.com, Workday). This is because leading companies tend to focus on immediate customer needs and short-term license revenue targets. Also, fear of cannibalizing their profitable product lines prevents them from making the necessary investments on disruptive, but necessary innovations.
- The best way for an existing leading company to become a serious player in the new generation following the “disruptive innovation” is to set up a separate entity with a different P&L center that will invest in this “disruptive technology” without any interference from existing lines of business. Cannibalization down the line is inevitable, but at some point, if that new entity does indeed build a business off the new “disruptive technology,” it can become a catalyst for change for the entire company and into the new generation. It’s probably too early to say, but SAP seems to be trying to follow this approach based on their actions after the acquisition of SuccessFactors.
In part 2 of this post, we will review the definition of SaaS and how it matters for vendors and buyers at the end of day.
I just read Stan Swete’s Workday Innovation blog piece on what SaaS actually means (you can find it here). In the piece Swete ends up cribbing from SystematicHR’s simple and short definition: SaaS means a hosted service on a single code base.
Because we host and because we incorporate literally every single client customization into core engineering and take it all forward in our general releases, by Swete’s definition NetDimensions has always been a SaaS provider. In fact, we may well have been the first ever SaaS talent vendor.
But we’re special. We seem to be able to work technology magic other companies struggle with (it must be the Hong Kong air). We not only host, but we also provide licensed software for third-party hosting and for our clients’ on-premise implementations (some clients will never be able to buy externally hosted services).
I’m pretty sure this kind of flexibility on a single code base is unique. I don’t know of any other SaaS talent vendor who does this.
So for us there’s no ideological rift. There are no SaaS vs. License discussions at NetDimensions. We do both. We do both in the same way, at the same time and we do it for all of our clients.