I finally had a chance to sit down and read a McKinsey report titled “The Emerging Platform Wars” that was a good and lengthy treatise on SaaS and the emergence of PaaS offerings to solve all that ails software companies.

The report did a good job at breaking down PaaS archetypes, value propositions, etc. but one thing notable missing was what impact PaaS based offerings have on SaaS consumers (end user). Building on a PaaS offering is by far the best approach for an ISV, but it also has significant impact on end user experience.

End users benefit from centralized application management, shared data and collaborative aspects offered by the platform, and even things like single-sign on across vendors. There are many, many more value propositions coming from PaaS for end users; it would be interesting to break these down and compare end users using PaaS based offerings on the same platform instance and what value they can derive vs usage of non PaaS-based offerings.

Are there any immediately apparant value propositions owned by the end user when they consume PaaS-based SaaS offerings?

I know I’m reading too much into this, but let’s have a bit of fun in Bill Gates’ final week on Microsoft’s full-time payroll. He seems to be dropping hints that he’s starting to realize that cloud is a better way of doing many of the things Microsoft always used to try and do on discrete servers and clients.

The firmest clue comes as a result of journalist Todd Bishop unearthing an “email rant” that Gates wrote in January 2003 after attempting to download and install the video editing product Windows Movie Maker. Read the email in full for an uplifting sense of schadenfreude at the blow-by-blow account that led Gates to berate Windows product chief Jim Allchin with this withering conclusion:

Many of the emerging Platform as a Service offerings encourage business users or specialist business solution providers to create their own custom applications. From Coghead to Iceberg, Quickbase to Rollbase and Longjump to Zoho, the message is one of unlimited freedom to custom-build your own business process automation.

It can only be a matter of time before this army of newly enfranchised business developers begins infringing pre-existing software patents, in particular those covering software implementations of business processes. If the US Patent and Trademark Office already has such a hard time finding prior art, how is the average business user supposed to work out whether they’ve breached some arcane patent for a Method of locating web-pages by utilising visual images or for Methods and systems of assisting users in purchasing items?

I’d like to refine the description of multi-tenancy that I set out in my post earlier this week on Many degrees of multi-tenancy. Intacct’s CTO, Aaron Harris, responded with some very illuminating detail on the vendor’s architecture, which leads me to reclassify Intacct (and indeed NetSuite) into the top tier alongside Salesforce.com. Their differences come down to implementation choices rather than any difference of principle, as I’ll explain. There’s also been lots of thoughtful TalkBack, and I’ll highlight some of those comments too.

Ok, I admit that I have a fetish for buzz acronyms, but I promise the use of service oriented architectures (SOA) and SaaS in this posts title is appropriate and introduces an important topic! Specifically, I’d like to tackle SaaS implementation approaches and how these different approaches relate to a SaaS business.

When deciding on how to technologically tackle a SaaS implementation, a software company should understand their marketplace and business strategy needs. B2B SaaS offerings that focus on businesses small and large generally bump into questions like:

1. Does your SaaS offering have an API?
2. Is cross-application interoperability important?
3. Do you need interoperability across broad technologies or are you targeting a single technology for interoperability?

In today’s on-demand world, companies like Salesforce have established an expectations baseline. B2B applications are expected to have APIs, as well as the ability to bridge technology divides from an integrations standpoint, and provide policy control over functional parts of an application. This provides a technological foundation for strategic partnerships that not only serve to tackle markets that may require legacy support, but actually deliver value at the same time (imagine that). Implementing a SaaS offering from a technical viewpoint can be divided, at the highest level, into two very broad categories: non-SOA and SOA.

After a week of intensive usage last December getting his company’s application to run against Amazon’s SimpleDB cloud database, DreamFactory founder and CTO Bill Appleton wondered how big a bill he’d run up. To his amazement, what had seemed like a week’s heavy usage had cost just a few cents. The discovery was an epiphany both for Appleton and for CEO Eric Rubin. They had stumbled upon what seemed to be a new economic reality for cloud-based application software.

I learnt of all this back in January, and I’ve since been biding my time until last week’s launch of the Amazon-hosted product . I’ve been eager to write about it because the story highlights two separate but complementary phenomena that in combination seem to radically undermine traditional on-demand pricing models.

 Uri Lederman of Konverge recently published an excellent post that maps the internal machinations of a non-SaaS ISV to those of a SaaS ISV. The key takeaway from that post is that the move from non-SaaS to SaaS is not only a revenue and model change, but also an operational change for ISVs. On various occassions, I’ve highlighted the fact that SaaS is a paradigm shift that requires buyin from within the organization rather than from just sales. Lederman identifies the impact in a more pointed fashion, specifying that operations and insuring proper transition impact customer churn.

For SaaS purists, multi-tenancy ? the architectural model that allows them to serve multiple customers from a single shared instance of the application ? is an article of faith, the one thing that marks them as a tribe apart from traditional software vendors. Suggesting that they’re anything other than fully multi-tenant, then, is tantamount to questioning a man’s virility or impugning an American’s patriotism. It’s not the done thing.

Perhaps, therefore, Milan Thanawala (pictured), director of platform products at Oracle, might have chosen his words a little more carefully in a panel session last week at the SIIA OnDemand Europe conference in Amsterdam. In the midst of a discussion of security, Thanawala made a passing comment that multi-tenancy isn’t a prerequisite for SaaS. Panel chair Bill McNee, CEO of analyst group Saugatuck Technology, immediately challenged this assertion with his own observation that multi-tenancy was fundamantal to SaaS. Now under pressure to defend his position, the Oracle spokesman responded that SaaS ISVs in Oracle’s partner network employ a range of different architectures. He went on to cite Intacct in support of his case, saying that the on-demand financials vendor runs its customers on separate pods, each with its own separate Oracle database.

Cloud computing refers to the virtualization of the data center, such that server machines are not thought of individually but as just a commodity in a greater collection of server machines. Cloud computing solutions in general strive to eliminate the need for an application deployer to be aware of the actual physical machines that are used to host the application. Some have called this idea “hardware as a service”.

The SaaS market as it is currently defined is just the starting point. Still composed largely of point solutions for CRM and HR, SaaS represents $5-$12B in spending today, depending on which analyst you believe. It's just starting to penetrate the full business application market, a $50-100B market that includes ERP solutions. More great businesses will built in the market for SaaS applications, and some of these companies will build their offering using the capabilities of a platform delivered as a service.

Even the $50-100B market for business applications, however, fails to capture the full market for platform as a service. The larger market to be disrupted by platform as a service is the business “solutions” market, composed of the software and services that companies consume to develop customized solutions. This market is 3-4 times larger than the market for business applications — generally estimated by analysts at $200-300B.

The ability to easily mix-and-match best-of-breed components from different vendors is often claimed as an advantage for SaaS over all-in-one suites from conventional on-premise software vendors. But it may not be such a boon for applications where a consistent user interface is important.

Although not as well known in the SaaS world as other people management vendors such as SuccessFactors and Workday, privately-held Authoria is recognized by those in the know as a leader in its field: “the rock star of the moment in talent management software,” said Workforce Management magazine in its December 2007 issue. Targeting larger enterprises ? the median headcount of its customer base is 20,000 employees ? Authoria claims more than 300 customers and a total of four million employees and managers served by its on-demand applications.