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Adding on Capabilities with SaaS – Part III of Turning Cloudy Chaos into an IT Strategy

This blog continues the discussion started in Part I of Turning Cloudy Chaos into an IT Strategy and Part II – Retreading Existing Systems to Leverage Cloud Technology.  In this blog we examine how Software as a Service fits into a hybrid IT Strategy for cloud computing.

If your company has extensive investments in on premise ERP such as SAP Business Suite, then pursuing an add-on approach with Software as a Service can be an agile way for your company’s departments to roll out new systems of engagement to users. Such a strategy should consider the business needs being solved in relation to other needs within the company such as information management and integration of business processes.

Figure 1: SAP’s vision of end-to-end business processes supported by both on premise and cloud-based applications.
[Source: SAP]

If your company’s IT governance is less mature IT such that it does not yet have standardized business processes or single sources of truth for its data, then implementing a comprehensive ERP Software as a Service solution might be an appropriate choice. See my articles from SAP Insider Professional Services Firms Boost Profits by Moving to the Cloud, and Why Manufacturing Companies are Flocking to SAP Business ByDesign for some ideas.  Your company may also prefer to select departmental point solutions to meet immediate needs, but developing a company-wide cloud strategy first is advised to realize the most business value for your company. A good starting point is to have IT do a survey and audit of existing SaaS subscriptions with a view towards determining how IT can help the business be more successful with its SaaS choices.

Meeting Business Goals With SaaS Applications

Like any application, the business value provided by Software as a Service offerings can be measured according to improvements they facilitate in supported business processes.  Before choosing a solution, you should know what business goals you are trying to solve, and have an idea of how you will measure the results.  One of the best approaches I’ve found for mapping business goals and measurements to implementations is BPM Methodology.

An example of mapping business goals to key metrics in different business processes is shown below.

Figure 2: Business goals mapped to business process KPI measures
[Source: from ASUG 2012 Annual Conference Preconference Session – How to Build a Cloud Strategy for Your SAP Center of Excellence]

As an example, lets take SAP’s newest SaaS offering, SAP Financials OnDemandKey new capabilities beyond traditional financials systems that it provides should be observable along the following dimensions:

  • % less FTE time assembling management financial reporting
  • % less lag time of data in management financial reports
  • % more employees with access to relevant insight from the financial system to help them make decisions
  • % access of reports and forms via mobile devices vs. PCs and laptops
  • Qualitatively more  flexibility in analytics
  • Qualitatively better collaboration and problem solving between departmental teams

Like any well designed SaaS application, SAP Financials OnDemand is deployable in an agile fashion, and can be integrated into diverse IT environments. This makes it suitable solution for an add-on cloud strategy.

SAP Financials OnDemand Manager’s Cockpit on Apple iPad
[Source: SAP © 2012]

Business Advantages of a SaaS Add-on Strategy

Let’s revisit our cloud business advantages tables to examine cloud benefits you can realize by wielding software as a service as an add-on strategy for your hybrid enterprise:

Business Efficiency

Business Capability Example Metrics for Comparison
X Automation of technical tasks Reduction of hours spent on previously manual processes
X Less reliance on specialized technical skills Number of systems supported per team member, % of cross training
* Elasticity – capacity when you need it Performance vs. peak scale achieved
Metered – you pay for what you use Metered cost vs. estimated cost of hardware capacity and administration
Optimization (utilization) of resources Percentage of idle capacity, licenses, users vs. total
Economies of scale Cost per unit per month: user, system, hardware capacity
X Certainty – service level agreement Achievable qualities, cost per capacity per month to build capability in house vs. external services
X Robustness & availability Monthly amortized cost to achieve required uptime and performance guarantees
* Greener – lower waste, energy, and carbon Difference in estimated power consumption, carbon footprint
X Conversion of capital to operating costs Calculated monthly costs + opportunity costs + value of flexibility

In many of the metrics, SaaS is similar to private hosted clouds that give you a high service level as compared to standard public cloud Infrastructure as a Service. However, most SaaS providers operate on a per-user subscription basis, not a usage model. Thus metered usage does not apply, and optimization and economies of scale should be baked into the price. Elasticity depends on your service level agreements with your service provider. Similarly, being greener depends on the data center implementation of the SaaS provider, and can be assessed by whether their operations hold certifications for energy efficiency.

Business Agility

Business Capability Example Metrics for comparison
X Faster system availability Elapsed time to service business request for additional system
X Faster ability to change systems supporting business operations Reduction in time waiting for completion of technical tasks in implementations. Qualitative description of beginning to end roll-out of business relevant changes.
X Flexible connection options Range of options for meeting user access and system to system integration requirements
X On demand service Elapsed time for business to be able to access systems according to scale needed.
* Tailoring of service agreements Range of options for meeting performance requirements
X Always up to date Time lag between new version release and production system update. Number of additional updates handled per year, and comparitive system downtime for managing updates.
X Sharing & collaboration Qualitative description of improved interworking relationships between teams and members.
X Quickly leverage new best practices Time to deploy new systems and new business functionality.

In my opinion, SaaS scores generally well in business agility metrics. I marked “tailoring of service agreements” with a ‘*’ since many SaaS offerings are not flexible in this regard. Some SaaS providers have multiple grades of service levels available, however.

Business Innovation

Business Capability Example Metrics for comparison
Lower barriers to Innovation Reduction in time needed for IT to provide systems for custom development, reduction in cost to administer
* Leverage or create a developer ecosystem Increase in number of potential ISV business partners and apps with little comparative increase in administrative or technical management tasks
* Realize new business practices Number and average time of successful business initiatives  for plugging gaps in standard on premise and cloud systems
Supporting competitive differentiation Reduction in time for rolling out business innovation supporting company core competencies
X Provide standard base to innovate against Qualitative improvement in ability of  IT to roll out standards for SLAs, security, data, business process, usability, access, APIs to existing systems – providing a substrate for creative extension and use of data and functions in new ways.
Encourage invention in the business Increase in business units to experimenting and developing new custom ideas with developres
Propagate  and scale good ideas When applicable, time required for IT to rapidly adopt and enhance custom innovations to wider base while meeting company standards for security, data, business process, usability and access.

SaaS applications are business optimizations that can be leveraged by any customer, so it’s natural that they only indirectly support “Business Innovation”.  They provide an excellent base of company standards such as APIs, accessibility, and data against which innovative competitive advantages can be developed. Some SaaS providers have a supporting platform and add-ons store that lets you tap into an ecosystem of ISV providers for new practices. Finally, with good APIs and connectivity, it’s possible for companies to achieve new first mover advantages by integrating together cloud services and on premise systems into new best practices.

A  Collaborative Process For Departments to Choose Their Software Services

If your company does not have mature business governance of IT purchases yet, a departmental SaaS selection process can be a good opportunity to start developing such a process.  If the company lacks standards for SaaS purchases such as security and service level agreements, then IT should assist in developing standards that a governing committee of business managers should approve.  Business users and managers of the department should take the lead in choosing services that best solve their business problems.  IT should provide a consultative role helping business managers understand how to plan a roadmap for their service as well to look after the needs of the company at large. To the extent possible, the business should take responsibility for rolling out and configuring their new service, with assistance as needed from IT.

By having business managers take ownership of their SaaS selections, this frees corporate IT to focus on managing legacy systems and coordinating a company-wide IT cloud strategy. Such a collaboration helps ensure that IT selections solve immediate business needs as well as meet a company’s long term strategy as well.

For more information about cloud computing and SAP, check out these helpful links:  

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