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Moving to the Cloud – “What the hell is Cloud Computing?”

Larry Ellison, Oracle CEO once famously ranted: “What the hell is Cloud Computing?!”

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In fact, if you were to run a Google Search for “Larry Ellison Cloud” – it will be the first result returned, from almost 6 years ago.

However, we should not be mistaken as his rant was not due to dumbfounded unfamiliarity, it was due to the fact the term “Cloud Computing” was starting to become the latest buzz word, used by many software companies, and ultimately its definition had become fuzzy.

This caused multiple definitions of the word: “Cloud” in computing terms.  Ask five people to define “Cloud”, you receive six different answers.

This post aims to dissect the term as it pertains to Public Cloud Applications and highlight the reasons as to why the market is being driven towards the Cloud.

Three Key Terms

There are three key terms to remember as it relates to the Public Cloud: ‘Cloud’ itself, ‘SaaS’ and ‘Multi-Tenancy’.  Let’s cover each aspect:

1 – Cloud

“Cloud computing is a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction”

This is a fair statement. However has this model of application delivery not been in practice for many years, decades in-fact?  Client-Server applications, Application Service Providers (ASPs) and Browser-based applications have been around for a long time – are they not Cloud also?  According to the definition above, yes they can be deemed as so.

Of course, the Cloud deployment models add complexity to the definition.  Terms such as Hybrid Cloud, Private or Managed Cloud will be covered in future posts.

2 – Software-as-a-Service (SaaS)

“Software as a service is a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted.”

Applications that can be subscribed are in use in our every day lives and are not uncommon. The SaaS model represents a significant shift in the way companies acquire and consume software applications.

Applications that traditionally may have only been available to large Enterprise companies are now consumable by small-medium businesses.  Rather than paying up-front for large enterprise licenses, companies can effectively subscribe to software on a monthly, quarterly or annual basis for a contracted period of time – on an operating budget as opposed to a depreciated capital budget.

This allows the Line of Business to gain significant value in obtaining applications that add strategic execution value – delivered efficiently as described within a previous post: Moving to the Cloud – What Changes with Consulting?

With that said, this is still nothing new. What is the true game-changing nature of Cloud?  Read on:

3 – Multi-Tenancy – Game Changer

Whereas the software architecture used by most ASPs mandated maintaining a separate instance of the application (including application and database layers) for each company, a true Cloud, SaaS application should utilise a multi-tenant architecture, in which the application serves multiple companies and users from a single code-line and database structure, and partitions its data and logic accordingly.

To clearly define Multi-Tenancy, we can use the analogy of a block of apartments:


Comparative An Apartment Block Multi-Tenant SaaS Application
Architect One architect, used to design the structure Designed by one software vendor. e.g.: SAP
Developer One property developer, used to build the structure Developed by one software vendor e.g.: SAP
Maintenance One maintenance crew, used to maintain the building and associated services Maintained and supported by the software vendor e.g.: SAP
Foundation Built on one one foundation Built on a single platform e.g.: SAP’s HANA Cloud Platform
Structure One single high-rise structure One single application – one code-line e.g.: SAP Cloud for HR
Utilities One utility infrastructure providing Gas/Electricity, Energy and Water One (or more) Cloud Vendor Data Centers providing power, processors, bandwidth, storage, memory and redundancy e.g.: SAP Data Center
Tenants Multiple tenants residing within one block Multiple customers residing within one Multi-Tenant framework
Configurations Each apartment is different due to internal layout, decor, flooring, appliances and accessories – configured to the tenant’s requirements Each customer’s application instance has differing look and feel, branding, workflows, templates, forms and logic – configured to the customer’s business requirements

It is a simple comparitive analogy however very effective, especially when we consider the benefits of the Apartment Block Tenant, the Multi-Tenant SaaS Application Customer and Software Vendor:

Key Benefits for the Apartment Block Tenant

  • Predictable Fees and Expenses
    • One moving in fee, and one recurring rental fee
  • Total Cost of Ownership and Time to Relaxation
    • It is cheaper, quicker and more efficient to rent an apartment, as opposed to buying or building their own house.
  • Flexibility
    • It increases the tenant’s flexibility to move as and when their circumstances change – increasing size, decreasing size or moving to a new location.

Key Benefits for the Multi-Tenant SaaS Customer

  • Predictable Fees and Expenses
    • One initial implementation fee and one recurring subscription fee
  • Lower Total Cost of Ownership and Faster Time to Value
    • It is cheaper, quicker and more efficient to subscribe to a SaaS application, as opposed to buying, installing and deploying or building their own software,  whilst delivering time-to-value. No IT hardware, hosting, perpetual licenses, or resourcing issues.
  • Increased Agility
  • Faster and Frequent Innovation
    • Always on the latest version of the application, benefiting from frequent and rapid innovations and keeping up-to-date with the latest technology, features and functions – typically all included within one recurring subscription fee.

Despite these benefits, companies may still have concerns about moving to the Cloud. We address the key concerns in this post, as part of the Moving to the Cloud series.

Key Benefits for the Multi-Tenant SaaS Application Vendor

  • Economies of Scale
    • As the SaaS Vendor does not have to build, maintain and support multiple application instances for every single customer (potentially thousands), a proportionate saving in costs is gained. Upgrades of every single customer tenant can take place in one day.
  • Research & Development
    • Due to the significant reduction in costs, the SaaS Vendor is able to divert investment into application R&D, delivering rapid and frequent innovation to their customers.  In addition, customers can contribute towards future innovation by providing feedback and ideas towards product strategy.  Should these ideas be applied, they would not only benefit the customer suggesting it, but every customer within the vendor’s subscription base.
  • Infrastructure Scalability
    • True Multi-Tenant Architectures and Data Centers are built in order to scale.  Due to significant redundancy, the acquisition of a customer with hundreds, or thousands of users does not impact performance.  Simply by increasing hardware provisions (storage, memory, processing power, bandwidth etc), further scale can be applied to accommodate an expanding cloud user-base.
  • Barriers to Purchasing
    • With lower, predictable and transparent and financial commitment from the customer, less IT dependency and shorter time to value, typical customer purchasing bottlenecks and barriers are reduced.

Companies typically ask me how they can be sure an application adopts true multi-tenancy, in order to reap the benefits described: The question to ask a software vendor is:

“What % of your customers are on the latest version of your software?”

If the answer is less than 100%, it is not multi-tenant.

Combining the three key terms: Cloud (Remote computing delivery model), SaaS (subscription model), and Multi-Tenancy (economies of scale) provides significant differentiators against traditional on-premise applications and brings a multitude of benefits that is driving an entire industry towards the Cloud.

The next post of this series will delve further into why market momentum is shifting towards Cloud.

Kunal Pandya is a Senior Director at SAP, responsible for the Global Cloud Solution Center, enabling and evangelising Cloud to SAP’s Partner Ecosystem.

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      Author's profile photo manu m
      manu m

      Could you give some examples of cloud, SaaS, MT .

      Also, what is a Gmail or a yahoo mail then ?

      Author's profile photo Former Member
      Former Member
      Blog Post Author

      Hi Manu,

      The best example of SaaS Multi-Tenant LoB applications I can give you are SAP's: SuccessFactors, Ariba, Cloud for Customer. All of the benefits described above can be gained through these applications.

      And you are correct, SaaS MT is already in our everyday lives through consumer apps such as Yahoo Mail, Gmail, Facebook, LinkedIn etc.

      Kunal Pandya

      Author's profile photo Joao Sousa
      Joao Sousa

      All of the benefits described above can be gained through these applications.

      Forgot to mention the downsides. The "cost" of always having update software from the vendor is a strict limitation in custom developments.

      Author's profile photo Former Member
      Former Member
      Blog Post Author

      There are no custom developments within a public multi-tenant SaaS app - any custom development would be outside the framework, add-ons, integrations etc.

      Typically, SaaS vendors would not charge for upgrades, and they should be backwards and integration compatible - meaning they shouldn't break anything that may exist within the framework of the multi-tenant SaaS app.

      With that said, there are pros and cons and I'll be covering the key downsides that customers should be aware of in order to protect their SaaS investments in a future post.

      Author's profile photo Joao Sousa
      Joao Sousa

      Too bad you didn't mention the downsides in this post.

      I tend to classify this as poor quality marketing focused material.

      Author's profile photo Former Member
      Former Member
      Blog Post Author

      My personal preference is to keep the posts shorter and focussed - but thanks for your feedback that will go towards improving.

      Author's profile photo Joao Sousa
      Joao Sousa

      Keeping it focused shouldn't give a skewed picture of the cloud. This blog wasn't called "The benefits", there was not reference it the blog that the downsides would be coming later.

      Someone less informed that reads your blog may figure there are really little downsides to the cloud scenario which is clearly false.

      That's why this smells marketing, and posting marketing material in a technical community will make sure someone will call you out.

      Author's profile photo Former Member
      Former Member
      Blog Post Author

      ...which is the benefit of an open community - being able to raise some good points as you have and allowing the writer to respond with clarification for all to review.

      For now, let us agree to disagree that this piece was intended as marketing, it certainly was not the intention. As mentioned, that perception will go towards improving.

      With regards to SCN being solely a technical community, I would disagree there also.

      Author's profile photo Joao Sousa
      Joao Sousa

      I didn't say it was purely technical, I meant it is hugely technical. You are going to face people who are interested in the detail, not "This is so great this is so fine" content.

      Author's profile photo Eshwar Salivati
      Eshwar Salivati

      Hi Kunal,

      Gr8 article!!!! Very informative and easy to understand.

      I would like to know what would it take to move to Cloud Computing...I am a Technical Consultant with around 10 yrs of exp in SAP ABAP, PI, Webdynpro. Is there any pre-requisites to get into the Cloud sphere?

      Will my existing knowledge and skill sets be helpful in leveraging a career in cloud.

      Kindly let me know regarding the same.

      Best Regards,


      Author's profile photo Joao Sousa
      Joao Sousa

      Is there any pre-requisites to get into the Cloud sphere?

      What is for you the "Cloud Sphere"? In this blog people are talking mainly about SaaS (SuccessFactors, Ariba) which mostly stick to the standard. Since you are a technical consultant, I don't know if this is really what you want.

      If you want to get to know SAP's PaaS offering, which is better suited to your skills (in my opinion) you can check out the SAP HANA academy videos on Youtube.