Web 3.0 is going to deliver a new generation of business applications.

Don’t be surprised, then, if Web 2.0 also turns out to be just a staging post on the way to a much more mature and durable Web 3.0 era. Over the next couple of weeks I’m going to be writing a series of posts about what I see as the key characteristics of Web 3.0, using a variety of on-demand companies by way of illustration. Of course I’ll be mentioning Google, Amazon.com and eBay. But don’t assume these companies will inevitably become the dominant players of Web 3.0. I’ll also be mentioning some less obvious players, including WebEx, WebSideStory, NetSuite, Jamcracker, Rearden Commerce and Salesforce.com. Each of these companies shed interesting light on how Web 3.0 may develop. As with any shift from one generation to the next, there’s plenty of scope for new leaders to emerge — and for established front-runners to stumble — in the battle for supremacy.

I’d like to make one thing is absolutely clear right from the outset: Web 3.0 isn’t just about shopping, entertainment and search. It’s also going to deliver a new generation of business applications that will see business computing converge on the same fundamental on-demand architecture as consumer applications. So this is not something that’s of merely passing interest to those who work in enterprise IT. It will radically change the organizations where they work and their own career paths. I’ll write more on that in a later posting.

Today I’m going to start by mapping out a brief topology of Web 3.0. It’s divided into three (and a half) distinct layers:

API services form the foundation layer. These are the raw hosted services that have powered Web 2.0 and will become the engines of Web 3.0 — Google’s search and AdWords APIs, Amazon’s affiliate APIs, a seemingly infinite ocean of RSS feeds, a multitude of functional services, such as those included in the StrikeIron Web Services Marketplace, and many other examples. Some of the providers, like Google and Amazon, are important players, but there is a huge long tail of smaller providers. One of the most significant characteristics of this layer is that it is a commodity layer. As Web 3.0 matures, an almost perfect market will emerge and squeeze out virtually all of the profit margin from the highest-volume services — and sometimes squeeze them into loss-leading or worse.

Aggregation services form the middle layer. These are the intermediaries that take some of the hassle out of locating all those raw API services by bundling them together in useful ways. Obvious examples today are the various RSS aggregators, and emerging web services marketplaces like the StrikeIron service. I’ll have a lot more to say about these emerging platforms in several of my posts. There will be some lucrative businesses operating in this layer, but in my view it’s not where most of the big money will be made.

Application services form the top layer, and this is where I believe the biggest, most durable profits will be found. These will not be like the established application categories we are used to, such as CRM, ERP or office, but a new class of composite applications that bring together functionality from multiple services to help users achieve their objectives in a flexible, intuitive and self-evident way. I’ll have much more to say about these applications when I write about some of the companies I’ve mentioned in more detail. But an interesting example just surfaced in Swivel, Halsey Minor’s new venture, which Dan Farber has been covering in his blog this week. Dan quotes one enthusiastic early user who describes the ‘wow’ moment of starting to use an application and discovering that it delivers utility he barely even knew existed. To me, that’s a fundamental characteristic of a Web 3.0 application.

Serviced clients are the ‘and-a-half’ layer I mentioned earlier. There is a role for client-side logic in the Web 3.0 landscape, but users will expect it to be maintained and managed on their behalf, which is why I’ve chosen to call these clients ’serviced’. Whether those clients are based on browser technology or on Windows technology is moot point that I shall also be returning to. After all, everyone will want to know what role Microsoft might play in Web 3.0.

Original Post: http://blogs.zdnet.com/SAAS/?p=68

SaaS is not just hype and most Internet users have actually already used SaaS without being aware of it. But let’s first start with this simple definition provided by InfoClipz, delivered by www.infoworld.com as part of their “Information Technology explained in 3 minutes or less!” series.

The staying power of SaaS, as opposed to other software delivery models, has arisen for several reasons:

- Easy set-up and customization,
- Low cost of entry,
- Predictable expense,
- Less risky investment,
- Easy to walk away from,
- Mobility,
- Smoother upgrades,
- Reduced overhead.

For years, organisations of all sizes have suffered the hassles and unexpected costs that accompany deploying and maintaining a variety of traditional softwares that were intended to make them more productive. Now a new breed of Web-based services are pushing this type of traditional applications aside and finally giving users the business benefits they were seeking.

The inherent inefficiencies of the traditional softwares, including the tremendous time, effort, and cost that organizations usually have to expend to install applications and keep them up and running, have finally been recognized. SaaS not only alleviates the costs of traditional licensing fees but also eliminates the need for additional IT infrastructure investments to support new applications. A variety of enabling technologies, such as service-oriented architecture (SOA) and Web services, enable SaaS to be more easily provisioned and metered based on actual usage levels. This means companies no longer have to pay for excess capacity. The bottom line? Lower total cost of ownership and quicker time-to-value. The scalability and flexibility of this new generation of SaaS solutions enable users to test the reliability and performance of on-demand applications in limited deployments, and expand their adoption incrementally. While SaaS certainly makes sense for many front-office functions (such as CRM for example) and team-oriented collaboration purposes, SaaS solutions are emerging to address nearly every business application need.

“SaaS-ification” will likely develop into a bona fide institution over the next several years. In this respect, analysts suggest 2007 could be a signal year in SaaS expansion and adoption. IDC, for example, lists SaaS growth and adoption as one of its big trends to watch in 2007 and expects SaaS to be a $10 billion market within three years. Gartner Group predicts that SaaS is primed for enormous expansion: growing from just 5 percent of software revenues in 2005 to nearly a third of all software revenues by the end of the decade. 84% of small and mid size companies and 69% of large companies are willing to consider, currently reviewing or already using SaaS solutions.

As SaaS gains mainstream acceptance, it is becoming an important disruptive force in the software industry. And as long as the quality and reliability of SaaS solutions continues to improve, the appeal of SaaS isn’t going to go away.

Original Post: http://www.saastream.com/my_weblog/2007/08/saas-the-stayin.html

The budding worldwide software as a service (SaaS) market will see an upward trend over the next four years, according to Gartner Inc.

The research firm predicts that the Worldwide SaaS market will grow to $19.3 billion by year-end 2011. Essentially, that’s triple the market’s value in 2006, which was $6.3 billion.
SaaS is a hosted software service in which customized applications are made available to clients on a usage or time basis. Gartner’s analysts expect to see SaaS implementations built on next-generation Web services, SOAs (service-oriented architectures) and highly automated server farms.

SaaS won’t just be used for customer relationship management and human resources-type applications. It will gravitate to providing procurement and compliance management solutions, according to Gartner.

The SaaS trend hasn’t caught on quickly with larger IT service providers, according to Ben Pring, research VP at Gartner, and that has allowed smaller service providers to get into the market. He adds that “incumbent IT solution providers are slowly waking up” to this challenge.

SaaS is no longer considered a pipe dream by the larger IT players, according to Pring.

“There is now a widespread consensus among the movers and shakers of the IT industry that SaaS is an important and meaningful issue which can no longer be regarded as the ‘lunatic fringe’,” he stated.

Gartner recommends that service providers implement early changes in their plans to move toward SaaS “because of the scale of change required to successfully exploit SaaS opportunities.”
And that scale is global. The SaaS business model will follow the trend of the manufacturing industries and move to lower cost production centers around the world, according to Pring.

SOA provides a flexible application framework for managing changing business needs. Services oriented applications are positioned to unlock the business portfolio by providing adapters that connect to output nodes and an engine to manage the adapters. Adapters are reusable pieces of code that implement Web services (SOA) to achieve automated information access. Benefits are achieved by accessing applications in a portfolio with discrete services.

The aim is to streamline IT infrastructure. Services oriented architecture (SOA) is designed to achieve an alignment of IT investments with business goals. Adapters are used to achieve more flexible business response to market changes by providing bits of application functionality that implement business rules in the context of achieving implementation of automated retrieval on designated information.

SOA is comprised of engines and components. Engines are at lower levels of the integration stack providing brokering, integration, business process management, mission critical messaging, and transformation capability. Components are adapters or automated processes that are messages with rules imbedded in them.

SOAs are easy to use because the rules are imbedded in the message using a graphical user interface instead of a programmer. The services oriented architecture is the foundation for higher-level capabilities such as business process management and business activity monitoring. It enables the assembly of composite applications that combine functionality from existing applications to more effectively address the needs of business users.

Major changes in the software industry go beyond technical issues. Customer service, supply chain, IT governance, and procurement innovation is occurring across every industry. A major benefit of these changes is that software comes closer to meeting the agility demands of business environments. Continuing change in tools, technologies, skills, processes, products, and vendor relations pose significant challenges. Strategic positioning is driving adoption of service-oriented architecture (SOA).

Service oriented architecture (SOA) markets at $450 million in 2005 are expected to reach $18.4 billion by 2012. Market growth comes because SOA enables the flexible IT architecture that is needed to respond to market shifts brought by speeded product cycles and competitive challenges.

SaaS platforms and marketplaces will begin to proliferate, becoming a significant channel opportunity for vendors, as well as a key means by which users will gain access to SaaS solution capabilities. During the past several years, SaaS marketplaces and platforms have evolved well beyond their initial capabilities, offering customisation, integration, data pipes for BI or data sharing, data storage, content management, workflow, development tools and APIs. Ecosystems have formed to enrich the value of their offerings through the synergy of functionality brought together on these platforms. SaaS platforms now express a wide range of capabilities that are driven by the business model of the ecosystem and the needs and characteristics of the marketplaces they enable.

SaaS is becoming an international phenomenon, driven by both local demand as well as large multi-nationals who are adopting SaaS business solutions on a global basis. While US SaaS adoption is clearly going “mainstream”, Europe and Asia are only now beginning to experience the steep adoption ramp that the US has witnessed over the past two years. Europe is beginning to go through a very similar adoption profile that the US has – albeit with an 18 month lag. A very strong European growth can be anticipated for US-based SaaS giants aggressively expanding into this region as well as regional and country-specific players. Whereas average US market growth rates will likely slow into the 35-40 percent range in 2008, European market growth rates should exceed 60-70 percent next year.

SaaS merger & acquisition activity will explode. No doubt a serious feeding frenzy is about to unfold and it could be anticipated that a large number of venture-backed start-ups and emerging SaaS companies in the $5 million – $20 million range would be put up for sale over the next 12-18 months – and acquired by either SaaS pure-plays, ISVs hungry to enter the SaaS fray or on-shore & off-shore IT services and BPO providers who are eager to leverage a SaaS model. The upcoming year is an important one where next-generation horizontal and vertical franchises will be cemented.

Traditional on-premise application ISVs will earnestly begin to fight back. Approximately 15-20 percent of ISVs have already either begun new skunk works initiatives or gained access to SaaS assets and development experience through M&A activity. However, over the next 12-24 months, this number is anticipated to rise dramatically, as a tougher economic climate will only exacerbate an already challenged on-premise and traditional perpetual license model. To be successful, ISVs will need to fully understand the journey that they will be on across five key dimensions – economic, technological, operational, organisational and cultural – as well as take advantage of the many best practices available based on the hard-fought experience of early adopters.

SaaS development platforms will evolve and 2008 will see explosive growth in the adoption and use of SaaS-based software development platforms and services, beginning with significant growth in the use of vendor-specific, application-specific, and marketplace/ecosystem-specific development platforms and services. Wide availability of open, standardised tools and technologies in subscription-based, on-demand environments will help streamline and reduce the costs of software development and customisation. It will also foster use and growth of services-oriented architecture development strategies.

Other insights and Strategic Planning Positions provided by the research include the following predictions:

By 2012, 30 percent or more of all new business software will be deployed and delivered as SaaS. 15 percent of SaaS solution revenue will be accessed through SaaS marketplaces. At least 75 percent of the revenue generated by SaaS marketplaces will be driven by five or fewer SaaS platform providers.

By YE2008, greater than 55 percent of North American-based businesses will have deployed at least one SaaS application, with Western European close behind at greater than 40 percent.

60 percent or more of SaaS firms funded prior to 2005 will either be acquired or go out of business by 2010. By 2012, all bets are off as it concerns traditional on-premise licensing schemas.

By 2010, 40 percent of traditional on-premise application ISVs will bring to market SaaS solution offerings, either via acquisition, development of new single-instance multi-tenant applications, or through virtualised (multi-tenant) versions of their traditional on-premise offerings. Less than half of the ISVs in transition will actually succeed.

By YE2008, the number of user enterprises taking advantage of SaaS-based software development platforms, services and offerings will number in the tens of millions worldwide.

These important trends will no doubt shape how the SaaS applications and business services sector will evolve, including changes to how vendors will go to market, as well as how customers will gain value from SaaS solutions.

Original Post: http://www.saastream.com/my_weblog/2007/12/saas-prediction.html