Clearing up the Cloud

In my last post I introduced the Third Turning in HR technology, namely Cloud computing. In this post I’ll attempt to bring clarity to this sometimes-murky topic. You may be relieved to know that I am not a technical guy. I am reminded of a friend who married a Venezuelan woman and lived in her home country for several years. Though he never took a single course to learn Spanish, he speaks what he calls survival Spanish. My technical literacy is similar. So I hope you will pardon me if I botch a few words. What is Cloud Computing? Experts argue about the correct definition of Cloud computing, so there’s probably no definitive answer. For our purposes, Cloud computing is simply the use of computing tools delivered via the Internet. A more tech-savvy reader may comment further, but this definition works for me. If you access the software via the Internet you’re computing in the Cloud. Here’s a clue: If in using the tool you notice a URL in the address field at the top of your browser and the address is outside your organization’s firewall, you’re in the Cloud. Thus, software as a service, or SaaS, is an application of Cloud computing. Software as a Service (SaaS) vs. Hosting Despite the suggestion of Salesforce.com’s "no software" slogan, SaaS is indeed software. It’s just that instead of residing on your own server, the software resides on the SaaS vendor’s server(s). SaaS products are essentially Web sites that perform certain functions and are accessed via User ID and password, granted through a subscription agreement. The hosted software model is similar to SaaS in that the software does not reside on the customer’s server(s), but in fact hosting is a version of client-server or even mainframe computing. In the hosted model, the software resides on the server of a vendor who "hosts" and maintains it for you. From a customer perspective it may seem like SaaS, but under the hood it is fundamentally different. To explain this I need to introduce the concept of tenancy. As you would expect, the ideal metaphor to explain software tenancy is housing. If you need a place to live you basically have two choices: own or rent. Client-server and mainframe computing are forms of ownership because the customer either builds the tool (and, thus, owns it) or buys (owns) licenses. In contrast, SaaS is like renting, because instead of owning licenses you pay the vendor for the right to use their software for a specified period. In housing it’s called renting; in software it’s called subscribing. Multi-Tenancy vs Single-Tenancy Multi-tenancy refers to multiple clients subscribing to the same instance of the software, like sharing an apartment building with other tenants. SaaS subscribers share the same computer program just as residents in an apartment building share the same structure, utility systems amenities, etc. SaaS subscribers can configure their "view" of the software to suit their needs, much as apartment tenants can paint and decorate their own units to suit their tastes. By the same token, in both cases there are things that cannot be changed. The apartment renter, for example, cannot change the floor plan or utility infrastructure. Likewise, the SaaS subscriber cannot change the core programming of the application. Apartment living has definite economic and convenience advantages, as anyone who owns their own swimming pool can attest. But renters must be willing to take what they get on many fronts (tacky neighbors included). Likewise, SaaS subscribers must be willing to accept the core functionality of the vendor’s product. It’s about trade-offs. Single-tenant SaaS is akin to renting a single-family home. It’s still SaaS because you subscribe to the service rather than buying licenses. But you are not sharing the instance of the software with any other customers. When renting a single-family home it is much more likely that you will be able to negotiate certain changes, such as a gas dryer instead of electric. The tenant in an apartment building would not be granted such flexibility. Likewise, the single-tenant SaaS customer may be able to request custom modifications to the software that the multi-tenant customer cannot. Thus, single-tenant SaaS, though technically different from hosting, can work similarly as a practical matter. Indeed, the only significant difference may be the nature of the business arrangement (pricing, contract, etc.) between the customer and vendor. Build, Buy or Rent? Although it may appear as though the whole world is headed to the Cloud, there are many things to consider before trading in your client-server licenses for SaaS subscriptions. These considerations are subject of my next post in the Third Turning series. [inlinead]

Clearing up the Cloud

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