It's Bandwagon Time

• By Joseph C. Panettieri
• 10/01/08

Universities are moving some, but not all,applications to a hosted SaaS model.Here's why it may be time to get on board

PATCH MANAGEMENT, SECURITY, SERVER OPTIMIZATION, PERFORMANCE MANAGEMENT... These issues and others are no longer major concerns for the Universityof Memphis' CRM (customer relationship management) system. The reason:Back in 2005, the university moved its CRM system from an onpremisesolution to a hosted, SaaS (Software as a Service) configurationfrom RightNow Technologies.

In 2005, "We had a problem with one of our local systems," recalls Joe Matesich, director of university web and portal services at the university. "We were using Windows Server and SQL Server, and had issues with patches not being secure." That's when the university made the move to SaaS. "Even without the past security issues, hosting the RightNow solution made sense for the university as a whole," says the web services director. "Because this vendor constantly provides updates to its products, we always have the best and most complete solutions available, with none of the usual implementation hassles."

The University of Memphis isn't alone in its move to SaaS. Across the globe, colleges and universities are discovering the power (and payoff) of this hosted application model and its cousin, managed services. Generally, SaaS involves applications (such as CRM, enterprise resource planning [ERP], and e-mail) offered by a hosting provider. Managed services, in contrast, involve IT consultants and integrators remotely managing university networks and applications, using a range of SaaS apps.

For either SaaS or managed services, universities pay a flat monthly fee instead of purchasing hardware and software outright, thereby reducing capital expenses for hardware, software, and data center build-outs. "Some universities are fed up with hidden fees, maintenance fees, and support fees from traditional applications," says Rich Baker, a consultant who serves community colleges in Florida and Georgia. "SaaS makes all of those headaches go away."

Many high-tech research firms agree with that assessment. According to Gartner, SaaS has gone from being an idea, four years ago, for early adopters, to representing a fundamental shift in the software industry today.

Watch the Hype

Still, SaaS isn't perfect. For one thing, not all applications are designed for deployment over the internet. What's more, inconsistent broadband connections, software bugs, and poor centralized management can knock out SaaS applications.

"SaaS remains in its glamour period," says Ed Golod, president of Revenue Accelerators, a New York-based consultancy serving software companies and managed service providers. "Wall Street investors are hyping publicly held SaaS companies. Venture capitalists are hyping SaaS. And everyone is talking about moving their data and applications out onto an internet cloud. But at some point, we're going to hear a few horror stories about lost customer data and remote system outages."

Indeed, even Amazon.com's S3 (Simple Storage Service) has suffered two major system outages this year, notes GigaOm, a media site that covers emerging technologies. (S3 is an on-demand storage system that some universities and thousands of businesses are evaluating for remote data backup and information retrieval.) Sure, each S3 outage lasted only a few hours. But for a university managing enrollment, student data, and other mission-critical information, extended application outages aren't an option.

Further complicating matters, some critics continue to confuse SaaS companies with the failed Application Service Provider (ASP) industry. Many ASPs went from boom to bust during the dotcom gold rush (see "SaaS vs. ASPs: What's the Dif?").

Good Outweighs Bad

Despite the S3 hiccups and some lingering ASP confusion, however, the SaaS industry continues to gain momentum. Most of the major established SaaS applications (offered by such companies as Salesforce.com, NetSuite, and RightNow) have earned high grades for their reliability and scalability. (Check out Astadia's Student Lifecycle offering, built on Salesforce.com's Force.com platform.) Then too, demand for SaaS applications continues to grow. Case in point: The SaaS 20 Stock Index, managed by MSPmentor, rose more than 15 percent this summer because of strong earnings and rapid revenue growth reported by a range of SaaS-centric companies.

Getting Started With SaaS

To be sure, SaaS offers clear benefits to universities (see "Why SaaS Is Winning Converts"). And there are multiple ways to get started with SaaS. The most traditional approach is to reach out to a software company that specializes in SaaS. Providers such as Salesforce. com and NetSuite, for instance, were launched to focus purely on SaaS. Other companies such as the Dynamics CRM team at Microsoft were initially staffed by on-premise software experts, and evolved to offer SaaS versions of their software. No matter which route you opt to take, engaging a SaaS company isn't rocket science; thousands of businesses and hundreds of colleges and universities already use hosted applications, so best practices for such deployments are firmly established.

Matesich at the University of Memphis notes, "RightNow was our first SaaS deployment and, looking back, we probably wouldn't do anything differently. RightNow was the appropriate choice, was easy to implement, and is easy to use."

Another SaaS approach involves universities leveraging applications from one another. A prime example: Drexel University (PA) hosts SunGard's SCT Banner application for both Cabrini College (PA) and Medaille College (NY), notes John Bielec, Drexel's CIO and VP for information resources and technology. Cabrini and Medaille are relatively small colleges that couldn't afford to purchase and maintain ERP applications on their own. By turning to Drexel, both colleges gain a proven ERP system that's designed from the ground up for the higher education vertical. In return, Drexel receives a recurring revenue stream from Cabrini and Medaille, to help offset the cost of its own IT operations. (Read more on this partnership in "Is Open Source the ERP Cure-all?" CT May 2008.)

'Open' to Alternatives

For the most part, the first SaaS applications used closed-source code, meaning that only the software provider could view and enhance the code. More recently, open source applications have been moving into the SaaS market. SugarCRM, for example, allows customers and partners to view and make changes to the company's source code. Although SugarCRM began its life as an on-premise application, roughly 30 percent of new deployments involve SaaS engagements, according to CEO John Roberts.

Other open source applications moving into the SaaS market include Zimbra, an e-mail platform owned by Yahoo!; Compiere CRM; Concursive CRM; and Open-Xchange groupware. Stanford University (CA), for instance, recently decided to embrace Zimbra because the university preferred the software's open architecture, notes a university press release.

Golod at Revenue Accelerators predicts that "By 2010, most new SaaS deployments in higher education will include open source components. Linux, Apache, and other open source options got their start in universities. It's only natural for those same universities to demand open source for their SaaS applications."

Challenges

Despite the growing popularity of SaaS, the technology does face some lingering challenges. For many colleges and universities that spent the 1990s building and refining their ERP systems, it simply doesn't make sense to abandon legacy investments that are finally delivering value. "Rip-and-replace has never been a popular strategy among university CIOs," Golod concedes.

And SaaS itself faces limitations. According to Gartner analysts, some SaaS applications are suffering under the weight of governance, data security, customization, architecture, agility, scale, and integration challenges. In addition, universities need to ensure that IT and business managers can effectively manage their SaaS partner relationships, note these same industry pundits.

But the challenges don't end there. As universities outsource more and more applications to SaaS providers, they run the risk of creating multiple data silos that don't communicate with one another. Here again, startup software companies are working to address these challenges. Take SnapLogic, which is developing middleware that creates links between SaaS applications such as CRM, ERP, and financial management systems, allowing universities to more easily coordinate data across multiple hosted systems, says SnapLogic CEO Chris Marino.

Similarly, companies like Vembu are writing backup applications that allow universities to back up their data to off-site management service providers (MSPs). The MSPs, in turn, can further protect the university data by creating links between the Vembu systems and Amazon.com's S3 service. The connectivity between Vembu and S3 service should arrive later this year, according to a Vembu spokesman.

The Innovation Factor

As software companies fill in the remaining SaaS gaps, some institutions are discovering that outsourced SaaS applications enable their IT teams to focus on innovation rather than system maintenance. In the typical enterprise, more than 80 percent of IT spending goes to system and network maintenance, and less than 20 percent goes to new IT developments that drive an organization forward, according to IDC researchers. But with SaaS, "We were able to free up some time for the system administrators who are now able to focus on more strategic activities," says Matesich. That's right in keeping with the mantra of Arizona State University maverick CTO and Campus Technology 2008 keynoter Adrian Sannier.

The situation is similar at Cabrini, where administrators were able to allocate dollars to new IT projects (such as wireless access) because the college's SaaS solution (hosted by Drexel) didn't require major up-front financial resources.

Ultimately-- and undeniably-- the case for SaaS is strong. While universities will need to keep many of their legacy applications in-house ("If it ain't broke, don't fix it"), a growing percentage of new deployments will be built upon SaaS. Matesich puts it plainly: "SaaS simply makes sense."

::WEBEXTRAS ::
White Paper: The Software as aService (SaaS) Solution: HowSaaS-Enabled Services Address3 Key Challenges for IT in Education.
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