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SaaS vs. IaaS: Key trade-off has nothing to do with vendor lock

Lately there were some blogs implying that businesses should pick Infrastructure as a Service (IaaS) over Software as a Service (SaaS) as SaaS has higher vendor lock compared to IaaS.  There has been a lot of buzz around the three flavors of cloud computing, SaaS, PaaS, and IaaS.  It is important for business and IT leaders to understand the true trade-offs; when would it make sense to pick one over the other.  Though  it is true that SaaS has greater vendor lock, the reason a customer picks SaaS vs. IaaS has less to do with the vendor lock and has more to do with the type of application and the competitive landscape of the customers's business.  SaaS provides the application as a service which is available to not only to you but also to all your competitors, so from a business perspective moving core competency application to the SaaS model is equivalent of giving up your competitive advantage and it doesn’t make any sense.  Savvy business leaders evaluate SaaS offerings only for non-differentiating applications.  For applications which are proprietary and have custom business logic, IaaS is the only option for reducing Infrastructure costs and effectively managing the service levels.  IaaS allows customers to keep their application logic/code proprietary and only use the virtual infrastructure resources from external service providers.  In this case businesses not using IaaS will be at a disadvantage compared to their competitors who will enjoy better cost and management advantages by using IaaS.  Businesses have already spent billions of dollars on building proprietary applications to gain competitive advantage and with information technology being more widely used for gaining competitive advantage, the number of applications which would require Infrastructure as a Service is going to grow significantly.  The number of suppliers providing Infrastructure as a Service is going to grow, exiting hosting providers and new players will enter in the market.  According to IDC data, businesses around the world currently spend over 400 billion dollars in IT infrastructure costs per year, these costs are going to be over 500 billion dollars in 2013.  I have worked for companies that were and still are spending over billion dollars annually on Infrastructure world wide and would love to find ways to optimize Infrastructure costs as long as they can make sure that their proprietary information and knowledge is not compromised by using external Infrastructure as a Service.  Over the period of time Infrastructure as a Service will become a significant portion of the world-wide IT infrastructure spend.  This being said there will be an increase in SaaS market size also as there will be several applications that businesses will consider non-differentiating and will be open to moving them to the SaaS model.  Another category of cloud offerings is Platform as a Service (PaaS).  Given that there is no restriction in using existing middleware platforms in the cloud, e.g. for our own IMOD application we are using JBOSS & MYSQL clusters with Apache web server for balancing the load.  We are able to deploy a scalable architecture using existing middleware technologies in the cloud for running a highly scalable application, because of this PaaS has less compelling value proposition as why do we need to learn a new Platform API for building scalable applications if we can use the existing middleware and deploy it easily on IaaS?  SaaS providers themselves will move to IaaS for hosting their applications efficiently and effectively.  Fundamentally cloud computing is about IaaS, and IaaS is a huge disruption to the traditional hosting model.  To cope with this disruption, traditional hosting providers are moving towards providing their own IaaS solutions.  All major players in the industry have recognized this disruption and are moving towards providing IaaS.  This is great news for Kaavo as we are providing automation and security for deploying and managing applications on IaaS.

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More Stories By Jamal Mazhar

Jamal Mazhar is Founder & CEO of Kaavo. He possesses more than 15 years of experience in technology, engineering and consulting with a range of Fortune 500 companies including GE and ING. He established ING’s “Center of Excellence for B2B” which streamlined $2 billion per month in electronic money transfer operations. As Lead Architect at GE Capital e-Business team, Jamal directed analysis and implementation efforts and improved the performance of the website generating more than $1 billion in annual lease revenues. At Trilogy he provided technical and managerial expertise for several large scale e-business implementation projects for companies such as Boeing, NCR, Gartner, British Airways, Quantas Airways and Alltel. Jamal has BS in Electrical and Computer Engineering from the University of Texas at Austin and MBA from NYU Stern School of Business.

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