The Five P's of SaaS Platforms

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The success of Software-as-a-Service (SaaS) has inspired a new generation of Platform-as-a-Service (PaaS) players to emerge, seeking to gain a higher ground in a rapidly evolving ‘cloud computing’ environment.

Growing acceptance of adoption of SaaS alternatives to legacy on-premise software applications has created a new competitive battlefield among a combination of established software vendors and upstart SaaS providers.

Salesforce.com, a pioneer in the SaaS market, was among the first to recognize the opportunity to resell its internal SaaS development and delivery capabilities to third-party software developers and enterprise customers via its Force.com PaaS portfolio. Google Engine and a wide array of niche players have also followed suit. And, now the line of demarcation between PaaS and cloud computing vendors, such as Amazon’s EC3, is quickly blurring.

In just the past few weeks, three more companies—Jaspersoft, ExpenseWatch.com, LongJump—have announced new platform strategies and solutions. These follow previous offerings from SaaS vendors like Bungee Labs and SpringCM, as well as established software and system vendors such as Oracle, Progress Software and IBM.

Microsoft also recognizes the opportunity and is trying to play catch up by promising its own development platform, Azure, in the next year or so.

Here’s a quick list of the essential ingredients which a platform player has to have in place in order to win a meaningful share of the market,

• Easy to use, ’standards’ oriented development code

• Reliable and secure development environment

• Automated and flexible procurement capabilities

• Name recognition and brand equity

• Customer base and channels to market

• Developer/Partner network

Put these assets together and the PaaS vendor can help third-party vendors and enterprise developers accelerate their SaaS development cycles, consolidate their go-to-market requirements, and reduce their overall costs. The PaaS vendor also gains a powerful competitive advantage by reinforcing the value of their core SaaS solutions by surrounding them with a wider assortment of third-party enhancements and complementary enterprise deployments.

However, if a platform player can’t offer a combination of these attributes they have little hope of survival. The most recent example of this Darwinian reality is Coghead, which was an early entrant into the PaaS arena that failed to win sufficient market penetration to stay afloat. As a result, its intellectual property was recently acquired by SAP which is hoping that it can use these assets to accelerate its success in the SaaS market.

Given that a further shakeout of the PaaS market is inevitable, just as it is in the broader SaaS and cloud computing industry, it is essential for software vendors and enterprise developers to carefully consider which PaaS supplier to select to meet their needs.

Marketing 101 suggests that there are four P’s that are critical to success—packaging, pricing, positioning and place. In the PaaS market, I believe there are five P’s which will determine the survival and success of today’s suppliers, and their customers.

• Primacy – Is the PaaS vendor’s offering pivotal to their overall success?

• Proprietary – Is the PaaS vendor’s development environment open or proprietary?

• Portability – Can you migrate your solution from one PaaS environment to another?

• Positioning – Does the PaaS vendor’s sales and marketing efforts enhance your position in the market?

• Profitability – Does the PaaS vendor have a sustainable business model to ensure their long-term success?

Keeping these questions in mind will help you determine which PaaS vendor is best suited to satisfy your corporate objectives, whether you are a software vendor or enterprise developer.

Jeff Kaplan is Managing Director of THINKstrategies (www.thinkstrategies.com), an independent consulting firm focused on the business implications of the on-demand services movement. He is also the founder of the SaaS Showplace (www.saas-showplace.com). He can be reached at jkaplan@thinkstrategies.com.