Article

SMB opens door to SaaS

Megan Santosus

IT controller Allan Rennie was looking for a cost-effective and relatively pain-free way to back up databases for the small Canadian manufacturing company where he works when he discovered on-demand software.

He wound up ditching the tape system he was using in favor of an online backup service from an on-demand provider. A year later, Rennie, who admits to being skeptical about the on-demand concept initially, is now contemplating on-demand options for other applications.

As controller of Super Seal Manufacturing Ltd., a maker of automated doors and shelters based just north of Toronto, Rennie also serves as the de facto IT manager for the 50-plus employee company. And he's also at the forefront of a trend that analysts say is spreading throughout the small and midsized business (SMB) IT community. According to a recent survey from market analyst firm Yankee Group Research Inc., software as a service (SaaS), or on-demand software, is a strategy increasingly resonating with SMBs.

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More than 60% of SMBS -- organizations that Yankee defines as those with between two and 1,000 employees -- say they see on-demand software as a way to cut costs and increase productivity.

Rennie opted for a Toronto-based IBM service provider, Global Data Vaulting Inc. (GDV), to provide Super Seal with its backup needs. GDV specializes in providing online backup services using IBM's Tivoli Storage Manager software on the client side to run the backup application.

With on-demand applications, customers don't buy, install and maintain software in traditional ways. They rent software by paying on-demand vendors a monthly subscription fee for services that typically include upgrades and maintenance.

Most often, vendors install on-demand software at a central data center and provide customers access via a Web browser. GDV tells clients its offerings differ slightly from traditional on-demand options because storage management software runs on a server at the customer site, explains GDV president Jeff Beallor. Although GDV software is installed at the customer end, GDV handles all the installation, upgrades and maintenance, and data is monitored and backed up from GDV's data center.

With customers such as Super Seal, GDV evaluates requirements at the client site, then sets up a server and installs the software as required. GDV then establishes a VPN and encrypts the software at the client's end -- a process that takes about two hours, Beallor says. Pricing options vary based on the length of contract and the volume of data that is backed up and archived. For example, GDV will waive the setup fee for a three-year contract. And 20 gigabytes of data cost about $340 a month. As a full-service vendor, GDV is pursuing the SMB market aggressively because smaller and midsized firms often lack enough dedicated IT staff to handle data backups, Beallor says. Other companies competing with on-demand data backup services for the SMB market include Waltham, Mass.-based AmeriVault Corp.; EVault Inc. in Emeryville, Calif.; and LiveVault Corp. based in Marlborough, Mass.

"I had heard about GDV from a business connection," says Rennie, who adds that for about six months prior to signing on, Beallor contacted him several times in an effort to get him to sign GDV's free 30-day evaluation. When Rennie finally grew tired of handling the tape backups himself, he decided to take Beallor up on his offer.

Within two days of starting to use GDV, Rennie says, he had to request the restoration of a file -- a process that was completed via e-mail in five minutes. Prior to going with online backup, Rennie said he might have spent hours going through reams of tape in search of the same archived file.

As for other applications, Rennie isn't actively looking to dump his packaged software that includes a Windows NT Server-based computer-aided design (CAD) system and desktop productivity applications such as Excel. But he will consider on-demand options when it's time to upgrade.

Many SMBs share that no-rush attitude when it comes to on-demand software, says Laurie McCabe, vice president of the SMB solutions practice at New York-based analyst firm Access Markets International Partners Inc. Most SMBs aren't aggressively pursuing on-demand technologies; and in part, that's a vendor problem, she says. "When it comes to software as a service, there really aren't any vendor evangelists out there except for Salesforce.com," McCabe says.

But other companies may start to get religious about SaaS. For example, Microsoft recently announced its intention to offer on-demand software to small businesses.

Yet even Rennie admits that he won't embrace on-demand technology without careful consideration. "It's tough for me," he says, "when I don't control things."

Megan Santosus is a senior features and departments editor for CIO Decisionsmagazine.


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