Complex, customized cloud application services could lead to backlash

Cloud providers are happy to customize their products for customers, but companies saddled with convoluted deployments may someday stage a revolt.

SaaS providers could be in for it.

IT consultant Jeff Kaplan penned a warning last week for the vendors that sell subscriptions to cloud application services, or software as a service. They've willingly -- some might say cynically -- allowed their customers to build specific processes into the applications to fit their IT deployments. Salivating over how long they can keep customers customers, they often allow organizations to use older versions of the software so that all of that customization gets put to use.

As a result, maintaining SaaS applications has gotten complicated and costly, Kaplan wrote in an E-Commerce Times op-ed. The managing director of ThinkStrategies, an IT consulting outfit in Wellesley, Mass., Kaplan asserted that the practice breaks the SaaS promise of meeting customers' needs with one software version -- and customers are getting tired of it.

Many of the companies that clamored for customization are now blaming heavily customized cloud application services for not meeting the demands of their customers fast enough, Kaplan wrote. Others sticking with old software are questioning why they're paying yearly fees if they're not getting the latest versions of the software.

If this pattern continues, in Kaplan's view, "the SaaS industry could face a serious backlash."

Anatomy of a rebellion

To find out what such a backlash might look like, I gave Kaplan a call. "You already see it beginning to manifest itself in a sense," he said.

He pointed to Microsoft's release last week of its Azure Stack. It's a hybrid IT approach -- part cloud, part traditional, server-bound IT -- that extends the Azure cloud into a company's data center. That could be construed as a Microsoft swipe at SaaS success -- instead of buying prepackaged cloud application services, customers could build and operate their own.

Jeff KaplanJeff Kaplan

"They're overtly offering customers the opportunity to utilize its functionality via the cloud, while at the same time taking some of those cloud capabilities and getting them behind the firewall," Kaplan said.

Organizations could also develop their own applications on an open source system like OpenStack, he added.

To the SaaS industry's credit, Kaplan said, larger vendors are adding features and capabilities geared toward particular industries, like government, healthcare and retail, reducing the amount of custom work that needs to be done. But with a tangle of product versions and partner ecosystems for consulting and integration and the like, complexity still reigns.

"Today's SaaS product portfolios are as complicated as those from the previous generation of perpetual license software vendors," Kaplan wrote in the article.

SaaS strikes back?

For now, though, SaaS isn't going anywhere but up. Gartner predicts the global market for cloud applications will grow 20% to reach $46 billion in 2017 and $76 billion by 2020.

And, Kaplan said, even if customers rebelled, vendors of cloud application services will likely be prepared. In response, they could take a page from the auto industry.

"There's always the opportunity to lease and then buy," Kaplan said. Take Salesforce, which carved out the SaaS market with its CRM service. If customers threaten to leave, the company could turn to them with an offer to buy the software that they can keep on servers behind their firewalls. And it won't be cheap.

"They'll figure out a way of actually being able to charge a premium for that privilege," he said.

But even the growth arc of market leaders like Salesforce isn't a given, especially if enough customers look beyond SaaS vendors to meet their business needs.

"At some point, the Salesforce bandwagon could slow down," Kaplan said. "And, of course, if that happens, Wall Street becomes less and less enamored by them -- and it becomes a vicious cycle after that."

And if Salesforce can't navigate a newly SaaS-hostile landscape, boutique app shops won't be able to either.

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