SpECIal EdItORIal FEatuRE, In association WItH CIO. Service-based software powers ahead

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SpECIal EdItORIal FEatuRE, In association WItH CIO SaaS adoption SPONSORED FEATURE 1 Service-based software powers ahead the trend towards SaaS in organisations of all sizes is now irreversible, a survey says in association with As CIOs plan to increase mobility in their organisations in order to boost productivity, reduce office space demands, provide flexible working and attract the next generation of technology-savvy workers, they will need to modernise the application experience they offer to the workforce. A recent CIO study analysed the responses to the adoption of Software as a Service (SaaS), the cloud-based application delivery model that will enable productive mobile computing. www.cio.co.uk CIO uk july 2012

2 SPONSORED FEATUre SaaS adoption The proportion of companies using some kind of SaaS will grow to 45% in 2012 and 60% by the end of 2013 holger kisker, forrester Four out of five enterprises have either already invested in SaaS or are planning to invest in it, the survey of 82 senior IT leaders conducted for CIO found. Of the organisations surveyed, 28 had already made significant or moderate investment in SaaS, and more than a fifth (23 ) planned an investment in the next one-to-three years. It looks as if SaaS is here to stay. But what s driving adoption and what are the barriers to its take-up? SaaS is a cloud-based model for delivering applications over the internet. Of the three cloud services (Software-as-a-Service, Infrastructure-as-a-Service and Platform-asa-Service), SaaS is likely to be far the biggest in terms of revenue and therefore adoption, according to predictions from both Forrester and IDC analyst houses. Rather than being installed on individual computers connected to one in-house servers, SaaS applications are hosted offpremise by a third party, are often multitenanted (where one instance of the software runs on a server and is used by multiple clients). They are paid for using term-based licensing that is, the customer pays for usage of the application for a fixed period of time. Compared with traditional large-scale software implementations (which can take a year or longer, particularly for ERP systems), SaaS can be relatively quick and easy to implement. Return on investment is quicker with SaaS, as there is no need for the organisation to make a large up-front payment to purchase an application. Maintenance is for the most part provided by the third-party supplier, freeing up an organisation s IT function to focus on innovation. Adopting a SaaS model also means that organisations Chart 1: How much funding is available for IT initiatives in 2012, compared with previous years? 31% More funding available The same funding is available Less funding is available 34% 35% Chart 2: To what extent is IT considered strategic in your organisation? 36% automatically get upgraded to the newest version of the software, without having to carry out extra work, and they can switch on the functionality they need when they need it they no longer need to work to vendors schedules. Furthermore, SaaS makes it easier to collaborate with partners, suppliers and customers, as they will all be using the same version of the software. Growing to scale SaaS has become increasingly attractive to organisations wanting to limit capital expenditure (capex) costs and improve their ability to scale according to demand. In the final quarter of 2011, analyst Forrester s Forrsights Software Survey found that 30 of companies were using some kind of SaaS solution. Forrester analyst Holger Kisker predicted that this proportion would grow to 45 by the end of 2012, and to 60 per cent by the end of 2013. Analyst Gartner is also making confident predictions of growth: it has said that the market for enterprise applications delivered by SaaS will grow at a rate of 17.9 a year, rising to $23bn ( 14.8bn) by 2015. The clear overall trend is that most organisations are moving towards adopting SaaS, though some are doing so at a faster pace than others. A 2011 Gartner survey of 525 organisations found that 95 expected to invest heavily in SaaS. Sharon Merz, a research director at Gartner, said that respondents cited ease and speed of deployment and cost-effectiveness as the top two reasons for adoption. In the current economic climate, SaaS is an increasingly attractive option because of the potential cost savings it offers. In our survey, about a third of organisations 9% 55% Very strategic Somewhat strategic Not strategic CIO uk july 2012 www.cio.co.uk

SaaS adoption SPONSORED FEATUre 3 (34 ) said that there was less funding available for IT initiatives in 2012 than in previous years, while slightly more (35 per cent) said that more funding was available, and slightly fewer (31 ) said that funding remained the same (see Chart 1). Given that we may be entering a double-dip recession, the fact that so many organisations have increased available spend on IT is perhaps a reflection of their growing awareness of its strategic importance. More than half (55 ) of those surveyed said that IT was considered very strategic in their organisation, while a hefty 88 said that their organisation was requiring them to become more strategic (see Chart 2). But asked whether their current systems supported innovation, 69 said yes, while 31 said no (Chart 4). So even though organisations require the IT function to become more strategic, in nearly a third of cases, their current IT landscape doesn t allow them to do this. Taking a more strategic approach requires CIOs to work more closely with the business, Chart 3: Do you feel that your organisation is requiring IT to become more strategic? Yes No 12% 88% Chart 4: Do you feel you are able to support innovation on your current systems? Yes No 31% 69% better understand the business s short-term and long-term goals and think about how IT investments can be used intelligently to meet those goals. SaaS makes this possible because it provides greater flexibility, instead of spending money on expensive software implementations that can be out of date by the time they are ready for use. The SaaS model enables organisations to provide the appropriate software applications to the right people for the length of time they are needed and to stop using them when they are no longer required. Balanced is best CIOs surveyed agree that SaaS is an important component of future IT strategy: asked about their own personal views, 78 per cent said that they were advocates of SaaS (see Chart 8). Asked about the view of the organisation as a whole, the picture was more mixed, though there was still a large majority in favour of SaaS (see Chart 7): nearly one in four (23 ) agreed that As far as possible, IT services should be hosted, while more than half (52 ) agreed that A balanced view is best, using SaaS when it makes sense. A small minority (11 ) agreed with the statement We do as much as possible ourselves. It was clear from the survey that SaaS is potentially a valuable tool in allowing CIOs to align IT with business strategy. Asked about their own personal views, 78% of CIOs said they were advocates of SaaS www.cio.co.uk CIO uk july 2012

4 SPONSORED FEATUre SaaS adoption Chart 5: Which of the following would be key drivers for SaaS adoption? Chart 6: Which of the following would be key inhibitors to SaaS adoption? Cost reduction Business enabler Releases IT for strategic projects Reduced IT overhead 41 42 51 63 Budget Restrictions Security issues Migration and integration issues with existing systems 34 59 73 Scalability 52 Disruption to the business 18 Flexibility Mobility 40 63 The organisation isn t ready for a cloudbased approach 22 Other 12 Other 7 0 10 20 30 40 50 60 70 80 90 100 0 10 20 30 40 50 60 70 80 90 100 IT management should formulate a strong business case for the funding of integration projects saurabh sharma, ovum Respondents were asked what they saw as the key drivers for SaaS adoption (they were asked to pick three out of the eight options provided see Chart 5). The most popular options were cost reduction and flexibility, both cited by 63, and scalability (52 ). These findings are very much in line with a 2012 report by analyst firm Forrester, Software-as-a-Service adoption in Europe, which found that the two main reasons for adopting SaaS were cost reduction and agility. A minority (12 ) of respondents also cited other drivers not listed in the questionnaire. Those mentioned included Increased reliability, Innovation from SaaS providers, Easy access to latest software versions and External expertise. However, moving from a client-server model to a SaaS model takes time and effort. Respondents were asked to give the main inhibitors to SaaS adoption (they were asked to pick three options out of six see Chart 6). The biggest concern, mentioned by 73, was migration and integration issues with existing systems. This supports the arguments of Ovum analyst Saurabh Sharma, who has written that SaaS CIO uk july 2012 www.cio.co.uk

SaaS adoption SPONSORED FEATUre 5 Chart 7: What is the attitude to SaaS within your organisation? Chart 8: Are you personally an advocate of SaaS? As far as possible, IT services should be hosted 23 A balanced view is best, using SaaS when it makes sense 52 22% We prefer in house and only use SaaS selectively We do as much as possible ourselves 11 14 78% 0 10 20 30 40 50 60 70 80 90 100 Yes No implementations often overrun because organisations have not adequately prepared for the potential challenges in integration: IT management should investigate and plan for integration requirements as well as formulate a strong business case for the funding of integration projects by aligning the potential outcomes to current and nearterm business requirements. In a 2010 report entitled As adoption grows, vendor managers can help business users succeed with SaaS deployments, Forrester analyst Liz Herbert writes, Firms not only face the challenge of integrating SaaS with on-premise but are increasingly finding that SaaS-to-SaaS integration can be difficult and often expensive. Often the problem is caused by the need to migrate data, which can be a time-consuming process, Herbert writes, and as a result, many companies are looking to third-party vendors to help with integration. The next biggest potential inhibitor, cited by 59, was security. Once again, the findings are in line with the Forrester report, which found that in the UK, the biggest concerns about adopting SaaS were integration and security. Budget restrictions were also mentioned by a third (34 ), and seven cited other concerns, including Bandwidth limitations on a countrywide basis and For appropriate SLA and ISO27001 security, SaaS hosted solutions work out very expensive. Must do better Many organisations in our survey are in a position where they need to think more about how to create a technology offering that can meet the changing needs of their workforce. Only 13 of those surveyed said that their existing systems were Very well suited to the needs of their organisation, while another 44 said they were Well suited. Although this is encouraging, just over a third (36 ) thought their systems could be better, while a minority (7 ) felt that their systems needed updating (see Chart 11). One of the major ways in which the needs of the workforce are changing is that many employees now expect to be able to work out of the office. More and more organisations are looking for ways of introducing mobile working opportunities. Providing staff with the tools that enable them to work out of the office can reduce demands on office Firms are finding that SaaS-to-SaaS integration can be difficult and often expensive Liz herbert, forrester www.cio.co.uk CIO uk july 2012

6 SPONSORED FEATUre SaaS adoption space and improve productivity. It is also a good way of attracting younger employees who increasingly expect to be able to access applications from their mobile devices, both for personal and business use. Analyst house IDC has predicted that by 2015 more than 1.3 billion employees (a third of the world s working population) will be mobile working at least some of the time. Upwardly mobile For a mobile workforce, SaaS represents the ideal way of delivering applications. It means that users are no longer tied to a single deskbased computer and instead can access an application over the web from their mobile phone, laptop or tablet device. For certain enterprise applications, such as CRM or ERP, this provides an immediate boost to productivity. A sales person visiting a customer site can check stock availability and prices and put in an order on the spot instead of having to write down the details and enter them on return to the office. Time that would otherwise be idle (sitting on the train, for example) can be spent completing office tasks. Customers benefit because their needs are responded to more quickly and efficiently. It also makes life simpler for the IT function because it can now offer users access to key applications without having to provide technical support on mobile devices. This represents a particular benefit in organisations with bring your own device (BYOD) policies, where users may be using a variety of different platforms. The arrival of HTML 5, which has simplified crossplatform development, means that we can expect to see an increase in the availability of business mobile applications. Already enterprises are turning to SaaS as a way to deliver mobile applications: a Chart 9: What are the biggest challenges your IT department is facing in 2012 and beyond? Agility Budget Operational effectiveness Security Global 55 61 60 70 Significant investment 10 68 Chart 10: Does your organisation currently have any investment in Software as a Service (SaaS)? Moderate investment Some Investment planned within the next 1-3 years 18 23 30 For a mobile workforce, SaaS represents the ideal way of delivering applications Data integrity No planned 45 19 investment 0 10 20 30 40 50 60 70 80 90 100 0 10 20 30 40 50 60 70 80 90 100 CIO uk july 2012 www.cio.co.uk

SaaS adoption SPONSORED FEATUre 7 Chart 11: How well are your existing systems suited to the needs of your workforce today? Our survey 36% 7% 13% 44% Very well Well Could be better Need updating Chart 12: Do you currently support a mobile workforce? 6% 82 people responded. Nearly half (43 ) were in organisations of between 1,001 and 5,000 employees. 29 were in organisations of more than 10,000 employees and 17 in organisations of more than 50,000 employees. Respondents were from a variety of sectors. The biggest sectors represented were non- IT-related manufacturing (11 ), software development (11 ) and government and defence (10 ). 53% 41% Everyone Executives only No Yankee Group report found that mobile user connectivity was the principal motivation for deploying software as a service (SaaS), cited by 48 of enterprises. Forrester analyst Herbert, also author of a 2011 report entitled Five trends that will change SaaS sourcing, predicts that over the next 10 years, the combination of falling prices, improvements in battery life and mobile coverage will drive mobility to the forefront. Increasingly, organisations will have to look at more flexible and more cost-effective ways of meeting the needs of their mobile workforce (see Chart 12). The vast majority of respondents said that they currently supported a mobile workforce: 41 said they supported executives only, while 53 said they supported everyone. Only 6 offered no support for mobile working. This finding suggests that organisations are embracing opportunities offered by mobile devices. They may have some way to go before they are able to fulfil the potential offered by mobile, however. The trend towards SaaS in organisations is now irreversible: the drivers for implementation, including financial savings, scalability, more predictable costs and greater business agility make the case for SaaS a compelling one. Combine this with an unequally unstoppable trend towards mobile- and home-working, and we can add improved productivity and customer service to the benefits. Despite this, the road to SaaS is not a straightforward one. Organisations need to plan for SaaS implementations just as they would plan for any other software implementation, addressing issues such as integration, security, data migration and long-term business alignment. www.cio.co.uk CIO uk july 2012