The New Nature of Software Demand:
Software as a Service and Cloud Computing

By Pekka Huttunen

One of the high-tech industry’s fastest growing product lines is netbook computers. This scaled down processor is proving to be popular for the rising number of consumers who would rather spend a few hundred dollars for a basic PC with Internet connectivity instead of spending more money for a feature-rich machine loaded with software and applications they don’t want, need, or can’t afford—especially during these tough economic times.

This trend toward less software is a fundamental industry shift and is described in a new Accenture report titled “The Accenture Global Software Study: Key Industry Trends and Evolving Requirements for Achieving High Performance.” The report identifies the traditional software licensing model, consisting of a master site license with ongoing upgrade revenues, as declining in use. This licensing model is being replaced by a technology application known as software as a service (SaaS). These are applications provided by vendors in hosted or “leased” on-demand environments. Use of SaaS translates to a declining need for dedicated, on-premise software as has been the traditional model.

One reason SaaS is acquiring converts is the model’s relatively rapid implementation cycle. Another is rising Internet familiarity and comfort among people and companies, combined with a continual increase in global broadband availability. SaaS tends to be attractive for companies that have experienced failed implementations or painful, lengthy product roll-outs.

Such companies may also be more receptive to hybrids (combining “traditional” software with SaaS) and to blended models that include license, maintenance and consulting. A vendor is considered to offer a hybrid SaaS model when it makes on-premise, hosted and SaaS delivery options available to the same customer segment, while promising that customers can seamlessly move between those platforms.

Another rapidly growing on-demand concept, cloud computing, refers to information permanently stored in Internet servers, and cached temporarily on client computers, entertainment centers and monitors. Think of cloud computing as the concept upon which SaaS is based. And like SaaS, cloud computing is forcing companies to rethink how they provide software to clients. Three subsets of cloud computing offer some practical parameters:

• Utility computing implies on-demand access to information and capabilities residing on storage and virtual servers and is currently limited to supplemental, non-mission-critical needs. Specific utility computing applications help create virtual data centers from commodity servers and one day may replace parts of a company’s data center.

• Web services in the cloud refer to functionality reached over the Internet, rather than full-blown applications delivered to the user. These range from providers offering discrete business services, to the more broad range of application programming interfaces.

• Platform as a service refers to delivery of development environments as a service. Users build their own applications that run on the provider’s infra¬structure delivered via the Internet. These services are constrained by the vendor’s design and capabilities. As a result, users get predictability and pre-integration but not necessarily complete freedom.

Worldwide demand is further influenced by the fact that Web 2.0 is reaching the mainstream. Web. 2.0 is all about new strategies and perspectives, leveraging the Internet to enhance creativity, stimulate communications, encourage information sharing and promote collaboration. The increasing number of Web. 2.0 applications have coincided with the emergence of software vulnerabilities.

Several business entities are selling, or will soon sell, software and services to address security threats. They include website security scanning vendors, application vulnerability management services, code assurance vendors, Web application firewall vendors, and manufacturers of Web-filtering products. In addition to these entities, large diversified companies have portfolios and capabilities geared to addressing Web 2.0 security concerns. Despite potential security concerns and

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