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The Top Ten SaaS Buzzwords
By James Maguire

April 5, 2007

Continued from Page 1

4) Multi-tenancy

In SaaS multi-tenancy, multiple companies all use a single physical database and infrastructure, which is hosted remotely. All these customers' data is stored in one place, though it's logically partitioned.

Multi-tenancy has its strengths and its challenges. The upside is that the vendor has a low cost-per-customer in building and maintaining its ifrastructure. The vendor can pass this lowered cost on to customers, and these customers are also spared the headaches of maintaining the platform.

The downside is that in many cases, customers are forced to upgrade when that central vendor upgrades — it's like the old Soviet Union, with a single central planner that everyone lives by. "So on June 1, if a new release is coming out, you have to go to that new release," Desisto says. "You cannot stay back on the prior release — otherwise the whole notion of multi-tenancy breaks."

There are, however, vendors that offer different versions of software to their various tenants. "But the minute you start to get into that game, you begin to lose some of the shared economics." When vendors support multiple versions, costs necessarily rise.

5) Vertical applications

The term vertical application — referring to apps built for a narrow market sector, like banking or pharmaceuticals — isn't a new term, nor is it unique to SaaS.

But while vertical applications have been around in the traditional on-premise software business for years, "in the SaaS world, in the biz app area, this whole notion of vertical applications is a relatively new thing," Desisto says.

"If you look at what Salesforce has done to date, a lot of that has been on their ability to support cross industry capabilities — I would expect that to change." As it matures, customers will expect the same degree of specific vertical apps capability from SaaS as is currently offered in on-premise software.

6) Parametric applications

With traditional on-premise software, the underlying code needs to be rewritten to alter the services it provides. With SaaS — in theory — a user can input a new parameter, or institute some new macro business rule, and thereby create a "new" service. This new service is sometimes called a "parametric application" because it is customized in response to a new parameter or piece of meta data.

"Salesforce has leveraged the meta data model, for example, to help facilitate and deal with upgrades and new versions, essentially allowing customers to opt in to new functionality through meta data switches and so forth," Desisto says.

7) Modular

"Modularity in the SaaS world is basically turning off or on services," Desisto says. So instead of buying a huge app that is installed on-premise with full functionality, an IT manager picks and chooses menu style, only selecting (and only paying for) what's needed at the time.

Also, most SaaS vendors have built their apps within the context of Web services architecture, enhancing the flexibility of modularity. "What that's allowed them to do is really componentize the capability of the system to a fairly reasonable level of detail."

Page 3: Net-native SaaS, Platform Infrastructure, and More SaaS

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