Cloud Brokers Help Software Vendors Move to SaaS

Cloud brokers can help traditional ISVs enter the SaaS market with services such as entitlements, analytics and security.

Some researchers¹ project the global market for cloud services such as software as a service (SaaS) will reach $55.5 billion in 2014. Tapping this market requires wrenching changes for independent software vendors (ISVs) that built their business around selling licenses and maintenance agreements. A new type of cloud provider, a cloud broker, can deliver “solutions as a service” to help ISVs transition to SaaS with the least possible risk while protecting their margins.

SaaS Challenges

SaaS allows customers to buy only the number of “seats” they require at any time, while avoiding the expense of buying and hosting software. But providing SaaS requires ISVs to develop new capabilities, such as meeting service level agreements, establishing real–time usage monitoring and billing capabilities and meeting strict security requirements.

The robust infrastructure required to deliver SaaS requires a substantial investment by ISVs, and could lower margins, require changes in cash flow and pricing models, and mandate new forms of customer support. Faced with such challenges, ISVs might test the market with, for example, a free version with limited features for a specific customer set. A cloud broker can reduce the cost and risk of such experimentation, helping the ISV embrace SaaS more easily, and as profitably as possible.

Role of the Cloud Broker

A cloud broker is an intermediary between the ISV and various cloud providers. It helps the ISV choose the platforms that best suit its needs, deploy and integrate applications across multiple clouds, and/or enable the ISV to move between cloud platforms. It can add value through vertical solutions marketed to specific industries, or through horizontal functions required across verticals such as entitlement, subscription management and billing.

A broker's services might include:

• Entitlement:In a SaaS model, ISVs cannot rely on per–module licensing models and software audits to ensure customers are using only the modules and functions for which they paid. Cloud brokers can provide real–time usage tracking, as well as the dynamic creation, revision and deployment of multiple pricing models, based upon which features particular users access.
  This service provides a lower cost of operations, more assured contract compliance and less lost revenue for the ISV. Customers benefit from reduced risk and greater purchasing flexibility as their needs change.
• Analytics:Analyzing large amounts of complex data to improve the business often requires that customers buy expensive, proprietary systems that sit idle between peak demand periods. A cloud–based analytics solution from a broker could significantly reduce costs for the customer, while providing complementary revenue for the ISV.
• Billing and Payment:Traditional ISVs may not have billing systems adapted to handle a subscription–based business requiring monthly, quarterly and annual billing, credit card transactions and automatic provisioning of services. A cloud broker might receive, reconcile and manage recurring payments at any frequency and using any form of electronic payment. Its notification engine would automatically and proactively update customers, apply payments against invoices, reconcile and reflect subscription changes and generate reports about business trends. The ISV avoids buying expensive accounting software, while providing more varied and flexible payment terms to customers.
• Security:SaaS may require a higher level of security and pose more complicated governance issues than previous provisioning models. A cloud–based security solution would protect the servers delivering the SaaS solution, ensure proper identity and access management and provide protection against unseen threats. This would provide consistent performance and security at less cost than the ISV could provide in–house.
• Context:This service helps ISVs provision the amount and type of information, and the application functionality, each user is authorized to access. For example, a broker can tell the ISV if a CIO rather than a system administrator is accessing a particular service, and appropriately tailor his or her access. By providing information about the user's interests and affiliations from social media sites, this service can also help ISVs better target offerings and promotions.
  This contextual information can also help ISVs provide customized access, pricing or usage for users who need only sporadic, very specific or time–limited access. It can also present the application in the form best–suited to devices other than PCs such as smartphones or tablet computers.

Moving Forward

To meet the growing demand for SaaS services, ISVs must reconsider everything from development processes, to budgeting, customer support and internal IT capabilities and partner relationships. Well–qualified cloud brokers can ease the move to a profitable SaaS strategy with everything from strategic business consulting, to specific cloud–based services and tools.

For more information, read the full white paper about cloud brokers (PDF), and about Cognizant's services to help ISVs transition to SaaS.

Footnotes

¹Worldwide and Regional Public IT Cloud Services 2010–2014 Forecast, International Data Corp., June 2010