by: VMware Senior Manager R&D (SEBU) Neelam Batra and Lead Business Systems Analyst (CDTO) Ashvini Vijayendra
What is SaaS
Is software-as-a-service (SaaS) a rental method, not the ownership of software? Just like leasing a vehicle from your local vendor? Or is it “a service layered over software” as in a complete solution, not simply a tool? Well, it’s a bit of a trick question—SaaS is both.
Software delivered as a service means “on demand.” It means eliminating the upkeep of the software itself through automation—automated deployment and automated maintenance. The software simply arrives and runs as needed, in a fashion that is visible to the customers, so they realize the benefit of the service without incurring the headaches of managing the technology.
SaaS is software transformed into a service, regardless of the technical architecture. See Figure 1.
Figure 1. Delivering applications over the Internet in a secure mode.
Take a moment to list all the products you subscribe to for either personal or professional use. It wouldn’t be surprising if you find products ranging from music to financial management on your list.
With this kind of growth, not only were many new subscription businesses born in recent decades, but plenty of existing businesses recognized the need to evolve and provide a “subscription” experience.
Top benefits of SaaS business models
For one, customers don’t usually care about the technical details of their services, they mostly care about the functionality and then value. SaaS business models, when combined with a SaaS architecture (single instance, multitenant, ~zero footprint and native browser-based) are typically more nimble than other architectures, which require either deployment of client components or centrally deployed “client instances,” in order to deliver value to customers without hidden overhead costs.
Payment structure is another added advantage. SaaS providers operate on a subscription model with a fixed, inclusive monthly account fee. Users know exactly how much the software will cost and can budget accordingly, without worrying about surprises.
- Direct access to services
Consumers in the usership model have direct access to services that fall under the product. As consumers don’t possess material goods, overhead for maintenance and upgrades is eliminated. See Figure 2.
Figure 2. Business models have evolved from making physical purchases, to purchasing electronic/digital goods to making purchases via subscription.
Conventionally, VMware software is deployed within the confines of the data center to power customers’ business applications. In recent years, VMware and AWS have worked together to create VMware Cloud Solutions, providing a cloud-based service for our shared clients.
With VMware Cloud™ solution, when consumers sign up for a VMware Cloud account, they can get access to the entire VMware stack in an AWS availability zone in about 90 minutes. Consumers can move functionality to the cloud and enjoy the many benefits of the platform, such as:
- Accessing all the functionality of VMware NSX®, VMware vSAN™ and VMware vSphere®, as well as the extended portfolio of solutions like VMware Tanzu® and VMware Site Recovery Manager™.
- Always running the latest version of VMware products without worrying about product compatibility.
- Leveraging the latest version for access to the latest features and product enhancements.
VMware takes care of maintenance, upgrading and patching.
Figure 3. As part of its cloud journey, VMware continues to add and improve cloud services.
VMware also rolled out programs and benefits to partners and customers that focus on easily upgrading and transitioning from existing perpetual licenses to equivalent cloud-service-at-a-price incentives, for the entire lifecycle support. See Figure 4.
Figure 4. Transition from perpetual-license to a SaaS model.
- Usership encourages continuous engagement
It’s not just about “being customer focused” or “hearing your customer” anymore. In a usership model, customer focus moves from good to great by “seeing around the corner” for customers. This encourages constant engagement—what we call “living in customers’ minds.” This means knowing customers and their needs, as well as showing and measuring business impact through consumption. See Figure 5.
Figure 5. VMware has a customer-first mindset.
Customer churn rate and NPS are key measures of health adoption and also drive predictive and proactive customer support. In order to meet churn rates and NPS, VMware achieves the highest availability for mission-critical apps and other demands as faster time to market, improved customer satisfaction, and increased scalability, security, performance and resiliency. See Figure 6.
Figure 6. Continuously seamless customer experiences across all parts of customer journey.
3. Try first and buy later
When a customer adopts a SaaS model, its benefits are evident—from lower commitment and lower costs to the opportunity to try a product before buying it, which gives customers a remarkable opportunity to assess a product before making a purchase.
For businesses, it means a new way of distribution, marketing and selling software. See Figure 7.
Figure 7. A price-by-value proposition allows customers to assess a product before making a purchase.
We offer various models such as:
- Pay-as-you-go: a $0.00 upfront commit
- Commitment-based models to offer attractive commitment-based discounts and saving plans.
Customers have the choice of moving from an initial pay-as-you-go model to a commitment-based model established based on their consumption trends, needs and business use cases.
4. CapEx vs. OpEx
CapEx typically decreases in a SaaS model. Operational and indirect cost savings that can be achieved by using IT resources and expertise of a managed cloud provider have the potential to dwarf the infrastructure acquisition savings of moving away from a self-managed, on-premises data center approach. This frees up the capital to be used for OpEx. See Figure 8.
Figure 8. OpEx vs. CapEx.
Offerings like VMware Aria Universal Suite™ are appealing, as it provides clients the flexibility to decide if the product runs as a cloud-based service or as a traditional virtual appliance in data center. By moving management and operations functions to SaaS services, customers have faster access to innovation. They benefit from predictable budgeting (shifting from a CapEx to OpEx model) through the subscription model, it simplifies ecosystem integration and offers greater elasticity, no matter what their operational model looks like.
As a result, with SaaS there is a:
- Shorter time to market as customers has expanded choices in terms of software, payment, scale up or down.
- Focus on revenue-generating functions.
- Data-driven customer relationships.
- Improved productivity and efficiency.
To sum up, SaaS is not only a new architectural approach to designing and delivering software applications, it’s a new mindset for satisfying evolving user needs.
What’s next in the VMware move to SaaS
- Practitioner view of SaaS—will provide a view of our SaaS programs, policies and products that practitioners have built outside and within VMware.
- Deep dive into digital transformation programs—success stories and challenges.
Check back for updates on this evolving topic and read our other SaaS blogs.
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