As Dennis Howlett notes in his coverage for ZDNet,

“Put simply, this is the first step to providing a cloud based integration framework that allows developers to pass data between Zoho applications and their own. This is exciting stuff.  For the first time, a commercial software vendor is providing an easy way to interoperate with its applications without imposing an entry or exit visa tax.”
(my emphasis)

Writing in a Zoho blog post, Rodrigo Vaca reminds readers of the important role played by SQL;

“As far as computer languages go, SQL (Structured Query Language) is a pretty old one. It came to light in the early 1970s and it is probably not too popular with the Facebook generation. But the fact remains – SQL is a pretty awesome thing. It is by far one of the easiest and most efficient ways to query and interact with structured data. That’s why it remains by far one of the most heavily used languages for business applications.

But perhaps the most important role that SQL plays is that it makes developers think with a relational model in mind – and that means thinking about the best data structures for the application at hand.”

SQL remains an important tool within the big databases that heat corporate data centres around the planet, but it has not really kept pace with the move toward hosted services out in the Cloud. Vaca goes on to explain,

“Zoho CloudSQL is a middleware technology that allows customers to interact with their business data stored in Zoho through the familiar SQL language. Customers are able to access Zoho cloud data using SQL on both other cloud applications as well as through traditional on-premises software.”

Howlett continues his post, commenting;

“Making it easy to consume services in an integrated manner without the distinction of whether the data is on premise or in the cloud is an incredibly smart move. It means that you don’t have to throw out your existing accounting applications if you don’t want to while opening up the business to other cloud services that are gaining traction.”

There is clearly value in lowering the barrier to entry to new ways of working, and it is also important that Zoho CloudSQL could be positioned as platform and application agnostic, working as easily with Zoho applications as with those of the company’s competitors. Larry Dignan picks up on this, writing,

“With the move, Zoho is playing an anti-lock-in card. One of the biggest worries about software as a service is that your data–and your business–can be locked into one provider. Under Zoho’s plan, the company will allow third party applications to read and write data. In a nutshell, Zoho is allowing users to take their data via SQL.”

Krishnan Subramanian also zeroes in on data portability as an important aspect of Zoho’s announcement;

“I have been emphasizing on dataportability as an important ingredient for SaaS success. With the release of CloudSQL to access data stored in Zoho apps, they are opening up new vistas for Zoho users to backup their data. Pretty soon, we will be seeing apps that solves this problem using CloudSQL. Enterprises could find it easy to integrate data on Zoho apps with their “private clouds”. This will help in faster SaaS adaption in the enterprise segment. I have talked about a cloud strategy that includes diversification of SaaS vendors. If SaaS vendors make their data available through SQL, like Zoho has done using CloudSQL, it is possible to achieve tighter integration between various SaaS vendors. Such an integration will help users develop a Cloud Strategy which also includes diversification. There are several interesting possibilities that could open up as an ecosystem develops around CloudSQL.”

That said, though, the model remains one that is essentially focussed upon a single enterprise (what we called the Intranet, back in the old days) and its interactions with its own data.

Although not directly comparable with SQL by any means, Semantic Web specifications such as SPARQL could surely be considered more appropriate for a Cloud of Data in which applications pull the data they require from various systems scattered through the enterprise’s data centres, its hosted *aaS properties, and the data stores of its trusted partners across the Web.

As data moves to the Cloud, the game changes. CloudSQL simply represents an incremental move that will enable Zoho to grow, extending a comfort blanket to nervous DBAs seeking reasons to resist relinquishing control over their data. The real disruption will come when we take our thumbs out of our mouths, consign the comfort blankets to the back of the cupboard, and embrace the opportunities offered by a Cloud-based data ecosystem.

Sage is a titan of the UK software scene but has struggled recently, both with expansion beyond Europe and (like others) with shifting their business toward a hosted capability.

According to Duane Jackson of competitor KashFlow (also picked up by Dennis Howlett and Ben Kepes at CloudAve), Sage are only weeks away from rolling out SageLive;

“On a laptop tucked away in a quite corner I spied a program running in a web browser with the title “SageLive Beta”. I got chatting to the guy demonstrating it (without saying who I am). He confirmed it’s their newest product, in development for 18 months and due for release in January. Until now they’ve tried to keep it under wraps. I commented that it seemed to be a new approach for Sage to develop a product from scratch rather than acquire an existing company. They were obviously very proud of what they’d achieved and rightly so.”

This is interesting, but I’m intrigued to understand more about why Sage were showing this ‘in a quiet corner’ at a big trade show? Is the product still ‘under wraps’? If it is, why on earth was it there for the competition to oggle? And if it’s not, why aren’t they talking about it? Maybe Duncan Hawes, Development Manager for the product, would like to set the record straight?

Duane suggests that SageLive is ‘posting to a Sage 50 database in the backend,’ which (if I understand correctly) means they’re limiting the reach of the new offering to just the UK because of the data structures used in that particular product line. If true, this would seem something of a missed opportunity for alignment of the company’s confused product mish-mash.

It would also be interesting to have a lot more information about the target audience for this product; small businesses, medium businesses, big corporations? And is it an alternative for existing customers, part of a drive to acquire competitors’ customers, or an attempt to address pockets of non-consumption?

Come on Duncan; tell us what you’re building up there in Newcastle. I drove past your building on Sunday, too. If only I’d known this then, I could have popped in for a chat!

Update 3/12/2008 – The Financial Times reports on Sage’s results…

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Facing the real prospect of significant disruption to the mid-range part of their business from the lower costs of relative newcomers Salesforce, NetSuite and others, it certainly made sense for SAP to ape Salesforce’s success and pursue a strategy that would see the German company able to offer their smaller customers a cheaper hosted solution, rather than continuing to rely exclusively upon the expensive purchase, installation and upkeep of hardware at customer sites.

However, as ZDNet’s Larry Dignan reported back in April, the company was forced to slow the roll-out of their Business ByDesign solution, and Phil Wainewright was quick to spot the opportunity that the company had handed to its competitors;

“By announcing its own SaaS product for the midmarket late last year, SAP put its stamp of approval on the on-demand model. Now that it has said customers will have to wait another year or more before they can buy it (due to scaling problems, no less), the company has created the worst of all worlds: it has validated a market and then vacated it, giving competitors a free run.”

So what went wrong, and are there broader lessons to learn from SAP’s mis-steps? As Vinnie Mirchandani notes, both Salesforce and NetSuite have been characteristically swift in publicly rubbing salt into wounds, and most companies would naturally be keen to avoid handing the competition such an easy target.

In a tightening economic climate, and with Dennis Howlett reporting customer disquiet at rising maintenance costs for SAP’s existing installed product base, the company must surely regret not having a good news story to tell about a product that requires no hardware or upgrade investment on the part of their customers. Zoli Erdos at CloudAve reports that NetSuite has jumped on this opportunity too, claiming a total cost of ownership comparable to 50% of just the annual maintenance component of SAP ownership. It’s worth noting that Dennis responds to Zoli’s post in the comments, describing the premise as;

“pure hubris and you know it.”

Unfortunately, and as SAP are discovering to their cost, moving an existing deployed software solution toward on-demand hosting is not simply a matter of moving the application from one data centre to another. Costs rise rapidly at the provider’s end, too, as they take on previously delegated costs for networking, power, maintenance and more. Software designed for single tenancy installation is either expensive in wasteful under-utilisation of numerous single tenancy servers, or technologically inefficient in the way that it operates across multiple tenancies and virtual machines. In either case, these new – and rising with every ‘successful’ sale – costs must be borne by the provider rather than the customer. Whilst SAP’s incremental costs in shipping each new software package to a customer site are very close to zero, every new SaaS tenancy brings costs that SAP must plan for and bear; space in a data centre, hardware, power, cooling, bandwidth, etc.  All too soon costs begin to spiral out of control, and if the economics are not carefully optimised ‘success’ runs the risk of very quickly becoming self-defeating.

Purely in terms of the corporate balance sheet, the shift from installing software to deploying it can be too painful to endure. Rather than a sizeable up-front license payment supplemented each and every year by an up-front annual maintenance charge and intermittently by hefty upgrade fees, software companies transitioning to provision of SaaS face the prospect of no more than a monthly or quarterly subscription payment. The ‘upgrade’ gravy train makes little sense in a SaaS environment, where customers have been led to expect continual incremental improvement. Even where customers could be persuaded of the value in some notional upgrade, the economics again become self-defeating as the software vendor rapidly finds themselves maintaining a plethora of legacy versions to their software and absorbing the resulting overheads in support, equipment partitioning and the rest.

That secret money machine of the enterprise software business – consultancy around implementation and customisation – is undermined by the Model T Ford plainness of much SaaS too, adding significantly to the woes of CFOs at traditional software companies who are trying to balance the books on a move to the Cloud. SaaS products today tend to target the low end, rather than competing head-to-head with the feature-bloated behemoths at the top of the software foodchain. The nature of SaaS products means that ‘trials’ are a couple of mouse clicks away. Even signing up to take the full product tends to be quick, painless, and priced at a point well within the budgets of middle managers and even individual professionals. Salesforce was one company to make significant headway in this fashion, infiltrating the enterprise via individuals with just enough budgetary authority to close the contract without having to negotiate the complexities of an ‘enterprise sale’ or compete directly with the incumbent system or the biases and politics of the C-suite.

Whilst perfectly capable of matching or exceeding the value of license and maintenance components over the long term, especially when the savings inherent in running a single version of the core software package in a controlled and manageable environment are taken into account, this retrospective trickle of utility rental funds requires a significant realignment of a company’s finances and metrics. All of an organisation’s carefully optimised profit and loss models need to be completely rethought, and tenets at the heart of the corporate DNA stand every chance of directly impeding any serious move toward a utility computing model where individual short-term margins will tend to be far tighter than before.

Although not directly addressing the utility computing market by name, the lessons in Clayton Christensen‘s The Innovator’s Dilemma and Innovator’s Solution are writ large here for all to see. What traditional provider of locally installed software can successfully cannibalise their own business and reimagine themselves fundamentally enough to succeed in the Cloud? SAP are certainly trying, but it’s not clear that they’re even close to succeeding.

The SaaS success stories tend to be SaaS from their foundation. Marc Benniof could not have produced Salesforce whilst at Oracle, and even Larry Ellison had to facilitate NetSuite at arm’s length to his main business.

Can traditional software providers ever make the transition, and are the major obstacles standing in their way technological or financial?